BUSINESS FOR SCIENTISTS WORKSHOP

WHAT ROLE CAN ECONOMIC ANALYSIS

PLAY? 

 By Steven PetersonClinical Assistant Professor, Economics

College of Business and EconomicsUniversity of Idaho

June 5, 2015  

Why Support Research?

Basic scientific research is defined as fundamental theoretical or experimental investigative research to advance knowledge without a specifically envisaged or immediately practical application. It is the quest for new knowledge and the exploration of the unknown.

Source: http://www.icsu.org/publications/icsu-position-statements/value-scientific-research

Tom Luna: ‘…Is there any effort at all to start moving [the UI] toward [the Brigham Young University-BYU Idaho] model that is not only keeping tuition low but also the [tuition] increases [low].’

Duane Nellis: ‘… BYU is a private institution and that UI’s mission includes research and outreach, which increases the student costs…’

Does the State of Idaho Support University

Research?

Source: http://www.uiargonaut.com/2013/04/18/inadequate-increase/

Tom Luna: ‘I think some students would be surprised to find out their tuition is subsidizing research that is then being used to grow business and economy in the state,’ Luna said.

Does the State of Idaho Support University

Research?

Source: http://www.uiargonaut.com/2013/04/18/inadequate-increase/

And if you thought Tom Luna is an Outlier……

[Idaho State] Board member Emma Atchley noted that UI is not on track with the national trend of dropping tenured and tenure track faculty and increasing the number of adjunct, part-time, and non-tenured faculty.

Source: http://www.uiargonaut.com/2013/04/18/inadequate-increase/

And if you thought Tom Luna is an Outlier……“We’re not just a teaching mission,” said UI Provost Doug

Baker. “We have a very strong research mission and we also have an outreach mission. So we need faculty to do all those things and it’s difficult with part-time and temporary structures to do cutting edge research and meaningful engagement.”

Source: http://www.uiargonaut.com/2013/04/18/inadequate-increase/

How Well does the UI Defend and Promote its Mission?

‘Nellis said the questions about the research portion of UI’s mission statement were unexpected.’

Source: http://www.uiargonaut.com/2013/04/18/inadequate-increase/

Idaho State Board of Education, April 2013

University of Idaho President: Duane Nellis

Superintendent of Public Instruction: Tom Luna

BYU Idaho Model

Three Semester Rotation Faculty Teaching Assignments Average Five Classes Per Semester…Which leaves little time for research or outreach…

How Do You Defend UI Research

to a Part-Time Citizen Idaho Legislator Who is Unaware of

the University of Idaho Mission?

Identify Your External Stakeholders

Who are they?What is their backgrounds and interests?Are they interested in your research

activities?Do they understand your research?How can you craft a message tailored

specifically for your stakeholders?Bottom line: What Sells?

Selling Point in Idaho: Jobs, Income, and Taxes

Key Selling Point for Research Universities across of the U.S.

Example: Stanford University

Stanford entrepreneurs have created an estimated 39,900 companies and 5.4 million jobs since the 1930s. https://www.stanford.edu/research/

UI Research Brings Nearly $100 Million of New Dollars to Idaho

Annually

UI Research/Outreach Jobs in Every Idaho County (i.e. Your County)

University of Idaho has research, extension, and teaching presence in all of Idaho’s 44 Counties

Extension services in 42 counties

Thirteen agricultural research facilities statewide

Seven research institutes

Source: http://geology.com/county-map/idaho.shtml

UI Research Creates 2,089 Living Wage Jobs For Idaho, Annually

Average Compensation = $42,920 per Job

Economic Impacts of UI ResearchFY 2013

Includes the Direct, Indirect, and Induced ImpactsImpact Measure Federal Dollars Total Research

Total Sales (Output) $93,331,910 $165,777,983 Gross State Product $64,352,892 $114,304,878 Total Compensation $50,469,400 $89,644,745Jobs 1,176 2,089

UI Research Creates $5.2 million in Tax Revenue For

IdahoTax Impacts

(Including the Mulitiplier Effects)Federal Total

Sales $801,065 $1,422,868Property $620,628 $1,102,372Excise $131,872 $234,233Income $1,373,549 $2,439,726

