Learning to Use RIMS II Multipliers: Part 2 · Learning to Use RIMS II Multipliers: Part 2 ......

Learning to Use RIMS II Multipliers: Part 2

The RIMS II Data and System of Analysis

RIMS II• Regional Impact Modeling System • This has been developed as a for‐fee data service by the U.S. Bureau of Economic Analysis – BEA

• BEA is the primary agency of the federal government that compiles economic information.

• For our purposes, they also produce what are called the Benchmark Input‐Output accounts of the U.S. Economy.

• We depend on those data to build our input‐output models

• And students will recognize the structure of the national I‐O table as identical to their own work

Benchmark 2002 I‐O Table From the BEA

IOCode Name

Agriculture, forestry,

fishing and Mining Utilities Construction Manufacturing 1 Agriculture, forestry, fishing an 1.37727 0.01400 0.00736 0.02617 0.084222 Mining 0.02678 1.06477 0.21221 0.03092 0.071983 Utilities 0.03524 0.03212 1.01049 0.01439 0.030724 Construction 0.01393 0.04428 0.03427 1.00678 0.012475 Manufacturing 0.36173 0.20737 0.12304 0.42882 1.623556 Wholesale trade 0.07766 0.03111 0.01826 0.05700 0.092747 Retail trade 0.00358 0.00585 0.00336 0.05172 0.005508 Transportation and warehousin 0.05734 0.03797 0.09126 0.04020 0.056159 Information 0.02289 0.03171 0.02251 0.03799 0.04508

10 Finance, insurance, real estate 0.22937 0.20511 0.09885 0.10162 0.1110111 Professional and business serv 0.10552 0.19121 0.11701 0.17432 0.2224512 Educational services, health ca 0.00507 0.00029 0.00057 0.00047 0.0006513 Arts, entertainment, recreation 0.00970 0.00999 0.01825 0.01191 0.0157014 Other services, except governm 0.01345 0.00896 0.00749 0.02259 0.0147415 Government 0.01913 0.01386 0.01103 0.01058 0.0184116 Scrap, used and secondhand g 0.00000 0.00000 0.00000 0.00000 0.0000017 Other inputs 0.00000 0.00000 0.00000 0.00000 0.00000

Total Industry Output Requirement 2.35864 1.89860 1.77596 2.01548 2.40537

When you buy RIMS II data from the BEA, here’s what you get ….

• A regionally or state specific set of total final demand multipliers for– Total industrial output– Value added– Earnings (labor income)– Jobs

• Rather than generating our own multipliers, we simply apply theirs

Example of Total Multipliers from RIMS II

This, too, contains the same type of information I’ve already showed you: Looking at Logging (113300), for example, if the Iowa economy had $1 change in logging final demand ….

– $1.4713 in total output change,– $.3442 in earnings change,– $.6036 in value added change, and – Each $million change in logging final demand required 14.0868 total Iowa jobs

State of Iowa

Industry Code

Industry Final-demand Output /1/ (And

Type II Output Multiplier)

Final-demand Earnings /2/

(dollars)

Final-demand Value-added /4/

(dollars)

Final-demand Employment /3/ (number of jobs

per $million in direct output

change)1111C0 Oilseed and grain farming 1.9038 0.3306 0.7649 9.5124111200 Vegetable and melon farming 1.7247 0.3627 0.8898 13.67051113B0 Fruit and tree nut farming 1.8305 0.4417 0.971 15.7385111400 Greenhouse, nursery, and floriculture production 1.6057 0.4299 0.965 12.3119111910 Tobacco farming 1 0 0 0111920 Cotton farming 1 0 0 01119C0 All other crop farming, including sugarcane and sugar beet 1.9076 0.3662 0.8047 10.27011121A0 Cattle ranching and farming 2.5588 0.4116 0.7901 10.7781112120 Dairy cattle and milk production 2.0851 0.3604 0.859 9.4993112A00 Animal production, except cattle and poultry and eggs 1.8743 0.314 0.9177 8.1777112300 Poultry and egg production 2.8151 0.4573 0.8566 11.2564113A00 Forest nurseries, forest products, and timber tracts 1 0 0 0113300 Logging 1.4713 0.3442 0.6036 14.0868

