General Electric's Impact on the State of Texas’s
Economy
May 2017
An Economic Analysis Prepared by:
1
INTRODUCTION ...................................................................................... 2
TEXAS ........................................................................................................ 6
TOTAL ECONOMIC OUTPUT .............................................................................. 6
EMPLOYMENT ........................................................................................................... 7
CHARITABLE IMPACT ............................................................................................. 8
INVESTMENT .............................................................................................................. 9
RESEARCH METHODOLOGY ............................................................... 10
DEFINITIONS .......................................................................................... 13
APPENDIX ............................................................................................... 15
REFERENCES ........................................................................................... 16
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General Electric's Impact on the State of Texas’s Economy
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INTRODUCTION General Electric Company (GE or 'the company') is a diversified industrial
corporation that offers a wide range of products and services including aircraft
engines, power generation equipment, medical imaging, as well as industrial
financing. The company primarily operates in North America, Europe, Asia, South
America, Australia and Africa and employed approximately 100,000 people in the
United States in 2016.
GE has operated in the Lone Star State for decades and is home to GE
Transportation, GE Oil & Gas, GE Aviation and GE Power, as well as other GE
businesses. GE Manufacturing Solutions facility in Fort Worth is part of GE
Transportation’s supply chain making advanced rail and mining-related equipment
and serves as the primary manufacturing facility for its Evolution Series locomotive
– the most technologically advanced, diesel-electric, heavy-haul locomotive in the
world. This 1 million-square-foot facility is one of GE’s largest manufacturing
rooftops worldwide, and in 2016, the site celebrated its 1,000th locomotive only
three-and-a-half years after opening. GE Transportation has also partnered with
Tarrant County Community College and North Central Texas College to help train
over 600 production employees in machining, welding, painting, electrical wiring and
shop math.
In Texas, GE Oil & Gas manufactures advanced physical and digital technologies for
the industry. The business has decades of manufacturing experience in Texas and
technologies that work throughout the entire oil and gas value chain - from wellhead
to refinery. GE Oil & Gas makes and assembles small-scale LNG (liquefied natural
gas) plants in Schertz, manufactures gearing technology and assembles pumping units
in Lufkin, and develops well automation technology in Houston. Houston is also
home to the GE Oil & Gas Training Center, where the business develops control
systems, reciprocating compressors, downhole technology, controllers and
automation equipment, and valve services. Through partnering with local schools,
fundraising and volunteering for major charities, GE Oil & Gas is committed to
creating opportunities for people by developing skills and building stronger
communities.
GE Aviation’s digital business is headquartered in Austin, bringing together design
engineers, data scientists and software developers to monitor more than 35,000
commercial jet engines in operation and help customers across the aviation
ecosystem to increase productivity and minimize down time by uniting analytics and
physics with software solutions. Two other Aviation locations in Texas include the
McAllen site, which services airfoils for commercial engines, and CFAN Company
in San Marcos, a joint venture between GE and Snecma that manufactures and
supplies composite parts, fan blades, and airfoils.
GE provides
substantial direct,
indirect, and
induced
socioeconomic
benefits to the
state of Texas.
3
In 2017, GE asked the business economic intelligence and research company, Frost
& Sullivan, to conduct an economic impact analysis (EIA) of the presence of GE’s
operations in the state of Texas. This EIA tool, built by researchers at Frost &
Sullivan, can be used to assess various scenarios and identify the potential impacts
of GE’s operational presence on Texas’s economy in terms of total economic output
impact, job creation, and charitable contributions.
Independent of which impact variable is explored, GE’s impact on the state of
Texas’s economy can be measured and categorized into three levels of impact:
o Direct impact—the total number of GE jobs created, its associated total
economic output, paid wages, and charitable contributions generated from
GE’s production operations
o Indirect impact—the number of indirect jobs created, its associated
wages, and total economic output related to GE’s direct expenditures on
goods and services through its supply chain and from each US state’s local
economy. This is the economic activity generated by GE’s supply chain to
serve GE’s operational needs.
o Induced impact—the economic impact created as a result of local
spending by GE employees and families, its associated wages and GDP
produced from those induced wages. This is the economic activity
generated by the household expenditures of GE employees in the local
economy.
