27 Chapter 3: Methodology The initial effect is the exogenous shock to the economy caused by the initial spending of money, for example, increased wages of the Business program’s alumni. The initial round of spending creates more spending in the economy, resulting in what is commonly known as the multiplier effect. The multiplier effect comprises the additional activity that occurs across all industries in the economy and may be further decomposed into the following three types of effects: The direct effect refers to the additional economic activity that occurs as the industries affected by the initial effect spend money to purchase goods and services from their supply chain industries. The indirect effect occurs as the supply chain of the initial industries creates even more activity in the economy through their own inter-industry spending. The induced effect refers to the economic activity created by the household sector as the businesses affected by the initial, direct, and indirect effects raise salaries or hire more people. The terminology used to describe the economic effects listed above differs slightly from that of other commonly used input-output models, such as IMPLAN. For example, the initial effect in this study is called the “direct effect” by IMPLAN, as shown in the table below. Further, the term “indirect effect” as used by IMPLAN refers to the combined direct and indirect effects defined in this study. To avoid confusion, readers are encouraged to interpret the results presented in this chapter in the context of the terms and definitions listed above. Note that, regardless of the effects used to decompose the results, the total impact measures are analogous. Multiplier effects in this analysis are derived using Lightcast Multi-Regional Social Accounting Matrix (MR-SAM) input-output model that captures the interconnection of industries, government, and households in the region. The Lightcast MR-SAM contains approximately 1,000 industry sectors at the highest level of detail available in the North American Industry Classification System (NAICS) and supplies the industry-specific multipliers required to determine the impacts associated with increased activity within a given economy. The multi-regional capacity of the MR-SAM allows impacts to be measured in the region and state simultaneously, accounting for the Business program’s alumni in each area, as well as each area’s economic characteristics. In this analysis, impacts on the region include impacts from the program’s regional alumni, as well as the indirect and induced multiplier effects that Net impacts reflect a truer measure of economic impact since they demonstrate what would not have existed in the regional economy if not for the program. Lightcast Initial Direct Indirect Induced IMPLAN Direct Indirect Induced
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