Accurately calculating the economic ripple effects of public investment projects on regional economies is crucial for recognizing their significance, establishing policies, and setting funding priorities. As systematic evaluations of the economic effects of fiscal projects become increasingly necessary, this study aims to provide guidelines for conducting analyses of economic ripple effects.
The input-output table is a key element of the national accounts system, periodically compiled and published by the Bank of Korea to track industrial structural changes resulting from economic growth and development. It serves as a fundamental resource for economic planning and policy-making. This matrix-based statistical table records all transactions related to the production and disposal of goods and services within a specific region over a defined period.
Input-output tables are categorized by “industry” and “commodity,” with further divisions into supply-use tables (organized by industry) and input-output tables (organized by commodities). This study focuses on input-output tables, which are especially useful for analyzing economic ripple effects, including production inducement effects, value-added inducement effects, and employment inducement effects.
Analyzing the economic ripple effects of Seoul’s major fiscal projects using input-output tables offers the benefits of objectivity and reliability. Updated every five years by the Bank of Korea, these tables reflect changes in Korea's economic structure and Seoul’s fiscal investment expenditure patterns, making them a valuable tool for economic impact analysis.
This study presents a framework for sectoral classification in ripple effect analysis, based on a review of Seoul's fiscal projects and evaluations conducted by the Seoul Public Investment Management Center. Seoul's fiscal projects are categorized into “investment projects” and “event-related projects.” Investment projects typically fall under the “construction” sector during the construction phase but shift to the intended industry (e.g., “social welfare,” “health”) during the operation phase. Event-related projects, such as those in “culture and tourism,” are classified under “arts, sports, and recreation services” in the input-output table. Identifying the project phase is crucial for accurate classification.
To assist Seoul's fiscal departments in calculating ripple effects directly, this study provides an Excel-based program. The analysis must take into account that production and value-added ripple effects require subcategories of the input-output classification, while employment ripple effects necessitate intermediate-level classifications.