To calculate these economic impacts, a pragmatic input/output (I/O) production
model was developed. The I/O model is based on the assumption that GE’s presence
in a given economy contributes to the total value of the economy, just like all other
economic actors in the economy and that each economic actor has a direct impact,
an indirect impact, and an induced impact on the total economy through the
economic decisions they make. Each of these types of impacts can be measured and
compared to the performance of the total economy. Consequently, economic
impact statements can be made regarding the relative and absolute benefit GE has
on the economy as a whole.
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General Electric's Impact on the State of Texas’s Economy
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GE provides significant economic and philanthropic benefit to the state of Texas. In
2016, GE contributed a total of $15.21 billion in direct, indirect, and induced total
production output in the state. GE’s economic presence in the state of Texas
supports 39,049 direct, indirect, and induced fulltime equivalent jobs. This is nearly
the same number of people that can fill Minute Maid Park in Houston, Texas to
capacity. GE employs 9,833 fulltime manufacturing and professional jobs in state of
Texas and GE supports an additional 13,893 fulltime equivalent jobs in its supply
chain. An additional 15,323 fulltime equivalent jobs are supported by local
companies that serve the personal consumption needs of GE employee households.
Consequently, GE’s economic presence in the state of Texas has contributed to the
generation of $3.867 billion in total direct, indirect, and induced compensation in
2016 and its employees and its foundation contributed $2.97 million in total
charitable contributions. Overall, GE has demonstrated its commitment to the state
of Texas’s economy through its continued investment and rock-solid presence
today, and tomorrow.
Note that this economic analysis only includes the impact of GE’s current operations
in the state of Texas and does not include the additional economic benefits that GE
brings to the state through capital investments, such as GE Transportation’s $235
investment in its Manufacturing Solutions facility in Fort Worth or the opening of
GE Aviation’s digital collaboration center in Austin. These investments lead to
additional construction and infrastructure jobs and economic activity which are not
covered in this report.
5
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General Electric's Impact on the State of Texas’s Economy
6
TEXAS TOTAL ECONOMIC OUTPUT
GE provides significant economic and philanthropic benefit to the state of Texas. In
2016, GE contributed a total of $15.21 billion in direct, indirect, and induced total
production output in the state of Texas. That is the same as $41.63 million of total
economic production output per day, $1.7 million per hour, and $482 per second.
The source of this total economic output is derived from three sources; GE’s direct
productivity contributed 31.0% of the total economic impact, the productive output
of GE’s supply chain, or the indirect impact of GE’s presence in the state,
contributed 61.2% of the total economic impact, and the economic output
contribution of the local businesses that serves GE employee household personal
consumption induced 7.8% of the total economic output supported by GE’s
presence in the state of Texas. GE’s economic output within the state of Texas is
shown below in both absolute and relative terms.
Total Economic Output Attributed to GE’s Presence in the State of Texas (Total Direct,
Indirect, and Induced), USD, 2016
GE's Impact on the U.S. State of Texas – Total Economic Output, USD Million, 2016
Metrics Total Economic Impact
Direct $4,707.3
Indirect $9,311.1
Total Direct and Indirect Impact $14,018.4
Induced Impact $1,187.0
Total $15,205.4
Direct
31.0%
Indirect
61.2%
Induced
7.8%
Relative Economic Output attributed to GE’s
Presence in the State of Texas by Impact Type
(Direct, Indirect, and Induced), 2016
PER DAY
$41.6M
PER HOUR
$1.7M
PER YEAR
$15.21B
PER SECOND
$482
$15.21B
Economic Output Attributed to GE’s
Presence in the State of Texas per $1
Spent on GE Employee Compensation,
USD, 2016
Source: Frost & Sullivan
Source: Frost & Sullivan
STATE OVERVIEW
Texas is the 2nd most
populous state in the
USA, with a population
of 27.9M. Texas is highly
diversified economically
and culturally despite the
strong perception as
being an energy industry
dependent state. The
state’s GDP is $1.65
trillion which would make
it the 12th largest country
in the world if Texas was independent of the US.
