OVERVIEW
Within the Social Accounting Matrix (SAM) framework, Trade represents the monetary flows into and out of a Region, with payments to the Trade rows representing imports and payments by the Trade columns representing exports. In the SAM framework, Trade consists not only of the trade of Commodities (goods and services) but also transfers of money in the forms of after-tax Employee Compensation, Business Transfers, Taxes, Social Benefits, and Capital Transfers.
For example, Industries engage in trade by importing goods and services for Intermediate Inputs and paying non-local (both foreign and domestic) workers. Industries also export goods and services both domestically and abroad. Households primarily engage in trade by purchasing household goods and services from outside of the Region (imports) and residing within a given Region and receiving compensation from companies located outside of the Region (gross out-commuting). Governments also engage in trade by importing goods and services and, in the case of Foreign Trade, disburse foreign aid.
Ultimately, trade represents a flow of money from one Region to another Region and is a source of leakage for the region being studied. For more detailed information about how Foreign and Domestic Trade are incorporated in the IMPLAN SAM, see Elements of IMPLAN SAM Tables article.
FOREIGN TRADE
In IMPLAN, Foreign Trade represents the flow of money (for goods, services, and employment) to and from the United States. Values of foreign trade are estimated for all IMPLAN Industries and Commodities. IMPLAN also estimates sub-national imports and exports for all geographic Regions within the United States. Note, however, IMPLAN does not currently have trading partner information for Foreign Trade.
During economic impact analysis, foreign imports and exports are removed from IMPLAN models a priori.
For more information about Foreign Trade in the SAM see Elements of the IMPLAN SAM and for more information about the data sources used to estimate Foreign Trade see Estimating Trade Flows.
DOMESTIC TRADE
Domestic trade represents the flow of money (for goods, services, and employment) to and from the Region of analysis. This reflects demands of goods and services produced within the national border but outside of the study area. As there are no raw data sources available for sub-national trade, IMPLAN has developed this domestic trade flow data. Trade flow data is available for all states, counties, zip codes, and congressional districts.
By estimating this sub-national trade flow data, IMPLAN allows for:
- Calculating improved regional purchase coefficients (RPCs) necessary for single-region impact analysis
- Multi-Regional Input-Output (MRIO) impact analysis
- Examination of likely trade patterns between trading partners
Domestic trade flows are available for all IMPLAN Commodities (as described in Commodity Trade below) and capture labor-related trade (as described in Labor Income Trade below).
COMMODITY TRADE
IMPLAN’s Domestic Trade Flow dataset consists of region-to-region dollar values of domestic trade in all IMPLAN Commodities (including services). These Trade Flows show the movement of goods and services between and within counties or user-defined regions made up of counties. The Domestic Trade Flows capture Commodity demand for both Intermediate Inputs as well as Final Demand.
LABOR INCOME TRADE
Not only are goods and services traded between Regions, but labor can be “traded” between Regions in the case of commuters. Commuters receive income in one Region, but live in another Region. Because payroll taxes are paid in the county of employment and personal income taxes on that same income are paid in the county of residence, one must account for these inter-regional flows of employment-based income. IMPLAN derives region specific commuting flows as described in Estimating Commuter Employee Compensation.
The resulting sub-national commuting flows are utilized in the generation of regional SAMs. Their inclusion allows for the calculation of the share of regionally generated compensation that leaks from the Region (i.e., the Region’s in-commuting rate).
For more information about the data sources and IMPLAN’s methods, see Estimating Trade Flows.
REGIONAL PURCHASE COEFFICIENTS
The Commodities purchased by each Industry cannot all be sourced from within a closed economy; some Commodity purchases are imported from other Regions. Therefore, each Commodity has a model-specific Regional Purchase Coefficient (RPC).
The RPC for a given Commodity represents the proportion of all local demands (industrial and institutional) that is satisfied by local production. For example, an RPC of 0.8% for the Commodity "fish" indicates that 80% of the demand for fish (by other Industries and by final demanders) is met by local fish producers. It also indicates that 20% (1 - RPC) of the local fish demand is met by imports (both domestic and foreign).
REGIONAL RPCS
Through the estimation of Domestic Trade Flows, IMPLAN has achieved improved RPCs, which can substantially affect multipliers (higher RPCs indicate less leakage and, therefore, larger multipliers).
For more information about how RPCs are incorporated into the SAM see Understanding IMPLAN Social Account Reports.
NATIONAL RPCS
U.S. RPCs are calculated using Supply/Demand Pooling. This method is the default (and only available) method for U.S. models since at the national level there is no domestic trade. In other words, at the national level, any supply that is not being exported to foreign destinations must be going to meet domestic demands; therefore RPCs at the national level can simply be calculated by dividing domestic supply by gross demand.
This method is not valid for sub-national models because it would assume that all of a region’s supply that is not being exported to foreign destinations is going to meet that region’s demand, which is an untenable assumption because it ignores cross-hauling1 and thereby under-estimates inter-regional trade and over-estimates RPCs. In reality, some of that domestic supply will be exported domestically (i.e., to other regions within the U.S.).
REGIONAL SUPPLY COEFFICIENTS
IMPLAN also produces Regional Supply Coefficient (RSC) by Commodity, which indicate the proportion of local supply of a Commodity that goes to meet local demands.
RELATED ARTICLES
Understanding IMPLAN Social Account Reports
1When cross-hauling is ignored, interregional trade is underestimated while RPCs and regional Multipliers are overestimated. Thus, the Supply/Demand Pooling method is not ideal for estimating commodity RPCs at the sub-national level. However, it is ideal for estimating RPCs at the national level. At the U.S. level, there is no domestic trade and no need to estimate the regional trade flows. We only need to know the proportion of U.S. gross demand for each commodity that is met by U.S. suppliers. We have data on U.S. foreign exports of each commodity; the remaining supply must therefore go to domestic consumption. The Supply/Demand Ratio is thus domestic supply divided by gross demand.
Written September 26, 2024