Economic Impact FAQ (RIMS II Edition)

This article answers common questions about the Regional Input-Output Modeling System II economic impact model and explains how to interpret economic impact metrics generated from spending data.

Frequently Asked Questions

Why is Total Compensation higher than what we spent?

Your spending supports more than your own operations. It generates jobs and wages throughout multiple levels of the economy, including your suppliers, their vendors, and supporting service providers.

Is Value Added the same as Total Output?

No.

• Total Output represents the total economic activity generated, including the value of resold goods.
• Value Added represents only the new economic value created, such as wages, taxes, and profits.

Think of Total Output as the entire product, while Value Added represents only the value contributed during production.

Why can the reported impact be larger than our actual spending?

The Regional Input-Output Modeling System II measures both indirect and induced economic impacts. As spending circulates through the economy, it creates additional economic activity beyond the original expenditure.

Does looking at multiple tiers result in double counting?

It can if impacts are calculated manually.

Regional Input-Output Modeling System II multipliers already account for upstream and downstream economic effects. Combining separate tier-level impacts outside the model may overstate the total impact.

What is the difference between indirect and induced impacts?

• Indirect impact results from business-to-business spending, such as purchases of raw materials, equipment, or transportation.
• Induced impact results from household spending by employees, including purchases such as housing, food, and transportation.

Are these actual dollars or estimates?

The results are model-based estimates, not actual financial transactions. They represent expected economic activity based on regional and industry data published by the United States Bureau of Economic Analysis.

Can these results be used in business cases or funding requests?

Yes. The Regional Input-Output Modeling System II is a widely recognized federal economic model. Results should be presented as economic estimates rather than guaranteed or audited outcomes.

Why do the categories not always total exactly?

Minor differences may occur because of rounding. In addition, some measures, such as Value Added, represent subsets of broader economic totals rather than separate totals.

What determines the size of the multipliers?

Economic multipliers vary based on:

• Industry
• Geographic region
• Impact type, such as output, employment, or income

For example, manufacturing industries often produce higher output multipliers, while service industries may generate stronger compensation multipliers.

Can Regional Input-Output Modeling System II results be customized?

Yes. Results can be refined by providing additional information, including:

• Detailed supplier or project spending
• North American Industry Classification System (NAICS) codes
• Local versus non-local sourcing information

Providing more detailed inputs generally produces more representative economic impact estimates.