Observation and assessment of local economic development with regard to the application of the local multiplier

ABSTRACT

This contribution deals with the observation and evaluation of the issues of local economic development with a focus on the relatively new method of the local multiplier LM3. The main objective of this article is to evaluate the application possibilities of selected tools for the analysis of local economic development, in order to verify the effectiveness of the methodology of the local multiplier LM3 and to discuss the possibilities of its practical use. This LM3 method is perceived to be one of the convenient methods on how to capture certain components of local economic development. This indicator of the power of local economies is verified within field research in two case studies conducted in the Šumava region in Southwest Bohemia. The added value of this contribution is both methodological and practical. Currently, there exist only very few studies using the LM3 method in the Czech Republic and they do not offer satisfying evaluation of possible broader use of this method in the area of local development in the specific Czech regions. Having summarized two new case studies, this article contributes to the methodological discussion of the LM method and includes concrete practical recommendations for future research and also practical use.

KEYWORDS:

• Local multiplier
• local economic development
• economic impact assessment
• regional analysis
• local stakeholders

Acknowledgement

This article was prepared under research project no. F5 30/2016 „Observation and evaluation of economic and social development of regions in the Czech Republic and the EU: methodology and practical applications, registered at the University of Economics, Prague.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. TIMUR is a Czech non-profit organization (NGO) that was founded in 2001 within the European project ‘European Common Indicators’.

2. For example, software application LM3 Online, which was invented in the U.K., uses a quantity estimate to identify the average percentage of local expenditures of local employees. Based on previous results, the authors set the portion to 66% regarding local expenditures of local employees and to 33% concerning local expenditures of non-local employees (those who commute to work from other regions). The authors of LM3 studies have gradually simplified the materials which are provided to local stakeholders, employees, suppliers and organisations, in order to achieve a high number of responses. Unfortunately, many of the returned questionnaires included inexact, suspicious and incomplete information (Sacks, 2002). The same simplification process have been observed also in the studies from Czechland (Došek, 2006; Ježková, 2008; Kutáček, 2007).

3. Certification of local products takes place in 26 Czech regions. Šumava is the only region in the Czech Republic that also provides certification of local services (especially tourism accommodation and traditional restaurants) (Association of regional brands, 2015). Currently, all of the certification process is based, exclusively, on qualitative criteria. A certain level of quantification would make the procedure more transparent and the results would be more comparable. This local approach to production and consumption is also supported in the Czech Republic through the ‘regional consumer’s contests’ (project that is organized by the Ministry of Living Environment for the purpose of supporting local producers) (Ministry of Agriculture of the Czech Republic, 2015).