IMPLAN is the leading provider of economic impact data and analytical software. The company began in 1972 working with the U.S. Forest Service and has grown to a current user base of academics, governments, economic developers, corporations, nonprofits, and consultants. For a brief review of IMPLAN through the years, check out our History page.
IMPLAN utilizes an economic modeling technique called Input-Output analysis. Input-Output (I-O) modeling is based on the work of Nobel Prize winner Wassily Leontief. The foundational concept is that all industries, households, and government in the economy are connected through buy-sell relationships; therefore, a given economic activity supports a ripple of additional economic activity throughout the economy.
IMPLAN’s I-O modeling system uses annual, regional data to map these buy-sell relationships so users can predict how specific economic changes will impact a given regional economy or estimate the effect of past or existing economic activity. One of the tenets that makes IMPLAN so attractive is that there are no black boxes. Analysts can view the background data used in the models and customize them with local data and knowledge.
IMPLAN data sets provide a wealth of data about the regional economy, including industry data (e.g., industry output, labor income, input purchases, taxes paid), commodity data (e.g., foreign and domestic imports and exports by commodity, commodity sales by government and industry), household spending data, area demographics, and more. Understanding the interactions between the various actors in an economy (industries, households, governments) and between economies (trade) allows for the modeling of wider economic impacts across industries and geographies.
Constructing IMPLAN's annual databases requires gathering data from a large variety of federal sources, converting them to a consistent Industry scheme and year, estimating the missing components, and controlling the newly formatted data against other known data sources to maintain accuracy. For details on how IMPLAN constructs the datasets, visit the References section for a full explanation.
For the U.S. models, IMPLAN Industry schemes are based on definitions put forth by the Bureau of Economic Analysis. Each year, IMPLAN gathers current data at the national level, compiles it into the IMPLAN data format, and derives new national Input-Output matrices, as well as national tables for deflators, margins, and regional purchasing coefficients. Data for state, county, zip code, and congressional districts are then gathered and controlled to the national totals.
There are four key economic indicators that IMPLAN reports economic effects for U.S. models. Each indicator is based on the Leontief Production Function for a given industry in the selected region in a given year which demonstrates the interconnectedness of the economy.
All analysis in IMPLAN is based on Output, which is the value of production by industry in a calendar year plus net inventory change. It is more commonly known as revenue or sales. Note that for wholesale and retail sectors, Output is equal to gross wholesale margin or gross retail margin, respectively, not gross sales. The value of production for wholesale and retail sectors is the value of the services they provide; it does not include the value of the items sold within their establishment.
Since Output is the total production value of an Industry, it includes all components of production value or Output for a given Industry: Output = Employee Compensation + Proprietor Income + Tax on Production and Imports + Other Property Income + Intermediate Inputs.
Value Added (VA) represents the difference between Output and the cost of Intermediate Inputs. Value Added is a measure of the contribution to GDP made by an Industry. Value Added is a large portion of Output, as it encompasses Labor Income (LI), Proprietor Income (PI), Employee Compensation (EC), Other Property Income (OPI), and Taxes on Production and Imports (TOPI).
Labor Income (LI) is the sum of Employee Compensation (EC) and Proprietor Income (PI). It represents the combined cost of total payroll paid to employees (e.g., wages and salaries, benefits, payroll taxes) and payments received by self-employed individuals and/or unincorporated businesses in a given year.
Employment data in IMPLAN follows the same definition as Bureau of Economic Analysis Regional Economic Accounts (BEA REA) and Bureau of Labor Statistics Census of Employment and Wages (BLS CEW) data, which is full-time/part-time annual average. Thus, 1 job lasting 12 months = 2 jobs lasting 6 months each = 3 jobs lasting 4 months each. A job can be either full-time or part-time. Similarly, a job that lasts one quarter of the year would be 0.25 jobs. Note that a person can hold more than one job, so the job count is not necessarily the same as the count of employed persons. Jobs in IMPLAN are not the same as a full-time equivalent number.
*Note the components of Output are slightly different for the International and Canadian models.
Input-Output (I-O) Analysis is designed to show the ripple effects of a given economic activity in other Industries and geographies through input purchases, labor payments, and trade. Production in a given Industry supports demand for production in other Industries throughout the economy, both due to supply chain spending and spending by workers. This spending is derived from the I-O and Social Accounting Matrix (SAM) model. For details on how this works, visit the article Examining Results & Interpreting Direct, Indirect, and Induced Effects.
The economic impact of an Industry consists of the following three types of effects which sum to the total effect.
A Direct Effect is the initial exogenous change in final demand in terms of Industry Output, Employment, and/or Labor Income. For Industry, Commodity, and Institutional Spending Pattern Events, the Event Value entered is assumed to be final demand. Thus, the Event Value(s) entered in these Event Types will be used to determine the Direct Effect of the Event. Labor Income, Household Income, and Industry Spending Pattern Events do not generate Direct Effects because there is no initial Industry spending.
Indirect Effect are the business-to-business purchases in the supply chain taking place in the region that stem from the initial Industry input purchases. As the Industry specified in an Event spends its money in the region with their suppliers, this spending is shown through the Indirect Effect.
Labor Income and Household Income Events do not generate Indirect Effects because no initial Industry is specified in these Event Types.
The Induced Effect stem from Labor Income being spent throughout the selected region(s) associated with the Industries specified in the Event (Direct effect) and those impacted through the supply chain (Indirect effects).
Written August 30, 2023