Regional multipliers and impact analysis : an application to irrigation development in New Zealand

Abstract

This study is concerned with the estimation of regional multipliers and their use in impact analysis. Three alternative methods of estimating regional multipliers are examined and each is applied to data for a small region in the South Island of New Zealand. The impact of irrigation development on the economy of this region is then quantified by combining the most appropriate multiplier estimates with the estimated direct expansion in the economy created by two major irrigation schemes in the region. The direct expenditure in the regional economy is estimated in terms of increased agricultural production, scheme construction expenditures and operation and maintenance expenditures. Further expansion in the regional economy resulting from this direct impact is shown to comprise an indirect impact and an induced impact. The overall impact on the regional economy is quantified in terms of output, income and employment. Owing to differences in the values of sectoral multipliers both within and between regions and to the importance of these differences with regard to regional development objectives, it is argued that the secondary impact is worthy of greater recognition in irrigation development, and in investment appraisal generally.