Population: 27.9 million
GDP: $1.65 trillion
Employment: 9.9
million
Unemployment Rate:
4.2%
$13.17 Total Economic Output
$1 Spent on GE Compensation leads to
7
EMPLOYMENT
GE’s economic presence in the state of Texas supports 39,049 direct, indirect, and
induced fulltime equivalent jobs. This is nearly the same number of people that can
fill Minute Maid Park. In all, one GE job in the state of Texas supports an additional
2.97 fulltime equivalent jobs in Texas, independent of the industry sector.
GE employs 9,833 fulltime manufacturing and professional jobs in the state of Texas
and GE’s supply chain supports 13,893 fulltime equivalent jobs in order to address
GE’s business activity needs. Furthermore, 15,323 fulltime equivalent jobs are
induced to serve the personal consumption needs of GE employee households.
Specifically, for every 100 direct fulltime equivalent GE jobs employed in the state
of Texas, 59 retail trade jobs (5,765 total FTE jobs) and 31 health care and social
assistance jobs (3,035 total FTE jobs) are supported. In addition, for every 100 GE
jobs, 22 fulltime equivalent accommodation and food service jobs (2,179 total FTE
jobs) and 10 education services including teachers (1,015 total FTE jobs) are also
supported by the presence of GE and its supply chain partners in the state of Texas.
GE's Impact on the U.S. State of Texas – # of Additional Jobs Supported per 100 GE
Jobs Employed, USD Million, 2016
Industry Sector Measure
Retail trade 59
Professional and business services 46
Health care and social assistance 31
Manufacturing 24
Accommodation and food services 22
Educational services 10
All Others 105
Total Jobs Supported per 100 GE Jobs Employed 297
GE's Impact on the U.S. State of Texas – Total Jobs Supported, Fulltime Equivalent
Jobs, 2016
Every GE job in Texas
creates 2.97 additional
jobs within the state.
This positive feedback
helps to create jobs in a
wider variety of industry sectors.
Source: Frost & Sullivan
Manufacturing
6,935
Retail trade
5,765
Professional and
business services9,750
Educational
services1,015
Health care and
social assistance3,035
Accommodation
and food services2,179
All Others
10,370
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General Electric's Impact on the State of Texas’s Economy
8
LABOR COMPENSATION
GE’s economic presence in the state of Texas has contributed to the generation of
$3.876 billion in total direct, indirect, and induced compensation in 2016.
Furthermore, GE compensates its direct employees significantly more than the
average Texas business. Specifically, GE compensates its average employee 2.19
times more than the state’s average compensation rate. This increased
compensation rate leads to a significantly greater economic output potential; $13.17
of total direct, indirect, and induced economic output was created for every $1 of
GE compensation expended in 2016.
CHARITABLE IMPACT
The benefits of GE’s presence in the state of Texas go beyond the economy as
indicated in its direct contributions to the communities of Texas. In 2016, GE
corporate, GE’s employees, and the GE Foundation contributed $2.97 million in
total charitable contributions (equivalent to $302 per employee) to local charities
in Texas. Overall, General Electric has clearly demonstrated its commitment to the
state of Texas’s overall economy and its communities through its continued
investment and charitable contributions.
GE's Charitable Impact – Monetary Donations and Volunteer Hours, Texas, 2016
Metric Unit of Measure Measure
GE Monetary Donations USD million $2.97
GE Monetary Donations
per GE Employee USD/person $302
GE Volunteer Hours Pro Bone Hours 9,736
$3.867B
Total GE Attributed Direct, Indirect,
and Induced Employee
Compensation, Texas, 2016
2.19x
Average GE Compensation
Relative to State Average per
State, Texas, 2016
Source: Frost & Sullivan
GE contributed $2.97
million in total
charitable contributions
and provided 9,736
hours of pro bono
volunteer hours to local
charities in Texas.
GE compensates its
average employee 2.19
times more than the
state’s average
compensation rate.
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INVESTMENT
This report’s economic analysis only includes the impact of GE’s current operations
in the state of Texas and does not include the additional economic benefits that GE
brings to the state through capital investments. These investments lead to additional
construction and infrastructure jobs and economic activity which are not covered
in this report.
