Wfed543 Implan

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Economic Impact AnalysisEconomic Impact Analysiswith IMPLANwith IMPLAN

WF ED 543WF ED 543

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Our process todayOur process today

• We have a lot of We have a lot of information. But, we don’t information. But, we don’t need to dump it all on you.need to dump it all on you.

• No time pressure to do it all.No time pressure to do it all.

• Bring your knowledge and Bring your knowledge and experiences to the table.experiences to the table.

• Ask questions! Talk! Ask questions! Talk! Challenge!Challenge!

• A copy of all slides is A copy of all slides is provided on ANGEL. We provided on ANGEL. We will not overwhelm you with will not overwhelm you with handouts.handouts.

• Sources of information are Sources of information are available on a web site.available on a web site.

• Breaks and lunch will occur!Breaks and lunch will occur!

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For information after todayFor information after today

http://PSU-IMPLAN-Refs.notlong.com

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Input-Output AnalysisInput-Output Analysis

A systematic view of production and A systematic view of production and consumption in an economyconsumption in an economy

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< the birds & bees< the birds & bees

of job creation >of job creation >

Sex life of a regional economySex life of a regional economy

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< complex >< complex >

< intertwined >< intertwined >

< large >< large >

< unexpected >< unexpected >

The economy is like a ball of stringThe economy is like a ball of string

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< input-output< input-outputtables >tables >

SummarizeSummarizeproduction &production &

consumption.consumption.

Way to organize dataWay to organize data

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Input-output tableInput-output table

ind 1

ind 2

ind 3

ind 4

ind 1 ind 2 ind 3 ind 4final

demandtotal

output

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How is economic activity classified?How is economic activity classified?• An An industry industry is a group of establishments with is a group of establishments with

similar production processes or products.similar production processes or products.• An An establishment establishment is a single physical location is a single physical location

where business is conducted.where business is conducted.– Industrial operations conducted or services provided.– Not to be confused with an enterprise.

• A A commodity commodity is a group of similar products.is a group of similar products.• Industries Industries make make and and use use commodities.commodities.

– Some commodities are primary products or services.– Some some commodities are secondary to primary

business.

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NAICS classifies industriesNAICS classifies industries• NNorth orth AAmerican merican IIndustrial ndustrial CClassification lassification SSystem.ystem.• Six-digit code read from left to right (general to Six-digit code read from left to right (general to

more detailed industries).more detailed industries).– First two digits = sector (manufacturing).– Third digit = sub-sector (food manufacturing).– Fourth digit = industry group (dairy product

manufacturing).– Fifth digit = NAICS industry (ice cream & frozen

dessert manufacturing).– Sixth digit is country–specific.

An example

http://www.census.gov/econ/census02/data/industry/E31-33.HTM

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Primary & secondary commoditiesPrimary & secondary commodities• Establishments are in industries that define their Establishments are in industries that define their

primary commodities.primary commodities.• Most establishments produce commodities in Most establishments produce commodities in

addition to primary.addition to primary.– Newspapers are primary product of newspaper

industry; advertising is secondary product.– Lodging is the primary product of hotels; meal

services are secondary products.– Other examples?

• Secondary commodities are Secondary commodities are redefined redefined to other to other industries.industries.

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Simple input-output tableSimple input-output table

ind 1

ind 2

ind 3

ind 4


demandtotal

output

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Industries Industries produce produce goods & servicesgoods & services

ind 1

ind 2

ind 3

ind 4


demandtotal

output

prod

ucer

s

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Industries Industries purchasepurchase goods & servicesgoods & services

ind 1

ind 2

ind 3

ind 4


demandtotal

output

purchasers

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Production sector of the economyProduction sector of the economy

ind 1

ind 2

ind 3

ind 4


demandtotal

output

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ind 1

ind 2

ind 3

ind 4


demandtotal

output

interindustryinterindustrytransactionstransactions

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ind 1

ind 2

ind 3

ind 4


demandtotal

output

directdirectrequirementsrequirements

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A closer look atA closer look atinterindustry transactionsinterindustry transactions