Total Change Per Million $ of Output Change

Table of Multipliers from 32619A Other plastics product manufacturing

State of Iowa

Industry Code




(dollars)


(dollars)



change)32619A Other plastics product manufacturing 1.7679 0.3977 0.7771 10.4591326210 Tire manufacturing 1.6547 0.3845 0.7107 8.0844


State of Iowa

Industry Code

Industry

Output Earnings Jobs 32619A Other plastics product manufacturing 1.0 0.212186 5.54326210 Tire manufacturing 1.0 0.218988 3.52

Direct Change Per $Million of Output Change

State of Iowa Type II Earnings Multiplier

Type II Jobs Multiplier

Industry Code

Industry Direct-effect Earnings /5/

(dollars)

Direct-effect Employment /6/ (number of jobs

per direct job change)

32619A Other plastics product manufacturing 1.8743 1.8868326210 Tire manufacturing 1.7558 2.2946

You also get

• Aggregated industrial contributions to the total final demand multipliers for– Total industrial output– Value added– Earnings (labor income)– Jobs

In the next table, the values are to be read left to right, but they are the same aggregated industry multipliers that were in your Total Requirements Table for your assignment

Using the Multipliers

Say we had a new plastics manufacturer wanting to locate in Iowa. In its application for economic development assistance it told the state that it would employ 45 workers, pay out a total of $1.96 million in labor incomes (Earnings), and have total output of $8.68 million, all producing for final demand (i.e., export sales).

We could easily build a table that lets us apply our multipliers from a table of RIMS II multipliers and arrives at the expected impacts

Refer to the Iowa multipliers handout

Table of Multipliers from 32619A Other plastics product manufacturing

State of Iowa

Industry Code




(dollars)


(dollars)



change)32619A Other plastics product manufacturing 1.7679 0.3977 0.7771 10.4591326210 Tire manufacturing 1.6547 0.3845 0.7107 8.0844


State of Iowa

Industry Code

Industry

Output Earnings Jobs 32619A Other plastics product manufacturing 1.0 0.212186 5.54326210 Tire manufacturing 1.0 0.218988 3.52




Industry Code


(dollars)



32619A Other plastics product manufacturing 1.8743 1.8868326210 Tire manufacturing 1.7558 2.2946

So, we could calculate the impacts as …

Direct Values X Multiplier = Impact

Output = $8.68 M X 1.7679 = $15.35 M

Earnings = $1.96 M X 1.8743 = $ 3.67 M

Jobs = 45 X 1.8868 = 84.9 jobs

If all they had told us was that their expected annual output was $8.68 million we could have done it this way ….

Total output of $8.68 million X

Total output multiplier of 1.7996 = $15.62 million

Total earnings multiplier of .3977 = $3.45 millionAnd

Total jobs multiplier of 10.4591 (per $million of output = 8.68 X 10.4591 = 90.78 jobs

The earnings and jobs values are different from the previous estimate, so the more information you get, the better your impact estimate as the industry in the first example indicated that it was somewhat different than the state average for that kind of manufacturing

New scenario

Now suppose that a new cookie factory was going to open but the only thing that it would tell you was that it would employ 100 workers.

What kinds of impacts could you calculate?

