INTRODUCTION
In addition to demand by Households and Governments, Capital (investment expenditures), Inventory (additions/deletions), and Private Enterprise are included as Institutions and Final Demand categories in IMPLAN. This article defines and describes these categories in IMPLAN. For more information about these components in the IMPLAN SAM, see Elements of the IMPLAN SAM.
ADDITIONAL FINAL DEMAND CATEGORIES
CAPITAL
In IMPLAN, Capital simply refers to durable assets (including savings) and devices that can be thought of as an investment for the purchaser. Per the BEA, a capital asset is something that lasts more than one year. Capital expenditures are made by Industries and Institutions for construction and to obtain capital equipment.
Capital Expenditures are not the same as purchases made by an Industry of non-durable goods and services that are used to produce other goods and services rather than for final consumption. Those are an Industry’s operating expenditures or Intermediate Inputs.
Capital expenditures are made by private Industries and are largely made up of equipment, software, and construction. The dollar values in the IMPLAN database are expenditures made to a specific industrial sector producing the capital equipment. These values do not represent capital investment by that industrial sector. In other words, we only know the investment demand by all private industry. There is no data that shows how much a particular Industry invested. However, IMPLAN does provide special investment spending patterns by industry that can be imported and used for analysis. These investment patterns are available for Furniture, Fixtures, and Equipment (FFE) and Construction and FFE, combined.
INVENTORY
Inventory reflects the stocks of goods held by an Industry or Institution over a period of time. In the I-O accounts, Inventory includes:
- Products purchased for resale, generally held by wholesalers and retailers
- Materials and supplies for use in the production of goods for sale or in the provision of a service
- Products that are partly processed and that require further processing prior to sale (work in process)
- Finished goods held for sale.
Additions to inventory include both finished and unfinished goods. Inventory sales occur when Industries sell more than they produce and Inventory stocks decrease over the year, whereas Inventory purchases occur when Industries produce more than they sell and Inventory stocks increase. Inventory purchases and sales generally involve goods-producing Industries as opposed to service Industries. IMPLAN Inventory sales and purchases are net values, meaning that for a given commodity and year there will be either inventory sales or inventory purchases, not both.
PRIVATE ENTERPRISE
The Private Enterprise Institution represents incorporated businesses (not proprietorships). It receives income in the form of returns to capital and depreciation allowances. Enterprise income consists entirely of corporate profits.
The Private Enterprise Institution makes payments to Households in the form of dividends and to Governments in the form of dividends and corporate profit taxes. Payments to Capital represent retained earnings, which can be saved for future investment, share buy-backs, and dividend payments, among others. Private Enterprises may also pay corporate profit taxes abroad, which is reflected by payments to Foreign Trade.
ADDITIONAL FINAL DEMAND IN ECONOMIC IMPACT ANALYSIS
Additional Final Demand components are treated as leakage in an analysis, meaning that they will not generate any additional multiplier effects in the Region. For example, although there may be sales and Commodity Market Share allocated to the Inventory Institution, it will not be modeled as continuing to circulate through the Region’s economy, as the effects from production of those products are attributable to the year in which they were produced.
RELATED ARTICLES
Estimating Other Final Demand: Capital, Inventory, and Private Enterprise
Updated September 27, 2024