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Calculating the Economic Impacts of Cooperative Firms at a State or Regional Level

 

As enterprises owned and controlled by their patron members, cooperatives can provide an effective tool for improving the economic well-being of its members and their communities. However, understanding and communicating the positive impacts that cooperatives have within a region can be a challenge.

A description of cooperative economic impacts, which helps place cooperatives in the context of a broader economy, can be a useful starting point. This description includes both the direct economic activity of cooperatives, and the additional economic effects as that activity ripples through that economy.

Like all businesses, cooperatives purchase inputs from other businesses (indirect activity), and pay salaries and wages that support household purchases (induced activity).  Input-output analysis models these interactions across the industry sectors of a particular economy. These additional effects can be described by numerical multipliers of the direct economic activity. The Center used IMPLAN modeling software to estimate these multiplers and the total impacts of cooperative economic activity at a national level in the 2009 Research on Economic Impact of Cooperatives (REIC) project.

While the scope of the REIC project did not include an impact analysis by state, there continued to be interest in this type of analysis at a state and regional level.

Responding to this interest in Wisconsin, the Center conducted a simplified study in 2012-13 using IMPLAN analysis and recently published the Economic Impacts of Cooperatives in Wisconsin report.

For a description of project methodology and data collection, see:

REIC: IMPLAN methodology
REIC: Data Collection
Economic Impact of Cooperative Firms in Wisconsin: Data Collection

Developing a Cooperative Impacts Calculator

A cooperative economic impact report for a state or region requires data collection resources, and access to IMPLAN or similar modeling software. In an effort to support impact reporting efforts by other groups, the state-level multipliers from the Economic Impact of Cooperative Firms in Wisconsin project are being made available in an "cooperatative impacts calculator" format that could be used as a first step to estimate cooperative economic impacts in other states or regions.

National or State Multipliers?

Mulitipliers describe the indirect and induced activities in a geographically defined economy by modeling the particular structural linkages that exist between the business sectors in that area. Indirect and induced impacts will also be affected by the size of the economy being analyzed; the smaller a defined region is, the larger the proportion of the multiplier effects occurring outside of a region’s boundaries. For example, the linkages between Wisconsin agriculture and other sectors in the Wisconsin economy may be different than those at a national level, and a greater portion of those multiplier effects may occur outside of the boundaries of Wisconsin. The multipliers for agricultural cooperatives in Wisconsin and in the U.S. will be different as a result.

For comparison, this calculator application allows the user to apply either national multipliers derived from the REIC project or state-level multipliers derived from Wisconsin data. The national multipliers are availble for more business sector categories, but the Wisconsin multiplier option may be more reflective of a state or regional economy.

Using the Cooperative Impacts Calculator

The cooperative impacts calculator was developed to broadly gauge potential cooperative impacts based on cooperative data that has been gathered by sector in a given region. It is for general estimates only, and is not meant to be a substitute for an economic impact analysis of cooperatives by sector in a state or region.

It should be noted that there is no “cooperative multiplier” within a sector: financial management practices differ significantly across sector, and the impact of patronage redemption practices is difficult to assess.

To use the calculator, cooperative firm data on annual sales revenue, wages, and the number of jobs (in full-time equivalents) by business sector are needed.

UWCC Cooperative Impacts Calculator

When referencing the data, calculator or analysis, please cite "Cooperative Impacts Calculator. University of Wisconsin Center for Cooperatives."