We begin, again with a table of multipliers for the cookie industry

Table of Multipliers from 311820 Cookie, cracker, and pasta manufacturing

State of Iowa

Industry Code




(dollars)


(dollars)



change)311820 Cookie, cracker, and pasta manufacturing 1.9008 0.3365 0.7226 8.4715


State of Iowa

Industry Code

Industry

Output Earnings Jobs 311820 Cookie, cracker, and pasta manufacturing 1.0 0.131077 3.21311830 Tortilla manufacturing 1.0 0.222524 7.08311910 Snack food manufacturing 1.0 0.110624 1.93




Industry Code


(dollars)



311820 Cookie, cracker, and pasta manufacturing 2.5672 2.6378311830 Tortilla manufacturing 2.0591 1.9013311910 Snack food manufacturing 2.6929 3.5056

Interpolating the impacts: finding the direct values

Steps:1. The table tells us that there are 3.21 jobs per $1

million in direct cookie industry output. So,100 jobs / 3.21 = $31.15 million in expected direct output.

2. The table tells us that we would expect, per $1 million in direct output, $.1311 million in direct labor income (earnings).

$31.15 in output X .1311 = $4.084 million in direct labor income

3. And there are 100 direct jobs, so …

Impacts continued

Now we can do the direct values times the multipliers now just like the first example using the numbers we knew and the numbers we discovered

Output = $31.15 M X 1.9008 = $59.2 M

Labor Inc. = $4.084 M X 2.5672 = $10.48 M

Jobs = 100 X 2.6378 = 263.8 jobs

Alternatively I could have just the change in output times just the final demand multipliers

• Output = $31.15 M X 1.9008 = $59.2 M• Earnings = $31.15 M X .3365 = $10.48 M• Jobs =$31.15 M X 8.4715 = 263.8 jobs

I chose to “back‐out” the direct values first so that we could evaluate the initial worth of the jobs.

State of Iowa

Industry Code




(dollars)


(dollars)



change)311820 Cookie, cracker, and pasta manufacturing 1.9008 0.3365 0.7226 8.4715


Comparisons

The cookie Type II multipliers are higher than the plastic multipliers. Why is that? What is going on in the Iowa (or Illinois) accounts that would make cookies worth more to an economy than plastics?

Why do we need to be careful when we are declaring our economic impacts, and most especially when we are looking at food processing industries?

Calculating the industrial distribution of the final demand change

• Now you would go to the spreadsheet if you were actually doing this, but I have a short summary of just a few of those multipliers on the last page of your multipliers table

• Attached are the transposed values (for display purposes) of the values in the final demand tables for vegetable and melon production, sector 111200

Vegetable and Melon Production Total Multiplier Components

Total output: Vegetable and melon farming

Total earnings: Vegetable and melon farming

Total jobs: Vegetable and melon farming

1Agriculture, forestry, fishing, and hunting 1.11 0.2128 9.2365

2Mining 0.0016 0.0004 0.0103

3Utilities* 0.0396 0.0085 0.103

4Construction 0.0085 0.0031 0.0801

5Manufacturing 0.1449 0.023 0.4893

6Wholesale trade 0.0511 0.0158 0.2963

7Retail trade 0.0328 0.011 0.4775

8Transportation and warehousing* 0.0385 0.012 0.3009

9 Information 0.0161 0.0035 0.0815

10Finance and insurance 0.0886 0.0227 0.4371

11Real estate and rental and leasing 0.0867 0.0068 0.7139

12Professional, scientific, and technical services 0.0137 0.0063 0.1341

13Management of companies and enterprises 0.0069 0.0027 0.0405

14Administrative and waste management services 0.0111 0.0044 0.2196

15Educational services 0.0073 0.003 0.1337

16Health care and social assistance 0.0357 0.0164 0.4133

17Arts, entertainment, and recreation 0.0024 0.0008 0.0462

18Accommodation 0.0034 0.001 0.0511

19Food services and drinking places 0.0098 0.003 0.2048

20Other services* 0.016 0.0049 0.157

Households 0 0.0005 0.0438

Total Multipliers 1.7247 0.3626 13.6705

Let’s apply these multipliers• Everyone thinks that local foods is the way to boost a local

economy.• My very good research tells me that each acre of Iowa fresh

fruit or vegetable and melon production operated efficiently produces about $4,100 in gross sales. Someone farming 25 acres would be expected to have 25 X $4,100 = $102,500 in total annual sales (at the farm gate). – Can this person make a go of it as only a farmer? – Is this level of production meaningful for my regional economy?

