Specifically, in the RIMS II model espoused by the BEA, capital spending in a region induces job creation therin, based off of specific multipliers.

Where do these multipliers come from, and what do they mean?

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    $\begingroup$ Even if non-'expert' are to be explicitly discouraged during the private beta stage I can't see how that could possibly make them off-topic! $\endgroup$ Commented Nov 23, 2014 at 23:45

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Induced jobs are those created by the spending of those employed directly by the primary source or indirectly by suppliers to the source. For example, you have a project to build a bridge. That project hires a worker. That worker stops at a convenience store every morning and buys a coffee and a bagel. The people responsible for selling the coffee and bagel are induced jobs. This includes the cashier, the stock person, the delivery person, the baker, etc.

Obviously this particular worker is only responsible for a small fraction of the overall cost of these others. However, if you aggregate all the effects across all the workers on the project, you may find that the convenience store has to hire an extra cashier, that the part-time stock person has to work full-time, that an additional delivery person has to be hired to share the stops, that another baker needs to be hired, etc.

The multiplier is simply an estimate of how much spending on the project will then be respent on labor indirectly. It can be given either in terms of jobs or in money. Economists use survey information and other studies to estimate how much this will be.

  • $\begingroup$ can you elaborate on "survey information and other studies"? $\endgroup$ Commented Nov 19, 2014 at 5:11

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