A Consumer ’ s Guide to Regional Economic Multipliers

ROPONENTS of major construction projects, such as a stadium) airport or convention center, point to their potentially large and widespread benefits. Since these projects are costly and may require public funds, estimates of their economic benefits are used by the community to assess their desirability. Similarly, the closing of a major manufacturing facility—or a large cutback in its production—is of interest throughout the community because of its anticipated adverse consequences. In a hypothetical, but realistic, example discussed later in this paper, a $50 million decline in aircraft sales by a St. Louis manufacturer is estimated to cause a $132 million reduction in output in the St. Louis economy and the elimination of 1,130 jobs. Upon hearing such a prediction, some basic questions come to mind. Where do numbers such as these come from? How accurate are they likely to be?