ABP: Adding an Industry that Doesn’t Exist Yet

BYE BYE BYE...IT AIN'T NO LIE

YOU DON'T NEED TO USE ANALYSIS BY PARTS ANYMORE! 

There is a new Event Type in IMPLAN called Industry Impact Analysis (detailed) released on October 6, 2021. You can now enter Employment (Wage & Salary and/or Proprietor), Labor Income (Employee Compensation and/or Proprietor Income), Intermediate Inputs, Taxes on Production & Imports, Other Property Income, and Output from the Impacts screen.

It might sound crazy; but in 99% of cases, you don't need to use ABP anymore. Check out Industry Impact Analysis (Detailed).

Special thanks to *NSYNC for putting the song in our heads again. We all knew life would be much better once you're gone, ABP.

ADDING A BRAND NEW INDUSTRY

The preferred method for adding an Industry that doesn't exist in your Region is outlined in the article Adding an Industry that Doesn’t Exist Yet by Customizing a Region.

INTRODUCTION

Sometimes the Industry that we want to examine does not exist in IMPLAN yet. When the Industry you want to examine does exist in IMPLAN, but not in your Selected Region, we recommend adding an Industry by Customizing the Region.

But perhaps the Industry is a new Industry altogether. It might be an Industry that only recently became legal. This article outlines the best way to analyze these new Industries in IMPLAN.  

DETAILS

The economy is always changing and Industries come and go.  Federal data follows these changes by adjusting the North American Industry Classification System (NAICS) codes.  IMPLAN follows suit, so when the NAICS codes change, so do IMPLAN Sectors.

There are two ways to create a new Industry depending on what you want to accomplish.  Both methods are outlined in this article.  

INDUSTRY THAT EXISTS IN THE US

If you have a Region that will be gaining an Industry that does exist somewhere in the US, you can follow the steps outlined in the article Adding an Industry by Customizing a Region.

BRAND NEW INDUSTRY

Federal data lags in categorizing these new Industries, which can pose a problem for researchers.  When the newest widget is invented, it is usually categorized with a similar product or under one of the catch-all codes like “all other…”  One interesting case is that of the legalization of cannabis or marijuana production and sales. The 2017 NAICS do have information on where the pieces of the supply chain fall for cannabis:

• Marijuana, grown under cover - Industry 6 - Greenhouse, nursery, and floriculture production
• Marijuana, grown in an open field - Industry 10 - All other crop farming
• Marijuana merchant wholesalers - Industry 400 - Wholesale - Other nondurable goods merchant wholesalers
• Marijuana stores, medical or recreational - Industry 412 - Retail - Miscellaneous store retailers

Let’s say we want to examine the effect of a $100M in cannabis agricultural production in Ohio and we know that a full $5M of that will be spent on legal fees. We also know there will be 25 employees each making $50,000.

First we have to decide what Industry we want to use. In this case knowing the climate in Ohio, we make the assumption that the agriculture will be most closely related to IMPLAN Industry 6 - Greenhouse, nursery, and floriculture production. 

Create an Industry Spending Pattern Event for $100M in Industry 6 - Greenhouse, nursery, and floriculture production.  If we know more details about the spending of cannabis growers as compared to other greenhouse products, we can edit the spending pattern to further reflect this new Industry. Remember in this example we know that $5M will be spent on legal fees specifically. To model this, we click the Menu icon to open the details of the Industry Spending Pattern and scroll down to Commodity 3455 - Legal Services.  Next, we override the value with 5%; the blue color shows the edited Commodity. We can also uncheck the SAM box. This will then show the LPP is now 100% which is what we want if we know the legal firm is in Ohio.

If any further information is known including Industries that could be deleted entirely from the Spending Pattern, that can be done at this point as well. More details on this can be found in the articles Editing Industry Spending Pattern Events or Editing Institutional Spending Pattern Events.  

You’ll notice that the Sum of Percentages at the bottom is now 104.94%.  

To fix this and return to 100%, click on the Advanced button and choose Normalize.

Now, a full 5% will be spent on legal fees. We were also told the $100M was the total Output, so we will choose Output instead of Intermediate Inputs. Click save.

Next, we create a second Event for our Labor Income (25 employees x $50,000 = $1,125,000).  We can then add them to our Group and Run our economic impact.

Notice that there are no Direct Effects in our Results so we will need to add those back in manually. To estimate the Direct Effects, take what information we already know for Employment (25), Labor Income ($1,125,000), and Output ($100M) and enter that directly. The template is on Recalculating Direct Effects will help you to estimate the Value Added based on data from:

> Region Details
     > Study Area Data
          > Industry Averages

TEMPLATE:

Recalculating Direct Effects

RELATED TOPICS:

Adding an Industry by Customizing a Region

Editing Industry Spending Pattern Events

Editing Institutional Spending Pattern Events

New Industry Direct Effects Calculator

Written September 10, 2019

Updated December 27, 2021