Total $2,927,114 $5,199,199

UI Graduate Student SpendingAlso Creates 815 Idaho Jobs annually

Economic Impacts of UI Graduate StudentsFY 2014

Includes the Direct, Indirect, and Induced ImpactsImpact Measure Federal Loans/Grants Student Spending Total

Total Sales (Output) 33,573,455$ $31,272,892 64,846,347$ Gross State Product 21,073,624$ $19,629,590 40,703,214$ Total Compensation 11,460,219$ $10,674,927 22,135,146$ Jobs 422 393 815

Tax Impacts (Including the Mulitiplier Effects)

Fed. Loans Student TotalSales $556,994 $597,969 $1,154,963Property $431,533 $463,278 $894,811Excise $91,693 $98,438 $190,131Income $323,331 $347,117 $670,448

Total $1,403,551 $1,506,802 $2,910,353

Countering Tom LunaTurning Research

from a Cost to a Benefit

Duane Nellis: ‘… BYU is a private institution and that UI’s mission includes research and outreach, which increases

the student costs…’

Increase in Idaho Agriculture YieldsCreates an Additional 888 Jobs Annually

For Every 1% Increase in Agricultural Productivity

Economic Impacts of UI Agriculture ResearchAnnual Impact from Cumulative Historical ResearchIncludes the Direct, Indirect, and Induced Impacts

Impact MeasureTotal Sales (Output) $152,768,026 Gross State Product $71,701,256 Total Compensation $46,315,898Jobs - 888

Tax Impacts (Including the Mulitiplier Effects)

Sales $1,427,576Property $1,106,019Excise $235,009Income $1,353,433

Total $4,122,037

Start-up Companies in Idaho Create 448 Additional Jobs from UI

ResearchFor Every 200 Actual (Direct) Jobs

Industries:

Environmental and other technical consulting services

Scientific research and development services

Waste management and remediation services

Management of companies and enterprises

Key Assumption: 200 direct jobs – 50 jobs each in the above industries

Economic Impacts of New Firms From UI Research Activities Includes the Direct, Indirect, and Induced Impacts

Impact MeasureTotal Sales (Output) $66,763,644 Gross State Product $36,647,193 Total Compensation $25,761,271Jobs - 448

Tax Impacts (Including the Mulitiplier Effects)Sales $650,823Property $504,227Excise $107,140Income $725,195Total $1,987,385

Economic Impacts of UI Graduates Employed in Idaho

(11,307 Jobs)Masters/PhD Students

Tax Impacts (Including the Mulitiplier Effects)

Added Income TotalSales $3,218,989 $22,157,177Property $2,493,923 $17,166,351Excise $529,912 $3,647,529Income $1,336,806 $13,074,118Total $7,579,630 $56,045,174

Impacts of UI Graduate Employees Cummulative Employment in Idaho Includes the Direct, Indirect, and Induced Impacts

Impact Measure Added Income Effect Total ImpactTotal Sales (Output) $145,086,387 1,755,625,799.64 Gross State Product $78,876,039 914,765,624.36 Total Compensation $45,332,401 476,605,548.39Jobs 1,307 11,307

Total Economic Impacts UI Research:15,546 jobs, $2.2 billion in Output, and

$70.3 million in Taxes

Grand Total Economic Impacts of ResearchFrom UI Research Activities

Includes the Direct, Indirect, and Induced ImpactsImpact Measure Research Students Agriculture Start-Ups Graduates Total

Total Sales (Output) 165,777,983$ $64,846,347 $152,768,026 $66,763,644 1,755,625,800 2,205,781,799$ Gross State Product 114,304,878$ $40,703,214 $71,701,256 $36,647,193 914,765,624 1,178,122,165$ Total Compensation 89,644,745$ $22,135,146 $46,315,898 $25,761,271 476,605,548 660,462,608$ Jobs 2,089 815 888 448 11,307 15,546

Grand Total Tax Impacts of ResearchFrom UI Research Activities

Includes the Direct, Indirect, and Induced ImpactsImpact Measure Research Students Agriculture Start-Ups Graduates Total

