Item B: Arts & Economic Prosperity IV (AEP4)

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The Input- Output Process The input- output model is based on a table of 533 finely detailed industries showing local sales and purchases. The local and state eccrttorny of cacti community is researched so the table can be customized for each community. The basic purchase patterns for local industries are derived fi -orn a similar table for the U.S. economy for 2007 (the latest detailed data available from the U.S, Depadment of Curnmerce }, The table is first reduced to reflect the unique size and industry mix of the local economy, based on data from C ouWy Business patterns and the Regional 1lcvnomie, Information System of the U.S. Department of Commerce. It is then adjusted so that cnly transactions with local businesses are recorded in the inter - industry part of the table. This technique compares supply and demand and estimates th+e additionaJ imparts or exports required to make total supply equal total demand. The resulting table shows the detailed sales and purchase patterns of the local industries. The 533 - industry table is then aggregated to reflect the ,general activities of 32 industries plus local households, creating, a total of 33 industries. To trace changes in the economy, each column is converted to shore the diYuet requirements per dollar of gross output for each sector. This direct- requirerrnants table represents the "recipe" for producing the output of each industry. The economic impact figures for Arts & liccortrsmi Prospei rIVwere computed using what is called an "iterative" procedure. This process uses the sum of a power series co approximate thu solution to the economic model. This is what the proxess looks liJke . in matrix algebra: T = IX + ABC + A2X + AI X + .., + An-X. T is the solution, a column vector of changes in each industry's outputs caused by the changes represented in the column vector X. A is the 33 by 33 direct - requirements matrix. This equadon.. is used to trace the d ire ul expenditures attributablc to nonprofit ails organizations and their audieenees. A mult.iplicr effect table is produccd that displays the results of this equation, The total column is T, The initial expenditure to be traced is IX (i is the identity matrix, which is operationally equivalent to the number 1 in ordinary algebra). Round I is AX, the result of multiplying the matrix A by the erector X (the ot;tPuts required of each supplier to produce the goods and services purchased in the initial change birder study). Round 2 is A2X, which is the result of multiplying the matrix A by Round I (it answers the carne question applied to Round 1: "What are the outputs required of each supplier to produce the goods and .services purchased in Round 1 of this chain of events ? " ). Each of columns l through 12 in the multiplier effects table represents ,one of the elements in the continuing but diminishing chain or expoDditures on the right side of'ihe equation. Their sum, T, represents the total production required in the local econoiny in response to arts activities, Calculation of the total impact of the nonprofit arts on the outputs of other industries (T) can now be converted to impacts an the final incornes to local residents by multiplying the outputs produced by the ratios of hOrlsehold income to output and employment to output. Thus, the employment impact of changes in outputs due to arts expenditures is calculated by multiplying elements in the column of total outputs by the ratio of crnployrnent to output for the 32 industries in the region, Changes in household incomes, local government rcvcnues, and state goverranertt revenues due to nonprofit arts expenditures are similarly transformed. The same process Is also wed to show the direct nnpact on incornm and revenues associated with the column of direct local expenditures. A comprehensive description of the methodology used to complete the national study is available at iN wtr.America nsFat •TheArts.orgtEcortnmictmpact, 20 arts & EOWWmic rarasp -9rrfy W I Arnevicans far the A is