How can spillover effects be measured?
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Measuring spillover effects involves a combination of theoretical approaches, statistical techniques, and practical simulations. Here are some insights from experts on the topic:
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Economic Multiplier Effect: Enrico Moretti discusses the spillover effects of attracting high-skilled, innovative jobs to a community. He highlights the "multiplier effect," where each high-tech job can support many additional jobs in the local service sector. This effect can be measured by estimating the additional jobs created as a result of the new high-tech positions 1.
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Theoretical Frameworks: Dave Donaldson explains that measuring spillover effects in real-world scenarios often requires help from economic theory. Since it's impractical to perfectly track all spillovers, economists rely on structural models to predict where and how spillovers will occur. Experiments can be designed to identify areas that receive varying levels of treatment to infer spillover magnitudes 2.
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Empirical Simulations: Isabella Weber describes using simulations to measure the impact of shocks in various industries. By simulating price shocks in different sectors and tracing how these shocks propagate through the economy, researchers can rank sectors based on their systemic significance. This involves tracking both direct and indirect effects on consumer prices (CPI) 3.
These methods provide a foundational approach to understanding and quantifying spillover effects in different contexts, helping policy makers and researchers make informed decisions.
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