Sales 1,422,868$ 1,154,963$ 1,427,576$ 650,823$ 22,157,177$ 26,813,407$ Property 1,102,372$ 894,811$ 1,106,019$ 504,227$ 17,166,351$ 20,773,780$ Excise 234,233$ 190,131$ 235,009$ 107,140$ 3,647,529$ 4,414,042$ Income 2,439,726$ 670,448$ 1,353,433$ 725,195$ 13,074,118$ 18,262,919$ Total 5,199,199$ 2,910,353$ 4,122,037$ 1,987,385$ 56,045,174$ 70,264,148$

University Research and Graduate Students Needed to Move Idaho Out of the Low Wage

Trap

The Famous Potatoes state ranks 50th for average annual wage, per-capita income, and for wage increases since 2007. It also has the greatest percentage of minimum-wage workers in America.

Source: http://www.spokesman.com/stories/2014/jan/02/idaho-ranks-last-four-wage-measures/

Stephen Cooke’s analysis of a low wage trap in Idaho. Idaho’s workers have low levels of human capital which attracts only firms

who want unskilled workers; and who are unwilling to invest in worker education...thus perpetuating the low wages.

Source: http://www.uidaho.edu/newsevents/item?name=study-suggests-idaho-caught-in-low-skill-low-wage-jobs-trap-44772

Investment in high levels of human capital is the only way to break this cycle through graduate programs and research.

One Last Thing….University of Idaho research advances

the frontiers of knowledge in science, engineering, medicine, mathematics, humanities, and other many disciplines.

These advances will enrich the lives of current Idaho residents and increase the well-being of future generations.

Why Might You Need Economics?

To build support for your research project to external stakeholders.

Why Might You Need Economics?

Economics may play a role in any outreach and engagement portion of a study.

Economics may play a long-run role in maintaining the financial support of (Idaho) legislators and policy makers who fully or partially fund your salaries.

Why Might You Need Economics?

Federally funded studies/projects may require the investigators to show “significance” of which economic significance is sometimes an explicit or implicit component.Educational, technological, economic, etc.

Some proposals either require an interdisciplinary component or an interdisciplinary component gives the proposal a selection/funding advantage.

Economic significance may be needed to attract federal, state, or local funding opportunities.

Why Might You Need Economics?

Economics sometimes plays an “officially” small or virtually nonexistent role in a funding or project proposal.

Unofficially, however, it is the proverbial “Elephant in the Room”

Analogy: Endangered Species Act (ESA)Economics is only allowed in the designation of

critical habitat. The listing process assumes a vertically demand curve for the species. Unofficially it often dominates every part of the ESA process.

External StakeholdersThey are important. They will contribute to the

decision-making process towards the funding of your project or the support of your project.

Translate your project’s inputs and outputs into concepts that will attract stakeholder support.

Usually that means translating your research activities into dollars, revenues and jobs.

The description of your project to external stakeholders may look very different than the “official” research goals of your project.

Significance -- Federal Grants

National Institutes of Health (NIH) significanceinvestigatorinnovationapproachenvironment

Translations >>>> to DollarsProject expenditures: Local jobs, income, and taxes.Project personnel: Local jobs, income, and taxes.Graduate students: Increases in worker income, Idaho jobs,

and gross state product.Reductions in mortality: Statistical value of a human life.Quality of life improvement: Increases in worker productivity,

reductions in lost work days, lower employer costs.New production processes for existing products: Lower

production costs, increases in worker productivity.New products/cures for diseases: New start-up firms, jobs,

income, and taxes.

Total Direct Public Charity 2013 Spending and Direct JobsIncluding Hospitals and Battelle Energy

Public Charity Total Charity Total Aggregate Total Direct Compensation

Classification/Category Spending Compensation Employment % Jobs Per Worker

Arts, Culture, and Humanities 45,009,991$ 14,410,944$ 827 1.6% 16,828$ Education 332,952,708$ 255,758,371$ 7,149 13.7% 34,531$ Environment 47,087,914$ 26,699,582$ 726 1.4% 35,516$ Hospitals 2,331,232,342$ 1,288,646,191$ 21,925 52.5% 56,732$ Health (Other) 606,533,444$ 336,083,893$ 5,796 0.6% 57,984$ Human Services 456,400,381$ 237,150,201$ 9,874 18.9% 23,184$ Public and Societal Benefit 79,115,351$ 43,188,387$ 1,400 2.7% 29,781$ Religious Organization 24,011,123$ 4,164,175$ 131 0.3% 30,781$ Other Public Charities 11,947,089$ 7,719,499$ 290 0.6% 25,678$ Battelle Energy Alliance 457,428,966$ 343,685,361$ 4,046 7.8% 81,986$

