What Is Included in the Economic Impact Calculations?
An institution’s economic impact on a region results from both the direct spending that is attributable to the institution and the indirect spending that arises from the institution’s direct spending. The direct spending that is attributable to Boston University consists of its salary and benefit expenses, the money it spends to purchase goods and services, the money its students spend on living expenses, and the money spent locally by the students’ out‐of‐state visitors. These expenditures flow directly into the regional economy.
In turn, the dollars that Boston University spends are then spent by the individuals and organizations that receive them. This constitutes indirect spending. For example, Boston University employees use their salaries to purchase goods and services. The businesses from which these purchases are made hire employees, pay salaries, and purchase the goods and services needed for their operation.
Therefore, Boston University’s direct corporate spending results in a combination of new corporate spending and new consumer spending. As a result, the economic impact that Boston University has on a particular geographical region is much greater than the sum of its direct expenditures.
The U.S. Department of Commerce recognizes that an organization’s economic impact on a region results from a complex combination of inter‐industry relationships that are driven by corporate and consumer spending, and has developed “regional input‐output multipliers” to compute the economic impact that results from corporate and consumer spending. The multipliers take into account the specific inter‐industry relationships and consumer spending patterns that contribute to a region’s economy. Research Methodology presents a more detailed explanation of corporate spending, consumer spending, and the multiplier effect. It also describes the sources of data used in the analysis.