ind 1

ind 2

ind 3

ind 4


demandtotal

demand

purchases ofpurchases ofind 2 from ind 1ind 2 from ind 1

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ind 1

ind 2

ind 3

ind 4


demandtotal

demand

purchases ofpurchases ofind 3 ind 3

from ind 2;from ind 2;or, ind 2 or, ind 2 producesproducesfor ind 3for ind 3

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ind 1

ind 2

ind 3

ind 4


demandtotal

demand

purchases ofpurchases ofind 1 from ind 1 from itself; someitself; some

industries useindustries usethe products the products

they makethey make

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ind 1

ind 2

ind 3

ind 4


demandtotal

demand

All purchases All purchases of ind 1; of ind 1;

akaaka industry industryproductionproduction

functionfunction

Industry production function Industry production function -- the direct supply chain-- the direct supply chain

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ind 1

ind 2

ind 3

ind 4


demandtotal

demand

< make/use…< make/use…make/use…make/use…make/use…make/use…the productionthe productioncycle goes cycle goes round & round >round & round >

Producing & purchasing continues Producing & purchasing continues until goods or services createduntil goods or services created

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ConsumptionConsumption

ind 1

ind 2

ind 3

ind 4


demandtotal

output

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ind 1

ind 2

ind 3

ind 4


demandtotal

demand

ind 1ind 1

ind 2ind 2

ind 3ind 3

ind 4ind 4

Final demand…Final demand…Gross domestic product…Gross domestic product…

< personal consumption >< personal consumption >

< government purchases >< government purchases >

< investment >< investment >

< export >< export >

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ind 1

ind 2

ind 3

ind 4


demandtotal

output

production + consumption = total outputproduction + consumption = total output

Total economic output…Total economic output…

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An Example of anAn Example of anInput-Output TableInput-Output Table

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< where jobs< where jobs come from >come from >

Here is the sex part….Here is the sex part….

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Jobs are created because…Jobs are created because…• Total output is created by a mix of productive Total output is created by a mix of productive

resources.resources.

• Labor is a productive resource, along with land Labor is a productive resource, along with land and capital.and capital.

• Human capital is required to produce goods and Human capital is required to produce goods and services.services.

• People, with other resources, create output.People, with other resources, create output.

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ind 1

ind 2

ind 3

ind 4


demandtotal

output

ind 1ind 1

ind 2ind 2

ind 3ind 3

ind 4ind 4

< in each industry, it takes a < in each industry, it takes a certain number of people to certain number of people to

create a dollar’s worth of create a dollar’s worth of total economic output >total economic output >

Jobs are tied to total output…Jobs are tied to total output…

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ind 1

ind 2

ind 3

ind 4


demandtotal

output

ind 1ind 1

ind 2ind 2

ind 3ind 3

ind 4ind 4

< if It takes .001 workers to < if It takes .001 workers to create $1 of economic output, create $1 of economic output,

then, then,

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ind 1

ind 2

ind 3

ind 4


demand


totaloutput

ind 1ind 1

Ind 2Ind 2

ind 3ind 3

ind 4ind 4

< if It takes .001 workers to < if It takes .001 workers to create $1 of economic output, create $1 of economic output,

then, with $1 billion of total then, with $1 billion of total industrial output, 1 million industrial output, 1 million

workers are required >workers are required >

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ind 1

ind 2

ind 3

ind 4


demandtotal

output

ind 1

ind 2

ind 3

ind 4

< changes in labor intensity< changes in labor intensityor in total economic outputor in total economic output

create changes in numberscreate changes in numbersand kinds of jobs >and kinds of jobs >

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Occupational employment is tied to Occupational employment is tied to total industrial output…total industrial output…

ind 1

ind 2

ind 3

ind 4


demandtotal

output

ind 1ind 1

ind 2ind 2

ind 3ind 3

ind 4ind 4

< industries use different occupations >< industries use different occupations >

< industries use different labor intensities >< industries use different labor intensities >

< occupational employment differs by industry >< occupational employment differs by industry >

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……when people when people use their unique humanuse their unique humancapital to create goods & capital to create goods & servicesservices

Occupational employment is Occupational employment is created..created..

