The Immigrant Investor( EB-5) Program was created in 1990 to encourage immigrants wishing to reside in the United States to invest capital in a new commercial enterprise in order to create new and permanent fulltime jobs. Immigrant investors in the EB-5 program are normally required to invest $ 1 million in regional center projects, unless the project is located in a targeted employment area( TEA), which allows a reduced investment level of $ 500,000. So the question arises, just how much does an immigrant investor’ s $ 500,000 expenditure, along with household and other expenditures impact the local economy? Moreover, what are the broader economic effects one can glean from this analysis if the individual investor impacts are extrapolated to reflect national trends in EB-5 immigration?
This article provides a case study of an immigrant investor’ s $ 500,000 investment in the construction and operations of a hypothetical hotel project( one of the most common EB-5 projects) in Los Angeles, CA. It further generalizes these findings by applying the results to recent national immigrant statistics. The study uses the IMPLAN v3( MIG, Inc.) input-output modeling software and associated regional data for the Los Angeles-Long Beach-Riverside Combined Statistical Area( LA-CSA) to analyze the impacts of the investor’ s $ 500,000 investment, household expenditures and other related relocation expenditures on the local economy. The article examines the impact of these expenditures on jobs, contribution to gross domestic product( GDP), and federal, state, and local tax revenues.
EB-5 Investment Effects
One must first identify a project in which the immigrant’ s $ 500,000 will be invested in order to determine the impact that the immigrant investor’ s expenditure will have on a local economy. Therefore, we begin with a hypothetical hotel project in Los Angeles seeking EB-5 funding. This typical EB-5 project consists of a construction hard cost budget of $ 100 million, which is assumed to be in the second year of a 24-month timeline in 2013, so all jobs— direct, indirect, and induced— are considered. In addition, the hotel has $ 10 million in annual gross operating revenues and a full service restaurant with $ 5 million in annual revenues, both occurring in 2014. Table 1 presents the IMPLAN events representing the three industry sectors, along with the event years and deflators: 34-Construction of new nonresidential commercial and health care structures, 411-Hotels and motels, including casino hotels, and 413-Food services and drinking places.
Table 1. Events for Hypothetical Los Angeles Hotel Sector
34 Construction of new nonresidential commercial and health care structures
411 Hotels and motels, including casino hotels
413 Food services and drinking places
Industry Sales( M $)
Event Year
Output Deflator
$ 100 2013 1.134
$ 10 2014 1.126
$ 5 2014 1.096
It is useful to look at the multipliers associated with each activity in more detail to better understand the number of jobs created within each industry sector. The employment final demand multipliers consist of three main effects: direct, indirect and induced, representing the jobs created per $ 1 million spent. The change in employment in an industry per million dollars spent in that industry is measured by the direct effects multiplier. The number of jobs created directly from a $ 1 million investment is shown in Table 2, ranging from 6.9 jobs for construction to 16.42 for food services. The response by all local industries caused by inter-industry spending is the indirect effects multiplier, ranging from 2.43 to 3.3 jobs per $ 1 million invested. Finally, changes in household and government spending, as income is generated from the direct and indirect effects create the induced effect. Additional jobs from this impact range from 11.19 to 12.47 jobs. Adding together the three effects results in the total effects multiplier, which represents the total number of jobs created per $ 1 million dollars spent. These effects range from 20.6 for construction to 30.8 for restaurants, implying for example, that for every $ 1 million dollars of gross revenues earned in the restaurant industry, 30.8 jobs are created in the local economy.
Table 2. Hotel Construction and Operations Multipliers for Los Angeles-CSA
Industry Code and Sector
34-Construction of new nonresidential commercial and health care structures
411-Hotels and motels, including casino hotels
413-Food services and drinking places
Source: v3( MIG, Inc. 2010)
Direct Effects
Indirect Effects
Induced Effects
Total Effects
6.9139 2.5457 11.1887 20.6483
9.0346 3.3003 12.4672 24.8022
16.4188 2.4301 11.9697 30.8186
Using the dollar expenditures and output deflators( to deflate the expenditures to the 2010 data year) in Table 1, and the total effects multipliers from Table 2, one can see the total impacts of the hotel project on the local economy. Table 3 shows the impacts of construction and operations of the hotel and restaurant in the LA-CSA. A total of 2,181 new jobs are created with an associated $ 190.11 million contribution to GDP. In addition, $ 26.97 million is generated in federal taxes and $ 15.97 million is generated in state and local tax revenues. The $ 100 million spent in construction in 2013 creates 1,820 jobs, while the $ 10 million of gross revenue from hotel operations in 2014 will create 220 jobs, and finally the $ 5 million of restaurant operations in 2014 will generate 141 jobs.
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