Total (with Battelle) 4,391,719,309$ 2,557,506,605$ 52,163 100% 49,029$

Translating Activities into Jobs Example: Idaho Nonprofits

Economic Impacts of 2016 Medicaid Expansion Spending and Existing Medicaid Spending

Federal Portion only (New Money to Idaho)

Federal Direct Medicaid Spending $2.04 billion Economic Impacts Sales Transactions $3.47 billion

Gross State Product $2.03 billion Gross Wages $1.56 billion Total Taxes $132.0 million

Sales/Excise Taxes $57.47million Property Taxes $30.78 million Income Taxes $43.75 million

Jobs 43,053

Translating Activities into Jobs Example: Medicaid and Expansion

Estimated annual deaths in Idaho Low 76High 179

Statistical Value of a Human Life $7 million to $9.1 million (EPA) Low 76---- $ 691,600,000

High 179--- $1,628,900,000

Does not include lost productivity effects

Source: Health Affairs Blog - http://healthaffairs.org/blog - Opting Out Of Medicaid Expansion: The Health And Financial Impacts. Posted By Sam Dickman, David Himmelstein, Danny McCormick, and Steffie Woolhandler On January 30, 2014 @ 10:00 am In All Categories,Coverage,Disparities,Health Reform,Medicaid,States.

Translating Activities into Jobs Example: Medicaid and Expansion

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Tribal Economic ImpactsThe Economic Impacts of the Five Idaho Tribes on the Economy of Idaho

January 2015

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Impacts of the Five Tribes to Idaho's EconomyThe five tribes of Idaho have an important, rapidly growing impact on Idaho's economy. As sovereign nations, these tribes have their own governments, health and education services, police forces, judicial systems, economic development projects, gaming casinos and resorts, agricultural operations, retail trade and service businesses, cultural and social functions, and other important regulatory activities. Providing these services creates significant economic and social impacts not only on the Indian reservations, but also in the communities surrounding them. Combined, the five tribes of Idaho are contributing to the economic and social health of the State of Idaho.

This report summarizes the results of a study, “The Economic Impacts of the Five Tribes of Idaho on Idaho’s Economy.” It was sponsored jointly by the five tribes of Idaho and completed January 2015. The study’s principal investigator is Steven Peterson, Research Economist and Clinical Assistant Professor, Economics, Department of Business, University of Idaho, who has more than 25 years’ experience in regional economic modeling. This study also complements regional economic impact analyses conducted for the Coeur d’Alene Tribe, Kootenai Tribe, Nez Perce Tribe, Shoshone-Bannock Tribes, and Shoshone Paiute Tribes. This study is an update of two previous studies conducted in 2002 and 2010. The results and findings of this study are those of the author Steven Peterson and do not necessarily represent the University of Idaho or any other organization or individuals.

The five tribes of Idaho add 13,840 jobs to Idaho's economy including the multiplier effects.

Including multiplier effects, total annual sales transactions from tribal economic activity exceed$1.1 billion.

The five tribes of Idaho have raised gross state product (value-added) by$653 million on average, which represents1% of the gross state product in 2013.

More than 500,000 people visit Idaho tribal casinos per year.60% are from out of state, adding new dollarsinto Idaho's economy.

