What is economic impact analysis?

What is economic impact analysis? What is economic impact analysis?

Economic impact analysis determines the impacts of additional tourist spending primarily on employment, income (value-added) and government tax revenues in an economy.

Initial or direct impacts alone are poor measures of the total impact of tourism on the economy. Often, indirect and induced impacts are just as large, if not greater, than direct impacts and involve sectors or activities that are distantly connected to the initial activity.

Let’s suppose a tourist travels to Alberta and spends $100 at a gas station. In an economic impact analysis, the focus is not on the amount of sales ($100) but rather on the impact of those sales on the provincial or regional economy.

Consider this:

  • Direct Impact: The gas station owner must take part of the $100 spent by the tourist and buy more gas from a distributor and pay salaries.
  • Indirect Impact: The wholesale gasoline distributor buys additional items, pays salaries and wages with parts of the $100.
  • Induced Impact: The gasoline station employees and the employees of the wholesale distributor spend part of their salaries on groceries, rent and so on.

All economic impacts include direct, indirect, and induced impacts.

For more information, contact the Research and Innovation Branch

Last reviewed/revised: May 12, 2014
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