Industry Impact Analysis (Custom) Events

INTRODUCTION

Industry Impact Analysis (Custom) is an Event Type in IMPLAN that, like the Industry Impact Analysis (Detailed) Event Type, allows users to enter any piece of the Leontief Production Function (LPF) to analyze a change in Production, while also providing the ability to utilize a Custom Spending Pattern. If a user would like to customize the LPF and use a previously created Custom Spending Pattern for an Industry, then an Industry Impact Analysis (Custom) Event is most appropriate to model the impact as it allows for those capabilities.

EVENT TYPE DETAILS

The Industry Impact Analysis (Custom), or IIA (Custom), Event Type is recommended when a user has more detailed information on the business or Industry they would like to specify and when they would like to use a Custom Spending Pattern.

Not only can users enter any value across the components of Output, but this Event Type is also going to rebalance the Leontief Production Function (unlike the standard Industry Events). The IIA (Custom) Event will use whatever values are entered and then impute the remaining values based on the relationship between them mathematically, taking into account all components of the LPF. Any value left blank will be estimated by IMPLAN. However, users can enter zeros in any field to signify they do not exist for that business or Industry. The use of a Custom Spending Pattern allows users to customize the allocation of Intermediate Inputs. Users also have the ability to edit their pre-built Custom Spending Pattern in the Event.

IMPLAN will always use the Industry’s LPF production function to estimate the Direct Effect for this Event Type, but will prioritize the Event Values in a certain order. IMPLAN will first look at Employment, Labor Income, and Output, then Intermediate Inputs, TOPI, and OPI. The calculation steps for this Event can be found in the Detailed Event Calculations section in the IIA (Detailed) article.

INDUSTRY IMPACT ANALYSIS (CUSTOM) EVENT

In this example, we know a restaurant, Oscar’s Bistro, opened a second location in North Carolina in 2023. The new location has 20 employees, 1 proprietor, a total Labor Income of $500K, a total Output of $1M, and earned no profit in the first year (Other Property Income).

To set up this activity using an Industry Impact Analysis (Custom) or IIA (Custom) Event, users must first create a unique Title for the Event, then select Industry Impact Analysis (Custom) for the Event Type. Next, users must click on Specification. The drop-down menu allows users to select from a list of Custom Spending Patterns they previously created for Industries and saved. A Custom Spending Pattern was previously created for Oscar’s Bistro and saved, which was selected for this analysis. The Custom Spending Pattern for Oscar’s Bistro was created using Industry 509 for Data Year 2022, in which Commodity 3013 and 3014 were deleted, and the pattern was Normalized. To use a Custom Spending Pattern Event, users must first create the Custom Spending Pattern under the Advanced Tools widget. Learn more about creating Custom Spending Patterns.

This Event Type will automatically expand to display all available fields. The value to enter for Wage & Salary Employment is 20, Proprietor Employment is 1, total Labor Income is $500,000, Other Property Income is $0, and Output is $1,000,000.

In this example, values were entered for both Wage & Salary Employment and Proprietor Employment. If either had been set to "0", to indicate they did not exist in this example, a warning would appear informing the user that IMPLAN is automatically setting the corresponding Labor Income to "0".

ANALYZING AN INDUSTRY IMPACT EVENT

Now it is time to assign Events to Groups. To assign an Event, click the Drag Event icon, hold it, and drop it into the corresponding Group. The Multi-Select feature allows users to select more than one Event at a time.

Each Group will indicate the number of assigned Events in the upper right corner by showing a number indicating the number of Events in that Group. To double check if an Event was correctly added to a Group, use the drop-down arrow to view the assigned Events.

Now click Run in the bottom right of the Impacts Screen.

When the analysis is finished, click View Results. For more information on how to interpret them, check out the article Examining Results & Interpreting Direct, Indirect, and Induced Effects.

Our Results show the 21 total employees, the $500K in Labor Income, and the $1M in Output. IMPLAN utilized the Industry’s production function to distribute the remaining $500K to the other components of the LPF (Taxes on Production & Imports and Intermediate Inputs).

NOTE OF CAUTION

The Industry Impact Analysis (IIA) Event Type is a powerful tool used to model impacts from Industry production. As users are able to enter any portion of the production function for an Industry in IMPLAN, there are certain instances when this can cause unexpected results. This typically occurs when an Industry has an abnormal production function where individual components can be greater than 100% or less than 0%. This often occurs for Industries receiving subsidies or with unusual labor requirements. As all production functions must balance to 100% for an Industry, this can sometimes result in negative percentage values for individual components, which may produce negative effects for the modeled Industry.

NEGATIVE EVENT VALUE WARNING

If the sum of the entered event values in the Industry Impact Analysis (Custom) Event result in a negative Output or you enter a negative Output value, IMPLAN will show an error message to confirm this was intentional. Running an Industry Impact Analysis (Custom) Event with a negative Output value will result in negative Impact Results. The warning will persist even after running the Impacts through an analysis.

RELATED ARTICLES

Industry Impact Analysis (Detailed) Events

Custom Spending Patterns

Written June 14, 2024