Using a Metropolitan-area Econometric Model to Analyse Economic Development Proposals

Abstract

This paper shows how an integrated input-output and econometric model has been developed and used by a municipal government to evaluate economic development proposals. The model simulates the impact of attracting or retaining various types of new businesses and calculates fiscal impacts for state and local governments. It can be used to determine a government's bottom-line tax concession or how much it is witting to give up to attract new businesses into the community. We present examples of proposals evaluated using our Louisville metropolitan-area econometric model and suggest that the methodology is readily adaptable to other urban areas.