• Let’s assume this is all net new productivity to the state and run it through the model. We would multiply $102,500 times every value in the previous table and sum the values to get the totals.

$102500 in direct output (gross sales) in this sector would produce these itemized impacts when multiplied times the previous table

Total output: Vegetable and melon

farming

Total earnings: Vegetable and melon

farmingTotal jobs: Vegetable and melon farming

Agriculture, forestry, fishing, and hunting 113,775 21,812 0.947

Mining 164 41 0.001

Utilities* 4,059 871 0.011

Construction 871 318 0.008

Manufacturing 14,852 2,358 0.050

Wholesale trade 5,238 1,620 0.030

Retail trade 3,362 1,128 0.049

Transportation and warehousing* 3,946 1,230 0.031

Information 1,650 359 0.008

Finance and insurance 9,082 2,327 0.045

Real estate and rental and leasing 8,887 697 0.073

Professional, scientific, and technical services 1,404 646 0.014

Management of companies and enterprises 707 277 0.004

Administrative and waste management services 1,138 451 0.023

Educational services 748 308 0.014

Health care and social assistance 3,659 1,681 0.042

Arts, entertainment, and recreation 246 82 0.005

Accommodation 349 103 0.005

Food services and drinking places 1,005 308 0.021

Other services* 1,640 502 0.016

Households ‐ 51 0.004

Total Impacts $ 176,782 $ 37,167 1.401

The impacts …We can see that

– most of the job and labor income amounts are in the vegetable and melon sector. 25 acres of production would support slightly less than one job and $21,812 in labor income to the farmer and all of her help.

– There are also more manufacturing, finance, and real estate costs than in the other categories.

– In all, this level of productivity in Iowa would support just over 1.4jobs and $37,167 in total labor income in the state.

It is safe to assume that our vegetable farmer is going to need another job or cannot exist solely by selling at the gate (perhaps farmer’s markets would yield better margins)

Oh, by the way, my very good research also tells me that 25 acres produces a large fraction (from 25 to 50 percent depending on the product) of the seasonal fresh fruits and vegetable needs of just under 5,000 persons in Iowa

Bill of Goods

• Often used when we are dealing with a new set of industrial activities

• Especially when a scenario detracts from the table of multipliers

• Like emerging industries or completely different industrial configurations

Begin with a scenario

Furniture Economic Impact Per $1,200,000 in Annual Output

Inputs SectorsPercent

of InputsInput

Amounts OutputLabor

Income Jobs

Sawmill (321100) 20%

Wholesale (420000) 10%

Plastic parts (32619A) 5%

Trucking (484000) 8%

Labor (H00000) 30%

Imports 27%

Determine Total Indirect & Induced Activity from Inputs



of InputsInput

Amounts OutputLabor

Income Jobs

Sawmill (321100) 20% 240,000

Wholesale (420000) 10% 120,000

Plastic parts (32619A) 5% 60,000

Trucking (484000) 8% 96,000

Labor (H00000) 30% 360,000

Imports 27% 324,000

Bill of Goods Procedures1. Determine the amount of regionally‐supplied inputs2. Multiply each input level times its final demand multiplier for:

a. Outputb. Labor Income (Earnings)c. And jobs

3. Do the same for payroll – multiply it times the household final demand multipliers for that sector

4. The sum of all input impacts represent all indirect and induced activity

5. To that total, you add all of the direct activity at the firm.6. Sum to arrive at total economic impacts as well as the respective

multipliers that result from the exercise

We Need to Use These Multipliers

State of Iowa

Industry Code

IndustryFinal-

demand Output

/1/ (dollars)

Final-demand

Earnings /2/ (dollars)

Final-demand Value-added /4/ (dollars)

Final-demand

Employment /3/

(number of jobs)