In October 2016, GE Aviation opened its digital collaboration center in Austin with
launch customer Qantas Airways. Through the partnership, data scientists, software
developers and architects from GE and Qantas will work together to analyze data
to achieve greater fleet intelligence and operational insights. GE Aviation occupies
approximately 27,000 square feet at the facility. Initiatives in the pipeline could lead
to a significant increase in employment in Austin for GE Aviation by the end of 2017.
In December 2012, GE Transportation completed the 1-million-square-foot GE
Manufacturing Solutions factory in Fort Worth, Texas. After purchasing the site in
July 2011, the team spent over a year retrofitting the facility, creating additional
construction and infrastructure jobs as well as bolstering the local economy. The
facility is now one of GE’s largest manufacturing rooftops worldwide, and represents
an investment of $235 million overall.
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General Electric's Impact on the State of Texas’s Economy
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RESEARCH METHODOLOGY There are a number of approaches in measuring the economic impact of a given
company’s operational presence, but the most common and acceptable economic
model is the input-output (I/O) method, invented by Nobel Prize-winner Wassily
Leontief. The Leontief I/O model is based on using matrices that report the value
of inputs (in producer prices) delivered at the national and regional level by a set of
industry sectors used by the same set of industry sectors producing output at the
national and regional level (and also measured in producer prices). These matrices,
known as national input-output tables, are produced and published in the United
States by the Department of Commerce’s Bureau of Economic Analysis (BEA).
There are 3 types of economic impacts – direct, indirect, and induced – that are
generally recognized by economic practitioners of the I/O model:
Direct Impact—the total number of jobs created and its associated value-
add to the local economy, paid wages, and associated federal, state, and local
income taxes generated from the primary economic entity of importance.
The primary economic entity of importance can be a given
company/corporation, industry sector, project, or organization.
Indirect Impact—the number of indirect jobs created, its associated wages,
and generated federal, state, and local income taxes related to primary
economic entity of importance’s direct expenditures on goods and services
within its supply chain and from each region’s local economy. This is the
economic activity generated by primary economic entity of importance’s
supply chain in order to serve primary economic entity of importance’s
operational needs.
Induced Impact—the economic impact created as a result of local spending
by the households of employees of the primary economic entity of
importance. These expended wages are used to create new wages, new
GDP, and new federal, state, and local income taxes generated in order to
deliver goods and services to the households of employees of the primary
economic entity of importance. This is the economic activity generated by
the household expenditures of the employees of primary economic entity
of importance in the local economy.
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I/O matrix tables are used to calculate economic impact multipliers used in the EIA
model. Multipliers are parameters that are used for calculating the total impact on
all industry sectors in an economy (including cascading effects derived from the
entire value chain) of changes in the demand for the output of any given industry
sector. These multipliers describe the expected, or average, effects and not marginal
effects. Thus, these multiples do not take into consideration economies of scale,
unused production capacity or technological change but they still provide a good
picture of the inter-relationships between industry sectors that supply valuable
inputs and industry sectors that use these inputs to make more valuable products.
Specifically, these multipliers can be used to calculate the direct and indirect
economic impacts of a new investment in an economy or the size of the economic
importance of a company, product, project, etc. in terms of the value of total
production output (in producer prices), gross value added (which is also a proxy
for gross domestic product), the total employment (in terms of the number of full
time equivalent jobs created), total expenditures on labor compensation, tax
revenue generation, and shareholder profits.
An I/O matrix table models the organization of the United States’ entire industrial
production system in a given year. The row of an I/O table reports the value of
inputs sold to each industry sector for a given industry sector and the sum of a row
report’s the total value of sold inputs across all industry sectors. The co lumn of an
I/O table reports the value of the inputs used and paid for by a given industry sector.
It is similar to a bill of material’s used by a given industry sector and the sum of a
given column equals the total expenditure on inputs used to create the given
industry’s output. Thus, I/O matrix tables show the relationships that exist between
industrial sectors in a given region.
