Using input-output models to measure local economic impacts

State governments are often interested in the economic impact of various policies and shocks to local economies. Typically, multipliers from an input-output model are used to determine the total effect, which includes the direct effect of the policy or shock and the so-called ripple effects. This paper presents the theoretical background and examples of applications of a regional input-output model. The theoretical background will focus on explaining hour to correctly use such models so that exaggerated effects are not claimed. Examples of how to apply a tailor made model, namely RLMS II, are discussed. The paper concludes with a discussion of the value and the potential misuses of regional impact models.