The Multiplier effect

As one economist has said, money is like blood. It needs to keep moving around to keep the economy going.1

Research out of the University of Toronto has suggested that, if every household in Ontario spent $10 a week on local food, we would have an additional $2.4 billion in our local economy at the end of the year and create 10,000 new jobs.2  How?  Because of the snowball (multiplier) effect of money being recirculated in the local economy.  As an example of the multiplier effect working in a buy local effort, this U.S. study showed that “on average, 48 percent of each purchase at local independent businesses was recirculated locally, compared to less than 14 percent of purchases at chain stores.” 3

Certainly, there are a lot of other economic factors to consider.  Buying local and local recirculation of dollars will not suddenly solve our economic challenges.  But, in the multiplier effect, we see at least one economic principle that we can all leverage as our nation works on post COVID-19 recovery.

Sources:

1 Schwartz, Judith D.  Buying Local: How It Boosts the Economy.  Time Magazine. June 2009. http://content.time.com/time/business/article/0,8599,1903632,00.html

2 The Multiplier Effect of Buying Local Food.  Sustain Ontario. July 2012. The Ontario Table. 2012. https://sustainontario.com/2012/07/04/multiplier-effect/#_ednref6

3 The Multiplier Effect of Local Independent Businesses. American Independent Business Alliance. 2015. https://www.amiba.net/resources/multiplier-effect/