Local multiplier effect

The concept has been taken up by advocates for "spend local" campaigns in addition to more formal treatments in the area of regional economic development.

The Institute for Local Self-Reliance, a non-profit organization, executed a study looking at much smaller communities in the Central Coast of Maine.

In discussing local multipliers, regional economists focus on differences in job creation in the tradable and non-tradable sectors of the economy.

This larger market allows the tradable sector to generate more revenue, have higher salaries, and increase in size independent of the local economic climate.

If the tradable industry has high demand for a type of non-tradable good that needs more workers to be produced then the multiplier will be higher.

Higher pay results in larger amounts of disposable income that can be spent on the local economy.

Such industries are not easily engineered by government intervention as their current locations are often due to random coincidences during their founding periods.

Moretti cites the example of Apple Computers which directly employs only 13,000 workers but generates 60,000 additional service jobs in the area.

Using a modified version of Moretti's method it found that the true multiplier effect was only 1.02 non-tradable jobs created.

For example, Sweden's relatively smaller wage difference between skilled and unskilled workers negatively impacts the overall multiplier effect.