Economic Impact Analysis Tool
About the Tool
This free tool was created to help you summarize how grant investments support the rural economy. Please note the formulas, multipliers, population estimates and industry codes are based on 2010 data.
This tool was developed for Federal Office of Rural Health Policy (FORHP) grantees to help them determine the economic impact of grant dollars in their communities. However, this tool is not specific to those grantees and can be used by any community health organization wanting to understand how its activities affect the community.
What is an Economic Impact Analysis and how is it useful?
Economic Impact Analyses (EIAs) track program dollars as they flow through local communities to the national economy, adding up jobs created, spending supporting local business and taxes, new or expanded healthcare services and their impact on the well-being of the population. Essentially EIAs translate project specific impacts into community-wide effects.
EIA tools can be used by grantees and HRSA in several ways:
- For planning purposes, to understand the timing and extent of program impacts in the community
- By grantees in demonstrating their value to the community and in advocating for additional local support
- By HRSA and grantees in benchmarking grantee performance against expected norms
- As a tool for identifying high-performing grantees and understanding best practices and environmental factors that contribute to greater community impact.
In simplest terms, the economic impact of a program is captured in the program multiplier, or the number of dollars of economic activity created by one dollar of spending in a community.
Multipliers can range from zero to over 10, and vary depending on size of the community, type of purchases made with HRSA funds and the community’s economic base. Typically, large multipliers are observed when a dollar spent by a grantee stays in the community and supports other local businesses, which in turn pay their employees who, in turn, buy more local goods and services. Lower multipliers occur when grantee funds are spent outside the community or for goods or services that support fewer local jobs.
For a government agency such as HRSA, EIAs show the return on public investment: that every dollar invested creates more than a dollar’s worth of value in the community, such as:
- Direct impacts. Measured by new health and community services, and number of jobs generated by grantee activities (e.g., wages, salaries and benefits paid directly to grant-supported employees)
- Indirect impacts. Result of “second round” of spending that occurs when grantees purchase goods and services from local businesses
- Induced impacts. Occur when employees of the grantees and of firms that sell goods and services to the grantees in turn spend their earnings on local goods and services
See an example scenario
- Lewin Group, with the assistance of the University of Washington Rural Health Research Center, developed the Economic Impact Analysis model and supporting formulas. Data for the tool was gathered from available expenditure information, and from online, telephone, and in-person interviews.
- The Rural Assistance Center, a project funded by the Federal Office of Rural Health Policy, developed the online tool in collaboration with the Lewin Group.