TalkAbout Jazz from western Colorado

Economic impact on local economies when a state or local government chooses to outsource work to a foreign country.

Background: In the late 1990's The Colorado Department of Human Services choose to outsource to India the development of new "management software" to manage the delivery of services to the citizens of Colorado.

Hi Joe;

RE: A short synopsis and example of the “Regional Input-Output System” model for economic impact

I finally obtained specific information on economic multipliers from John Stump at the San Luis Valley Development Resources Group.

The data, generated by the US Bureau of Economic Analysis, are described at Discription and are part of RIMS (Regional Input-Output Modeling System). I/O economic models were developed by Vassily Leontif, who received the Economics Nobel Prize in 1973. The models use matrices to capture economic interaction of industries, services, ...

Although the multipliers are rather crude, they are the most accurate available. SLVDRG's values were for January, 1999. While the multiplier value was old, John averred that there was not so much growth in rural Colorado since 1999 to significantly alter the input-output models or multipliers. More recent values of multipliers are available from BEA for $225 per region.

John said that the Earnings Multiplier for state and regional spending was the one to use. It was 2.11--so $2.11 in economic activity was obtained for every $1.00 spent by state and local governments. The $2.11 includes the $1.00 of government spending, so the net increase in economic activity for every $1.00 of spending was $1.10.

I could not find information on the total cost of the CDHS software system. If (hypothetically) it cost $500,000, then Coloradoans lost $1.05 million.

I don't know what company got the contract to develop the software, but a quick Google search showed CIBER got a contract from Colorado Department of Human Services in 1999. CIBER's report on the contract The report does not report specific costs.

Caveats: The 2.11 figure is crude--an aggregate over all industries/services for our region (San Luis Valley). This value would probably be different for your region (which includes part of the I-70 corridor, so has more industry, more services,...), and it would be different for the specific industry (computer and data processing services).


PS: Thank you for the great time at your sheep camp. Rita still enthuses about it ;-)

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