Economic modelling is important for a client particularly when arguing for any new infrastructure or services as some sort of economic justification needs to be made. Due to my belief that communities need to think beyond economics, the economic modelling I conduct usually also has some element of wellbeing in it – I would call it wellbeing economics.
The types of economic modelling I conduct are:
Microsimulation Modelling: This type of economic modelling uses records of individuals and households to identify the impact of an intervention before it is implemented. I use this type of modelling when I want to estimate the impact of a change in local rates; or a change in development rules. The method I use is a synthetic population which is aged using birth, death and migration rates. Using this model, I can calculate poverty rates; housing stress and affordability; and other outcomes for small areas.
Cost-Benefit analysis: While I call this cost-benefit analysis, I also try to incorporate wherever possible the social costs and benefits of a proposal. While these may be difficult to cost, they will be highlighted in my report as uncosted costs and benefits.
My approach to cost-benefit analysis is to take a consultative approach with the community, talking to as many people as possible, before identifying and properly costing all social and economic costs and benefits that can be calculated; and then taking this back to the community to identify any costs or benefits (social and economic) that I may have missed. These are then incorporated into the final report to Council.
CGE and Input/output Modelling: I started my career in the ABS in the Input/output section in 1989, so have considerable experience with Input/output models. These models allow me to identify what materials are coming into your council area; where these inputs are being used; and what outputs are being created. Input-Output models use ABS data, but I also use data from local businesses by talking to them and getting an idea of what inputs they are using and what value they are adding.
These Input-Output tables give a good idea of what comes into and out of a local economy, and what value it adds. They can also be used as the basis for Computable Generalised Equilibrium (CGE) models, which can calculate second round impacts – so the amounts being spent in local stores by new employees. While I have access to this type of modelling, I rarely use it as by definition, it assumes general equilibrium (supply and demand are balanced), and I don’t think I’ve seen many local economies in equilibrium over the long term – drought, floods, Federal Government policy, and a host of other outside influences means this assumption is unreasonable.
Value Chain Analysis: This is an economic technique that surveys businesses in an area to identify the value chain, and identify gaps in the chain, and what could be done to fill these gaps. The process is consultative, involving local businesses; and identifies where new business can value add to your current businesses, for agglomeration economies (businesses that feed their outputs as inputs into another local business).
Examples of published work
Tanton, R. , Vidyattama, Y. , Nepal, B. and McNamara, J. (2011), “Small area estimation using a reweighting algorithm”. Journal of the Royal Statistical Society: Series A (Statistics in Society), 174: 931-951. doi:10.1111/j.1467-985X.2011.00690.x
Tanton, R. (2011), “Spatial microsimulation as a method for estimating different poverty rates in Australia”. Population, Space and Place, 17: 222-235. doi:10.1002/psp.601
Tanton, R., Peel, D. and Vidyattama, Y., (2018), ‘Poverty in Victoria’, NATSEM, Institute for Governance and Policy Analysis (IGPA), University of Canberra. Report commissioned by VCOSS.
Vidyattama, Rao, Mohanty and Tanton (2014), “Modelling the impact of declining Australian terms of trade on the spatial distribution of income“, International Journal of Microsimulation, 7(1) 100-126
Value Chain Analysis
Hogan, Carson, Cleary, Donnelly, Houghton, Phillips, Tanton (2014), “Community Adaptability Tool – Securing the wealth and wellbeing of rural communities“, RIRDC Report
Hogan, Carson, Cleary, Donnelly, Houghton, Phillips, Tanton (2014), “The Community Adaptability Tool (CAT) -A guide to using the CAT to secure the wealth and wellbeing of rural communities“, RIRDC Report