IFC’s Economic Impact Estimation Framework has been developed to estimate value added and job creation of IFC’s long-term investment projects. Depending on the sector and general characteristics, the framework applies one of 13 different models to estimate economy-wide impacts. The models employ a variety of methodologies, each suited to represent specific characteristics of the projects in manufacturing, agribusiness, and services, as well as infrastructure and financial sector projects.
Estimates produced with the Economic Impact Estimation Framework are used as part of AIMM assessments, to report jobs as part of IFC’s IDA19 Policy Commitments, and, since fiscal year 2019, IFC reports job creation as part of the “Measuring Up’ chapter of its annual report.
Within AIMM, economic modeling is used to inform economy-wide impacts within project outcomes. Economy-wide job and value added estimates are used to compute “intensity indicators” (total value added and total number of jobs per $1 million of investment) and are combined with the respective development gap indicators (the World Bank Group income group classification for value added, and informal labor and unemployment rates for job creation, respectively).
The IFC Economic Impact Estimation Framework considers three layers of economic effects:
- Direct effects, such as jobs created by an IFC client company as a result of a project.
- Indirect effects, which can occur downstream and/or upstream from the investment project or client company. An example would be jobs created along a client’s supply chain, or as a result of a downstream industry’s growth.
- Induced effects, which are caused by an increase in domestic consumption resulting from an increase in direct and indirect employment and income. Induced impacts include newly created jobs that cater to the increased consumption in the economy.