What economic indicators should you consider when analyzing the impact of a new industry?

1 GDP and GVA

Gross domestic product (GDP) and gross value added (GVA) are two indicators that measure the total output and income generated by an economy. GDP is the sum of the value of all goods and services produced in a country, while GVA is the difference between the value of output and the cost of inputs. A new industry can contribute to GDP and GVA by increasing production, employment, and income in the economy. However, GDP and GVA do not capture the distribution of income, the environmental impact, or the quality of life of the population.

2 Employment and wages

Another indicator that can help you analyze the impact of a new industry is the level and quality of employment and wages. A new industry can create direct, indirect, and induced jobs in the economy. Direct jobs are those that are employed by the new industry itself, indirect jobs are those that are supported by the supply chain of the new industry, and induced jobs are those that are generated by the spending of the direct and indirect workers. A new industry can also affect the wages and working conditions of the existing workers, either positively or negatively, depending on the demand and supply of labor, the skill level, and the bargaining power.

3 Taxes and subsidies

A third indicator that can help you analyze the impact of a new industry is the amount and type of taxes and subsidies that are involved. A new industry can generate tax revenues for the government, both directly and indirectly, by paying corporate taxes, income taxes, sales taxes, and other fees and charges. A new industry can also receive subsidies from the government, either directly or indirectly, by benefiting from tax incentives, grants, loans, guarantees, or other forms of public support. The net effect of taxes and subsidies on the economy depends on how they are financed, allocated, and spent.

4 Innovation and productivity

A fourth indicator that can help you analyze the impact of a new industry is the degree and direction of innovation and productivity that are stimulated. A new industry can foster innovation and productivity by introducing new products, processes, or technologies, by investing in research and development, by creating spillovers and linkages with other sectors, or by enhancing human capital and skills. Innovation and productivity can improve the competitiveness and efficiency of the economy, as well as the quality and diversity of goods and services available to consumers.

5 Externalities and social welfare

A fifth indicator that can help you analyze the impact of a new industry is the extent and nature of externalities and social welfare that are generated. Externalities are the positive or negative effects that a new industry has on third parties that are not directly involved in its production or consumption. For example, a new industry can create positive externalities by reducing pollution, improving health, or increasing social cohesion. Alternatively, a new industry can create negative externalities by increasing congestion, degrading natural resources, or creating inequalities. Social welfare is the overall well-being of the society, which depends on the balance between the benefits and costs of a new industry, as well as the distribution of these effects among different groups and regions.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?