Economic impact analysis: a theoretical approach

Where the traditional focus of local planning has been on access to health services, recent legislation and policy reflect an equally prominent concern for costs. Appropriate methodologies for collection and analysis of financial and economic data have been lacking. A particularly difficult problem, both theoretically and practically, is the economic impact of a capital investment by one provider on the rest of the local service system. In order to focus the attention of health service planners, economists and others on this issue, a preliminary theory of "economic impact analysis" is outlined here. Scope of concern and conditions of application ("ripple" and "spigot" models) are defined. Existing analytical tools are reviewed, and related philosophical issues raised.