Indirect and induced effects

Brown’s impact on the Rhode Island economy goes beyond the direct impact of its spending on payroll, purchasing and construction; it also includes "indirect and induced” or “multiplier” effects. Rhode Island companies from which the University buys goods and services use some of the money they earn from Brown to buy goods and services from other local businesses; and those businesses in turn buy some of what they need from still other Rhode Island companies. Similarly, Brown’s employees (and the employees of its Rhode Island-based suppliers) spend part of their take-home pay locally — for housing, utilities, food, child care, entertainment and other routine household needs.

As Table 4 shows, in fiscal year 2011 the indirect and induced effects generated by Brown’s spending on payroll, purchasing and construction – that is, the effects of household spending by Brown employees, and of in-state spending by the University’s Rhode Island suppliers and contractors – totaled approximately $294.5 million in statewide economic output, and 2,295 FTE jobs.

Thus, the direct, indirect and induced effects of the spending on payroll, purchasing and construction – and the spending by university employees and in-state suppliers that university spending made possible – generate more than 7,800 full-time-equivalent jobs throughout Rhode Island, and more than $725 million in statewide economic output.

Table 4: State-wide impact of purchasing, construction and payroll spending

 

Direct University spending

Indirect and induced impact of spending by vendors, contractors and employees

 

Payroll

Purchasing / construction

Impact of employee spending

Impact of vendor and contractor spending

Total impact

Rhode Island

$271.9 million

$159.3 million

$183.0 million

$111.5 million

$725.7 million

4,459 jobs

1,050 FTE

1,445 FTE

850 FTE

7,804 FTE