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King University News :: King University's KIRES Report Ranks Industries in East Tennessee According to their Marginal Economic Impact

BRISTOL, Tenn., Jan. 10, 2014 – The King Institute for Regional Economic Studies (KIRES) has released its tenth report, “A Methodology to Rank Industries According to their Marginal Economic Impact: Case Studies for the First Congressional District of Tennessee and the Knoxville Metro Area.”

The newly released report outlines a methodology which allows one to rank industries according to their marginal economic impact. The marginal economic impact for a particular industry is defined as the “change in total earnings paid to households employed in all industries for each job created or lost in the particular industry.”

“The marginal economic impact is not the same as an industry’s total contribution to the local economy,” says Dr. Sam Evans, director of KIRES and associate professor of Finance and Economics for King University. “Some service industries provide thousands of jobs in the local economy, but have small marginal economic impacts, whereas some manufacturing industries with far fewer employees have large marginal impacts.”

The marginal economic impacts may be used to answer questions, such as: How do industries rank in terms of their marginal economic impact? What is the economic impact of a new retail development?  What is the economic impact of the gain or loss of 100 jobs in a particular industry? These are just a few of the many questions which may be answered with the aid of the methodology outlined in the report.

Marginal economic impacts were calculated for industries with 1,000 or more employees in the First Congressional district of Tennessee and in the Knoxville metro area.  In both regions, the lowest ranked industries in terms of their marginal economic impact are service providers whose primary locally purchased input is hired labor, with average earnings at the low end of the scale. Manufacturing industries characterized by relatively high average earnings and extensive supplier linkages, and the higher-paying service industries dominate the top of the rankings.

Specific industries with the largest marginal economic impact include chemical, paper, machinery, food and fabricated metal product manufacturing, utilities, ambulatory health care, broadcasting, management of companies and enterprises, telecommunications, wholesale trade, and banking services. Specific industries that ranked lowest in terms of marginal economic impact include retail trade, food services and drinking places, social assistance, amusements and recreation, nursing and residential care facilities, educational services, accommodation, and administrative and support services.

“The methodology developed for this report enables one to compare any two industries in terms of their relative marginal economic impacts,” says Evans. “To cite just one example, it takes 3.1 jobs in retail trade to match the economic impact of one chemical manufacturing job in the First Congressional District.”

KIRES Report No. 10 was prepared by Dr. Sam Evans. This report, along with the nine previous reports, is available in electronic format at http://kires.king.edu/.

The next KIRES report will be released during the summer of 2014. The report will present a survey of U.S. energy markets, including the competition between coal and natural gas.

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