An I/O table also includes expenditures paid out to various stakeholders for each
of the industry sectors, including total compensation paid out to labor for their help
in transforming the acquired inputs into valuable industrial output, expenditure to
federal, State, and local governments in the form of production and import taxes,
and payments to shareholders and creditors. The sum of all payments to the value
chain for inputs and all other stakeholders for their contributions in transforming
the inputs into valuable production output equals the total economic impact of the
given industry sector’s activity in the given region.
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General Electric's Impact on the State of Texas’s Economy
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As stated previously, the BEA provides national I/O tables that must be adjusted for
regional scale and variance since the size and mix of industrial sectors participating
in each region clearly varies from the aggregated national reporting. In order to
control for this variance, location quotient (LQ) weights can be applied to the
national table in order to scale and adjust the table. The LQ weight is calculated by
taking the ratio of a given industry sector’s share of regional earnings and the given
industry sector’s share of national earnings. If the LQ ratio is less than one, then the
ratio is multiplied by the regional share of the industry sector’s earnings relative to
the national earnings. If the LQ ratio is greater than one, then only the regional
share of the industry sector’s earnings relative to the national earnings is used as
the weight. In addition, primary research and expert judgment must be applied to
check to make sure that the weighted I/O table is truly representative of each state’s
economic interactivity between industry sectors supplying inputs and industry
sectors producing output. In other words, each intersection within the I/O table
must be reviewed and adjusted accordingly if newer or better information is
available.
The following inputs were utilized in this economic analysis:
o Total Production Output and Gross Value-Added of GE’s operations and
the U.S. state in general per U.S. state
o GE provided inputs, including the number of production-related and
professional jobs created per U.S. state and expenditures on goods and
services for local operations from the local economy
o Local employment trends per U.S. state
o Average compensation and wages per laborer in each U.S. state
o Number of employees per industry sector per U.S. state
o Production, Import, and other taxes paid per U.S. state
o Average household/personal expenditures on local goods and services
o Expenditure on local charities by GE and each U.S. state in general
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DEFINITIONS This analysis looks at various measures of economic impact of GE’s presence in each
of the states under investigation in this report. The list below of economic impacts
shows the specific economic impacts measured for the purposes of this analysis.
Total Economic Output – Also called Total Value of Production Output, this
metric reflects the total value of all production activity of a given primary economic
entity of importance. A primary economic entity of importance can be a single
corporation like GE, a set of companies, or an entire industry sector. Specifically,
this measure is basically the value of all production activity, in producer prices,
related to presence of GE in the state and includes the value of production of GE
(direct impact), the suppliers of GE (indirect impact), and the businesses that serves
GE employee household personal expenditure (induced impact). The Total
Economic Output is also equal to the sum of all payments to all of GE’s stakeholders
including the raw material/input suppliers (payments for raw materials), direct
employees (compensation payments), and payments to other stakeholders including
governments (taxation), creditors (interest payments on debt), and profits
(payments to owners). In other words, this metric can be thought of as a proxy for
TOTAL REVENUE generated by GE plus TOTAL REVENUE generated by GE’s
supply chain plus TOTAL REVENUE generated by companies servicing GE and its
employee’s households. Total economic production output per time period can be
easily deduced.
Gross Value Added – This metric is the total value created by GE due to the
transformation of the sourced raw materials/inputs into something more valuable.
This metric is equal to the sum of all payments to employees (compensation
payments) and payments to other stakeholders including governments (taxation),
creditors (interest payments on debt), and profits (payments to owners). This
metric excludes payments to input suppliers.
Labor Compensation – This metric is the total wages and benefits created and
paid out directly by GE (direct impact), the indirect labor payments of GE’s supply
chain, and any wages and benefits created and paid out by the local companies
servicing the needs of GE employee households (induced impact). This is a
component of Gross Value Added. Using the results of the I/O model developed
for this report, the average GE labor compensation relative to the given state’s
average labor compensation (ratio of GE compensation relative to average state
compensation; $GE wage/$ average state wage).