Types of Economic Analyses

Benefit cost analysisNet present value (time value of money)Dynamic costs and benefits-- flows over time

Economic impact assessmentMeasure changes in key economic

indicators from policy actions, new project analysis, or from a changing economy or economic environment

Types of Economic AnalysesCost effectiveness analysis

Compares relative costs of project alternatives to their outcomes (i.e. cost per life saved)

Business feasibility analysisNew business ventures/start-ups company

analysis/investment project/research spinoffBusiness planPro-forma financial statements –i.e. profit/lossSWOT analysisMarket analysis

P & L Railroad

Pullman to Spokane

Tiger ProposalB/C Only

No Impact Study

Port of Whitman County Tiger Grant

Total Benefits/Costs ---3% Discount RateCosts Benefits Benefits/Costs Summary Total

Year 16,000,000$ Net Trucking Savings Road Damage Safety C02 Total Benefits Net Benefits0 (16,000,000)$ -$ (16,000,000)$ 1 3,456,019$ 682,896$ 803,780$ 57,287$ 4,999,982$ 4,999,982$ 2 3,355,359$ 663,005$ 780,369$ 55,619$ 4,854,352$ 4,854,352$ 3 3,257,630$ 643,695$ 757,640$ 53,999$ 4,712,963$ 4,712,963$ 4 3,162,747$ 624,946$ 735,573$ 52,426$ 4,575,692$ 4,575,692$ 5 3,070,628$ 606,744$ 714,148$ 50,899$ 4,442,419$ 4,442,419$ 6 2,981,193$ 589,072$ 693,348$ 49,416$ 4,313,028$ 4,313,028$ 7 2,894,362$ 571,914$ 673,153$ 47,977$ 4,187,406$ 4,187,406$ 8 2,810,060$ 555,257$ 653,547$ 46,580$ 4,065,443$ 4,065,443$ 9 2,728,214$ 539,084$ 634,511$ 45,223$ 3,947,032$ 3,947,032$

10 2,648,751$ 523,383$ 616,030$ 43,906$ 3,832,070$ 3,832,070$ 11 2,571,603$ 508,138$ 598,088$ 42,627$ 3,720,456$ 3,720,456$ 12 2,496,702$ 493,338$ 580,668$ 41,385$ 3,612,093$ 3,612,093$ 13 2,423,982$ 478,969$ 563,755$ 40,180$ 3,506,887$ 3,506,887$ 14 2,353,381$ 465,019$ 547,335$ 39,010$ 3,404,745$ 3,404,745$ 15 2,284,836$ 451,474$ 531,393$ 37,874$ 3,305,577$ 3,305,577$ 16 2,218,287$ 438,325$ 515,916$ 36,770$ 3,209,298$ 3,209,298$ 17 2,153,677$ 425,558$ 500,889$ 35,699$ 3,115,824$ 3,115,824$ 18 2,090,949$ 413,163$ 486,300$ 34,660$ 3,025,071$ 3,025,071$ 19 2,030,047$ 401,129$ 472,136$ 33,650$ 2,936,963$ 2,936,963$ 20 1,970,920$ 389,446$ 458,385$ 32,670$ 2,851,420$ 2,851,420$

Total (16,000,000)$ 52,959,347$ 10,464,554$ 12,316,964$ 877,856$ 76,618,721$ 60,618,721$

Input-Output Model

An Input-Output Model is:Comprehensive databaseA system accounts and a regional

accounting frameworkDouble-entry bookkeeping systemModel general equilibrium

Multipliers?

Multipliers calculate the total effect throughout the economy arising

from one unit change in final demand

Types of Multipliers (Total to Direct)

•Sales (output) multipliers

•Employment multipliers

•Value-added (GSP) multipliers

•Income (earnings) multipliers

•Indirect business taxes (IBT)

Firms (Public and Private) Producing Input/Output Models Available to the Public

•Minnesota IMPLAN Group

• (EMSI) Economic Modeling Specialists, Incorporated (Moscow)

•RIMS II Bureau Economic Analysis

•REMI Policy Insight

•Others•Computable general equilibrium models (CGE)

University of Idaho ResourcesRegional I/O Economists University of Idaho

Stephen Devadoss Ag. EconPaul Lewin Ag. EconJon Miller CBESteven Peterson CBEGarth Taylor Ag. EconPhillip Watson Ag. Econ

Retired: Joel Hamilton Ag. Econ Charlie McKetta CNR Mike DiNoto CBE

PrivateHank Robison-

EMSI

University of Idaho ResourcesDarin Saul Proposal Development

SpecialistGrant writingStakeholder surveysOutreach and engagementCommunity partnershipsSocial and economic analyses

Any Questions?