Expenditure Lags in Impact Analysis

Cole S. (1989) Expenditure lags in impact analysis, Reg. Studies 23, 105116. The paper presents a method for calculating the short and medium term regional economic impact of plant closures, taking into account expenditure lags. The method is a straightforward modification of the generalized Leontief inverse approach for determining income and employment multipliers. An approximation is given which maintains the relative simplicity of that calculation. The biases in the approximation are shown to be relatively small for many practical calculations and for a range ofexpenditure distributions. An example is computed. The results suggest that the conventional model may overestimate the short run (one year) impact of a closure by 1/30% but underestimate the medium term (five year) impact to an even greater degree.