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Thread: Spending dollars local question

  1. #1
    Jul 2008
    Illinois as of 1/1/09

    Spending dollars local question

    There have been tons of studies on how spending local impacts your community. A common number is 65% of dollars at a local stores stay local and about 35% spent at a national store stay local.

    My question is in regards to service industries - is there a similar study done? For example, if I go to the local doctor office or hire the local engineering firm are the ratios the same? If I'm a local bank trying to win the rights to finance a project do those dollars stay local at the same ratio as the retail numbers?

  2. #2
    Cyburbian WSU MUP Student's avatar
    Mar 2007
    Lowering the PCI in the Hills
    Generally, the money spent at local service firms stays in the local area at a slightly, but significantly, higher rate but it can vary quite a bit from industry to industry, and even within particular geographies.

    There is some scholarly literature and good articles on the topic but it's been so long since I've looked for them that I cannot remember where I saw them. You might want to check with the Chicago Fed as they have a very strong focus on community and economic development or with the NFIB as they have done quite a bit of research (granted, they are sort of one-sided) on the impact of small businesses and their impact on local economies.

    Another source might be the Bureau of Economic Analysis. They do a lot of research on base industries and their impact on local economies (for the RIMS II program) and there should be some overlap with impacts of spending at small businesses that are service providers compared to goods producers.
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