321100 Sawmills and wood preservation 1.4505 0.2561 0.467 7.426232619A Other plastics product manufactu 1.7679 0.3977 0.7771 10.4591420000 Wholesale trade 1.5894 0.4744 1.0217 10.7122484000 Truck transportation 1.8055 0.5057 0.9238 13.9057H00000 Households 0.9073 0.2355 0.5351 7.5199





of InputsInput

Amounts OutputLabor

Income Jobs

Sawmill (321100) 20% 240,000 348,120

Wholesale (420000) 10% 120,000 190,728

Plastic parts (32619A) 5% 60,000 106,074

Trucking (484000) 8% 96,000 173,328

Labor (H00000) 30% 360,000 326,628

Imports 27% 324,000 NA




of InputsInput

Amounts OutputLabor

Income Jobs

Sawmill (321100) 20% 240,000 348,120 61,464

Wholesale (420000) 10% 120,000 190,728 56,928

Plastic parts (32619A) 5% 60,000 106,074 23,862

Trucking (484000) 8% 96,000 173,328 48,547

Labor (H00000) 30% 360,000 326,628 84,780

Imports 27% 324,000 NA NA




of InputsInput

Amounts OutputLabor

Income Jobs

Sawmill (321100) 20% 240,000 348,120 61,464 1.78

Wholesale (420000) 10% 120,000 190,728 56,928 1.29

Plastic parts (32619A) 5% 60,000 106,074 23,862 0.63

Trucking (484000) 8% 96,000 173,328 48,547 1.33

Labor (H00000) 30% 360,000 326,628 84,780 2.71

Imports 27% 324,000 NA NA NA

Complete the Analysis


of InputsInput

Amounts OutputLabor

Income Jobs

Sawmill (321100) 20% 240,000 348,120 61,464 1.78

Wholesale (420000) 10% 120,000 190,728 56,928 1.29

Plastic parts (32619A) 5% 60,000 106,074 23,862 0.63

Trucking (484000) 8% 96,000 173,328 48,547 1.33

Labor (H00000) 30% 360,000 326,628 84,780 2.71


Indirect & Induced Values 1,144,878 275,581 7.7 Direct Values 1,200,000 360,000 17.0 *Total Impacts 2,344,878 635,581 24.7 Total Multiplier 1.95 1.77 1.46


* Sector 3211999 (misc. wood products manufacturing) indicates that there are about 14 jobs per $million of direct output in this industry, so 14 *1.2(million)= 17 jobs.


of InputsInput

Amounts OutputLabor

Income Jobs

Sawmill (321100) 20% 240,000 348,120 61,464 1.78

Wholesale (420000) 10% 120,000 190,728 56,928 1.29

Plastic parts (32619A) 5% 60,000 106,074 23,862 0.63

Trucking (484000) 8% 96,000 173,328 48,547 1.33

Labor (H00000) 30% 360,000 326,628 84,780 2.71


Indirect & Induced Values 1,144,878 275,581 7.7 Direct Values 1,200,000 360,000 17.0 *Total Impacts 2,344,878 635,581 24.7 Total Multiplier 1.95 1.77 1.46

State of Iowa

Industry Code

IndustryFinal-

demand Output

/1/ (dollars)

Final-demand

Earnings /2/ (dollars)

Final-demand Value-added /4/ (dollars)

Final-demand

Employment /3/

(number of jobs)

321100 Sawmills and wood preservation 1.4505 0.2561 0.467 7.426232619A Other plastics product manufactu 1.7679 0.3977 0.7771 10.4591420000 Wholesale trade 1.5894 0.4744 1.0217 10.7122484000 Truck transportation 1.8055 0.5057 0.9238 13.9057H00000 Households 0.9073 0.2355 0.5351 7.5199



* Sector 3211999 (misc. wood products manufacturing) indicates that there are about 14 jobs per $million of direct output in this industry, so 14 *1.2(million)= 17 jobs.

Learning to Use RIMS II Multipliers: Part 2 · Learning to Use RIMS II Multipliers: Part 2 ......

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