Estimating the Impacts of Business Assistance Programs

The Manufacturing Extension Partnership (MEP) is a public-private partnership that provides small and medium-sized manufacturers (SMMs) technology-based services needed to thrive in today’s economy and create well-paying manufacturing jobs. The mission of MEP is to enhance the productivity and technological performance of U.S. manufacturing.

• The study’s goal was to use the client-reported outcomes to estimate the overall effect of MEPs on the U.S. economy. The estimates have been created for the past three fiscal years.
• The study used new and retained jobs, new and retained sales, new investment, and cost savings reported by clients and then aggregated.
• The study used the survey results in combination with an economic impact model developed by Regional Economic Models Inc. (REMI) to estimate the indirect and induced effects of the reported increase in jobs, sales, cost savings, and investments by MEP clients.

The study takes the reported outcomes of MEP clients at face value. It did not attempt to validate the reported outcomes.

• It considers how the results would vary if only a fraction of the reported outcomes represented the actual effects of MEP activities.
• Recognizing that one use of this study is to determine whether the cost of the MEP program is justified by the benefits it generates, the study estimates the fraction of reported outcomes required for the program to break even, as measured by the projected personal income tax increases covering the annual cost of the program for FY2018 ($140 million).

The study presents three scenarios:

• Scenario One: The unconstrained approach in which it is assumed that an increase in sales of one firm does not affect or reduce the sales of another firm. This assumption is not entirely realistic since it does not consider competition among firms and the displacement effects that occur from the competition across firms. This scenario is included to serve as an upper bound on the results.
• Scenario Two: A more accurate, yet conservative scenario assumes that competition among firms reduces the outcomes as a result of competition.
• Scenario Three: A third model was run to examine how much the overall survey impacts used in the model must be discounted to generate enough federal personal tax revenue to equal federal funding. This is intended to serve as a lower bound on the results.

(The presentation is 18 slides long.)

The presentation noted the following:

• Data from the national FY 2018 NIST MEP client survey were provided to Upjohn. This was used to estimate the overall effect of the MEPs on the U.S. economy.
• It is likely that not all of a firm’s revenue growth, investment, and cost savings are fully attributable to MEP center activities.
• The final forecast tests the sensitivity to this consideration. It asks, “How much of the changes to the firms must be attributable to MEP activities for the annual cost of MEP to equal its benefits?”
• By setting the return on investment (ROI) at 1:1, with personal income tax collection equal to MEP’s FY2018 budget of $140 million, the needed level of MEP attribution is about 6.9 percent. Even by claiming just under 7 percent of the reported client outcomes, MEP activities are associated with an additional 16,427 jobs and just over a $1.6 billion increase in GDP.

This resource was presented at the REMI 34th Annual Users' Conference, Populism, Policy Analysis and the Economy on 10/16/19

• Last Updated:
• Created:
• Resource Publication Date: 2020
• Author(s): J. Robey, R. W. Eberts, K. Voytek
• Funding Source: W.E. Upjohn Institute
• Resource Availability: Publicly available
• Posted by: India Johnson
• Posted in: Workforce System Strategies