Employment – This metric is the total number of fulltime equivalent jobs created
by GE (direct impact), the total number of fulltime equivalent jobs created by GE’s
supply chain as a consequence of servicing the raw material needs of GE (indirect
impact), and the total number of fulltime equivalent jobs created by local companies
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General Electric's Impact on the State of Texas’s Economy
14
servicing the needs of GE employee households (induced impact). All employment
findings reported in this analysis are measured in fulltime equivalent jobs. Using
multiples derived from the I/O model, types of jobs created by industry sector can
be deduced. In addition, the number of indirect and induced jobs created due to
GE’s presence per one GE job created and total direct, indirect, and induced jobs
created relative to total state jobs can be deduced.
Charitable Impact – This metric measures the total direct charitable expenditure
by GE and its employees in the form of payments to local charities (monentary
donations) or through donated time (charitable pro bono hours). Charitable Impact
can be measured per GE employee and in total terms.
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APPENDIX General Electric's Impact on the U.S. State of Texas – Economic Impact Summary Table,
USD Million, 2016
Metrics
Total
Economic Impact
Gross
Valued Added
Rest of
Value Added*
Labor Compensation
Employees (People)
Direct $4,707.3 $1,996.0 $841.4 $1,154.6 9,833
Indirect $9,311.1 $3,802.8 $1,692.5 $2,110.3 13,893
Total Direct and Indirect Impact^ $14,018.4 $5,798.9 $2,533.9 $3,265.0 23,726
Induced Impact@ $1,187.0 $1,061.1 $459.2 $601.9 15,323
Total $15,205.4 $6,860.0 $2,993.2 $3,866.8 39,049
* Includes estimated government tax types (Federal, State, and Local; Corporate, Income, Property, Sales, and Others), payments to creditors, and payments to owners (profits) ^ Excludes Second-order Induced Wholesale Trade and Construction Jobs. All Jobs are Full-Time Equivalent. @ GE + Upstream Value Chain Partners
General Electric's Impact on the U.S. State of Texas – Number of Jobs Supported by
Industry Sector, # of Employees, 2016
Industry Sector Direct Jobs Indirect Jobs Induced Jobs Total Jobs
Manufacturing 4,594 2,342 -- 6,935
Retail trade -- 155 5,610 5,765
Professional and business services 5,240 4,511 -- 9,750
Educational services -- 6 1,009 1,015
Health care and social assistance -- 3 3,032 3,035
Accommodation and food services -- 592 1,587 2,179
All Others -- 6,286 4,085 10,370
Total 9,833 13,893 15,323 39,049
Note: Excludes Second-order Induced Wholesale Trade and Construction Jobs. All Jobs are Full-Time Equivalent.
Source: Frost & Sullivan Analysis
General Electric's Impact on the U.S. State of Texas – Charitable Impact, USD Million,
2016
Metrics Total Charitable Impact Expenditure
(USD Million) Volunteer Hours
Texas $2.97M 9,736
Note: NPISH = Nonprofit Institutions Serving Households
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General Electric's Impact on the State of Texas’s Economy
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REFERENCES Angelos Pagulatos and Kurt R. Anschel. (October 1981). An I-O Study of the Economic
Structure of Appalachian Kentucky. Growth & Change. Wiley-Blackwell
Dan S. Rickman. (April 2001) Using Input-Output Information for Bayesian Forecasting of
Industry Employment in a Regional Econometric Model. International Regional Science
Review 24, 2: 226–244
Information Sources: Bureau of Economic Analysis; U.S. Department of Commerce.
Retrieved at https://www.bea.gov/iTable/index_regional.cfm
Miller, Ronald E.; Blair, Peter D. (2009). Input-Output Analysis: Foundations and
Extensions. Cambridge, GBR: Cambridge University Press 10. Retrieved at
http://site.ebrary.com/lib/mitlibraries/Doc?id=10329730&ppg=44
Rebecca Bess and Zoë O. Ambargis (2011) Input-Output Models for Impact Analysis:
Suggestions for Practitioners Using RIMS II Multipliers. Presented at the 50th Southern
Regional Science Association Conference. March 23-27, 2011, New Orleans, Louisiana
U.S. Department of Commerce (1997) Regional Multipliers. A User Handbook for the
Regional Input-Output Modeling System (RIMS II). Third Edition. March 1997
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General Electric's Impact on the State of Texas’s Economy
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