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Page 3 Direct Economic Impacts The main focus of the economic analysis is on industry employment. While industry revenue would be apreferred indicator of industry economic health, these data are normally not available at the regional level on a consistent basis over time. In these instances, economists tend to study industry employment patterns. An industry employment function was estimated separately for the bar/tavern and restaurant industries. A multiple regression approach was used to explain the number of employed workers in each industry as a function of personal income, an industryprice factor and pro� variables to capture the impacts of anti-smoking regulations and the transitional recovery from the 2001 attack on the World Trade Center. These functions were estimated at the state level, using a log - log format (see Appendix II for the regression results). The employment function for the baz/tavern industry exhibited strong statistical properties. The coefficient of the price deflator is negative, reflecting the normal inverse relationship that exists between price and sales volume and, in a derived manner, with employment. Adjusting the estimated price impact from the regression by industry labor productivity, the price elasticity of demand (customer sensitivityto changes in product price) is -1.9. The magnitude of the number puts the elasticity in the elastic zone, indicating a relatively high price sensitivity of barftavernpatrons to prices. The income elasticity (the responsiveness o f product demand to changes in consumer income) derived Fr�rrt the employment functzon is estimatedto be 1.65, indicatingthat the bar/tavern industryprovides productsthat economists call "normal" goods. These types ofproducts respond positivelyto income gains. Both elasticities are consistent with the existing body of research literature. Employment losses from the anti-smoking regulations are estimated by comparing two versions of industry employment predictions. The first estimate of employment comes from the fitted regression with the ban-coverage proxy variable coded to reflect the current status of these regulations. The altemate estimate uses the same regression parameters, but sets the pro� variable to zero to simulate the removal of all anti-smoking rules. The difference between these two estimates indicates that approximately 2,000 j obs (10.7% of actual employment) were lost in New York State last year. Using data from the New York State Department of Labor, the average wage per employedworker in 2003 was approximately$14,175 per year. Combiningthe job loss with the average annual worker compensation estimate, lost wage and salary payments amounted to $28.5 million in 2003. These 2,000 workers would have added nearly $37 million to constant-dollar Gross State Product (output) in New York State. A similar approach was used to calculate loss j obs in the restaurant industry. The price elasticity of restaurant meals is quite similar to the price sensitivity of bar/tavern patrons (-1.8 versus -19 for bars). However, in contrast, the income elasticity in this segment of the hospitalityindustry is significantly greaterthan for bazs/tavems. Based on the fitted regression, the elasticity is appro�mately2l (versus 1.65 for bazs/tavems). This