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Results of input-output analysisResults of input-output analysis

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Input-output tables are used for…Input-output tables are used for…• Economic Economic

accountingaccounting

• ForecastingForecasting

• ““What if” simulation What if” simulation

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< producer & < producer &

purchaser data >purchaser data >

< multipliers >< multipliers >

Local uses of input-output analysisLocal uses of input-output analysis

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MultiplierMultiplier

A product of input-output analysisA product of input-output analysis

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producer/purchaser data…producer/purchaser data…

ind 1

ind 2

ind 3

ind 4


demandtotal

output

prod

ucer

s

purchasers

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MultipliersMultipliers• Economic impact of change in final demand.Economic impact of change in final demand.

• Calculated for output, income, employment, Calculated for output, income, employment, taxes, and other factors.taxes, and other factors.

• Show total effects of change on economy.Show total effects of change on economy.

• Expressed as a positive number.Expressed as a positive number.

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Producing & purchasing multiplies…Producing & purchasing multiplies…

ind 1

ind 2

ind 3

ind 4


demandtotal

demand

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Multipliers display three Multipliers display three components of changecomponents of change

• Direct.Direct.

• Indirect.Indirect.

• Induced.Induced.

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Direct effectsDirect effects• Changes in production as a result of immediate Changes in production as a result of immediate

effects of a change in final demand.effects of a change in final demand.

• E.g., increase in demand for autos increases E.g., increase in demand for autos increases production of autos.production of autos.

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Indirect effectsIndirect effects• Changes in production in industries supplying Changes in production in industries supplying

industry delivering the final product.industry delivering the final product.• E.g., increase in auto production increases E.g., increase in auto production increases

production in supplying industries (like glass, steel, production in supplying industries (like glass, steel, plastics).plastics).

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Induced effectsInduced effects• Changes in direct and indirect production Changes in direct and indirect production

increase income and, therefore, consumption increase income and, therefore, consumption (and, maybe saving).(and, maybe saving).

• E.g., workers in auto industry and supplying E.g., workers in auto industry and supplying industries spend and save their income, creating industries spend and save their income, creating additional economic activity.additional economic activity.

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Two types of multipliersTwo types of multipliers

type 1 =

type 2 =

direct + indirectdirect

direct + indirect + induceddirect

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Some employment multipliersSome employment multipliers

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http://www.implan.com

• Input-output model, extended to social Input-output model, extended to social accounting.accounting.

• Type 1 and type 2 multipliers for output, value Type 1 and type 2 multipliers for output, value added, employment, taxes, and others.added, employment, taxes, and others.

• Full access to input-output table.Full access to input-output table.• Available for nation, state, county, and sub-Available for nation, state, county, and sub-

county.county.

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Marketing waste industriesMarketing waste industries• Waste hauling and landfills are part of our Waste hauling and landfills are part of our

highways and landscape.highways and landscape.

• No one wants waste hauled near their homes.No one wants waste hauled near their homes.

• Landfills are not desirable neighbors.Landfills are not desirable neighbors.

• The Pennsylvania Waste Industries Association The Pennsylvania Waste Industries Association wanted information about economic impact of wanted information about economic impact of waste hauling/landfills in Pennsylvania.waste hauling/landfills in Pennsylvania.

IMPLAN analysis of multipliers for waste/recycling activity:

EmploymentPersonal Income

Total IncomeValue AddedTotal Output

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Waste/recycling multipliers Waste/recycling multipliers for Pennsylvaniafor Pennsylvania

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Loss of opportunityLoss of opportunity

Penn State research on:

Community Costsof Technical Skills Deficits

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Quick response, regional impactQuick response, regional impactPenn State research:

Economic & Workforce Brief series

http://PSUBrief.notlong.com

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Economic Impact AnalysisEconomic Impact Analysiswith IMPLANwith IMPLAN

WF ED 543WF ED 543

Wfed543 Implan

Business

Transcript of Wfed543 Implan