What's the best way to measure economic impact in your study?
If you are conducting a study that aims to assess the economic effects of a policy, program, project, or event, you need to choose a suitable method to measure the economic impact. Economic impact is the net change in the value of goods and services produced and consumed in a specific area and time period as a result of an intervention. Measuring economic impact can help you evaluate the benefits and costs of your study, identify the winners and losers, and communicate your findings to stakeholders. However, there are different ways to measure economic impact, and each one has its advantages and limitations. In this article, you will learn about some of the most common methods and how to select the best one for your study.
Input-output analysis is a method that uses a matrix of coefficients to capture the interdependencies between different sectors of an economy. It shows how much output from one sector is used as input by another sector, and how much income and employment is generated by each sector. By applying input-output analysis, you can estimate the direct, indirect, and induced effects of an intervention on the economy. Direct effects are the changes in the output, income, and employment of the sector directly affected by the intervention. Indirect effects are the changes in the output, income, and employment of the sectors that supply inputs to the directly affected sector. Induced effects are the changes in the output, income, and employment of the sectors that benefit from the increased spending of the households that receive income from the direct and indirect effects. Input-output analysis is useful for measuring the economic impact of interventions that affect multiple sectors, such as infrastructure projects, tourism events, or natural disasters. However, input-output analysis also has some drawbacks, such as assuming fixed coefficients, linear relationships, constant prices, and no capacity constraints.
Cost-benefit analysis is a method that compares the total benefits and costs of an intervention in monetary terms. It shows whether the intervention is economically efficient, meaning that it generates more benefits than costs for society as a whole. By applying cost-benefit analysis, you can estimate the net present value, internal rate of return, and benefit-cost ratio of your intervention. Net present value is the difference between the present value of the benefits and the present value of the costs. Internal rate of return is the discount rate that makes the net present value zero. Benefit-cost ratio is the ratio of the present value of the benefits to the present value of the costs. Cost-benefit analysis is useful for measuring the economic impact of interventions that have clear and measurable outcomes, such as public health programs, environmental policies, or education reforms. However, cost-benefit analysis also has some challenges, such as valuing intangible benefits and costs, dealing with uncertainty and risk, and accounting for distributional effects.
-
Elmer Vidal Liscano
CEO /Entrepreneur / Global Manager / Board Member
El análisis Costo-beneficio es un o d elos que más utilizamos para revisar el impacto de nuestros proyectos, enfocandonos en tener resultados claros y cuantificables utilizando indicadores como: VAN, TIR, Relacion (B/C), sin embargo nos genera limitaciones al tratar de valorar beneficios y costos intangibles, tambien para cuantificar la incertidumbre y riesgo y aquí es donde la experiencia ayuda a mitigar estas limitaciones.
-
Jaume García Olivé
IT Consultant - Software & Data | Firmware | Hardware Specialist
El análisis costo-beneficio compara costos y beneficios monetarios de una intervención, evaluando su eficiencia económica. Mide el valor actual neto, tasa interna de retorno y relación beneficio-costo. Útil para intervenciones con resultados claros. Sin embargo, enfrenta desafíos como valorar beneficios intangibles, gestionar incertidumbre y considerar efectos distributivos.
-
Mansi Vyas
Student at Narsee Monjee College of Commerce and Economics | Research Intern at AIC-NMIMS
Cost-benefit analysis is a versatile method that I employed in a study evaluating a public infrastructure project. By comparing the total costs and benefits associated with the project, we quantified its economic impact. For example, when assessing the construction of a new highway, we considered not only the immediate construction costs but also the long-term benefits such as reduced travel time, lower transportation costs, and improved safety. This method allowed decision-makers to weigh the economic gains against the investment
Experimental and quasi-experimental methods are methods that use randomization or other techniques to create comparable groups of subjects that receive or do not receive an intervention. They show how much the intervention causes a change in the outcome of interest, controlling for other factors. By applying experimental and quasi-experimental methods, you can estimate the average treatment effect, which is the difference between the mean outcome of the treatment group and the mean outcome of the control group. Experimental and quasi-experimental methods are useful for measuring the economic impact of interventions that have specific and observable outcomes, such as microfinance programs, cash transfers, or job training. However, experimental and quasi-experimental methods also have some limitations, such as ethical issues, practical difficulties, external validity, and selection bias.
-
Jaume García Olivé
IT Consultant - Software & Data | Firmware | Hardware Specialist
Los métodos experimentales y cuasiexperimentales utilizan técnicas de aleatorización para comparar grupos y evaluar el impacto de una intervención, estimando el efecto medio del tratamiento. Útiles para medir efectos en intervenciones con resultados observables. Limitaciones incluyen cuestiones éticas, desafíos prácticos y posibles sesgos.
-
Elmer Vidal Liscano
CEO /Entrepreneur / Global Manager / Board Member
Los metodos experimentales los hemos utilizado muy pocas veces, especificamente en un programa de microfinanzas, sin embargo la losgistaca fue muy compleja, las respeustas sentumos que fueron muy sesgadas por los grupos de personas que abordamos, sin embargo fue una muy buena herramienta complementaria para medir el impacto que se estaba generando.
(edited)
Choosing the best method to measure economic impact is dependent on a variety of factors, such as the type and scale of your intervention, the availability and quality of data, the resources and time you have, and the purpose and audience of your analysis. To determine the most appropriate method, consider what the main question or hypothesis of your study is, what the expected outcomes and impacts of your intervention are, which relevant sectors and stakeholders are involved, what data sources and methods you can access and use, what assumptions and limitations each method has, what criteria and indicators you will use to evaluate your intervention, and how you will communicate and disseminate your results. By answering these questions, you can select the best option for measuring the economic impact of your intervention.
-
Jaume García Olivé
IT Consultant - Software & Data | Firmware | Hardware Specialist
La elección del método adecuado para medir el impacto económico es esencial y depende de varios factores, como la naturaleza de la intervención, la disponibilidad de datos, recursos y el propósito de tu estudio. Debes considerar cuidadosamente tus objetivos, las partes interesadas involucradas y las limitaciones de cada método antes de tomar una decisión. Esto garantizará que obtengas resultados precisos y significativos para evaluar el impacto económico de tu intervención
-
Elmer Vidal Liscano
CEO /Entrepreneur / Global Manager / Board Member
Dependiendo del tipo de programa podremos adaptar uno o varios métodos, siempre tratamos de tener mas de un método de evaluación de impacto para poder cotejar la consistencia de las mediciones, nada esta escrito y todo debe adaptarse a la necesidad, y nada mas interesante que mezclar varios métodos!.
-
Mansi Vyas
Student at Narsee Monjee College of Commerce and Economics | Research Intern at AIC-NMIMS
Choosing the best method depends on the specific context and goals of the study. For instance, when dealing with a complex regional economy, input-output analysis may be more suitable for capturing the interconnectedness of industries. In contrast, for a single project with identifiable costs and benefits, cost-benefit analysis provides a straightforward assessment. Experimental and quasi-experimental methods are beneficial when a study aims to establish causality and control for potential confounding variables. The choice should align with the research questions, data availability, and the level of detail required for a robust economic impact assessment.
-
James (Tiago) Freire, PhD
Economist | Data Scientist | Quant
In my experience as an applied economics researcher, the first thing we need to determine is what is the outcome we want to measure? We need to make sure we are using economic outcomes (such as prices, wages, consumption of goods, decisions or outcomes which can be influenced by economic incentives) and not outcomes which don't respond to economic incentives. Second, we need to make sure: Am I measuring what I think I am measuring? This is where I would use quasi-experimental methods to establish what causes the economic outcomes.