Direct Effect Results don't match Direct Input

INTRODUCTION

We get this question a lot at IMPLAN. User ran an analysis of $5M and the Results only show $4.8M in Direct Output. Where did the other $200,000 go? 

There are seven reasons that these numbers won’t match. Let’s walk through them.

THE SEVEN REASONS WHY

MISSING INDUSTRY

When modeling a list of Industries, it is possible that one of them doesn’t exist in the Region. If the Industry doesn’t exist in the IMPLAN data, there will be no effect from that Industry. IMPLAN will share a popup letting users know of any Industries that are not present in the Region. If the Industry does now operate in the Region, users can add it by Customizing the Region.

DIFFERENT DOLLAR YEARS

In order to see the exact number entered on the Impacts screen in the Direct Effects, the Dollar Year must match on both screens. For example, if Events were analyzed using 2018 Dollar Year, filter the Results for 2018 Dollar Year. If different years are used, there will not be an exact match between the Impacts screen and the Results screen due to Deflators. Check out the article on Selecting a Dollar Year & Data Year for more details.

EVENT TYPE

The only Event Types that result in a Direct Effect are Industry Events, Industry Impact Analysis (Detailed), Industry Contribution Events, Commodity Output Events, and Institutional Spending Pattern Events. Direct Effects are not a part of Labor Income Events, Household Income Events, or Industry Spending Pattern Events. More details are in the article Explaining Event Types.

MARGINS

A Margin is the value of the transportation, wholesale, and retail trade services provided in delivering Commodities from the factory floor to buyers. Margins are calculated as sales receipts less the cost of the goods sold. They consist of the trade Margin plus sales taxes and excise taxes that are collected by the trade establishment. Most Input-Output models, including IMPLAN, record expenditures in producer prices (known as Marginal Revenue). This allocates expenditures to the Industries that produce the goods or services. Any Output or sales applied to multipliers that are in purchaser prices (prices paid by final consumers) need to be converted from purchaser price (Total Revenue) to producer prices (Marginal Revenue) or allocated to the producing Industries. Margins enable the move from producer to purchaser prices or vice-versa. 

IMPLAN values are based on the actual costs of producing the product or service being sold. Margins are necessary whenever an item is purchased from a retailer or wholesaler. Margins can be applied to retail and wholesale Industry Events and Commodity Events. When margins are applied, the full Value from the Impacts screen will not be present in the Results. The portion in the Results is the margin coefficient for retail or wholesale Industry.

LOCAL PURCHASE PERCENTAGE

The Local Purchase Percentage (LPP) in Commodity Output Events and Institutional Spending Pattern Events are set to specific defaults, but these can be edited via the Advanced Fields icon. Remember, the LPP indicates to the software how much the Event affects the local Region and should therefore be applied to the Multipliers. If the LPP is set to anything less than 100%, the inputs will not match the Results. Learn more in the article Setting a Local Purchase Percentage (LPP).

COMMODITY MARKET SHARE

The portion of Commodity supply coming from each source for a given Commodity is called a Market Share. When analyzing Commodities, some of the Market Share can come from Institutional Sales (like out of inventory or produced by the government). Because Commodity Market Shares allocated to Institutions will be treated as leakages, these portions of Commodity Output will not be included in the Direct Effect of the Results. Market Shares for a given Commodity can be explored in Region Details, under Social Accounts.

COMMODITY EVENTS AND DEFLATORS/INFLATORS

When a Commodity Event is run with the same Dollar Year and Data Year and the Results are viewed in that same Dollar Year, the Direct Effect will match the Direct Commodity input. However, when the Dollar Year on the Impacts screen or the Dollar Year on the Results screen do not match the Data Year, the Direct Effect will be slightly different than the Direct inputs. This is because the Commodity Event is adjusted using Commodity deflators/inflators and then those dollars are deflated/inflated on the Results using Industry deflators/inflators. The slight difference in the Results for Direct Effect is due to the differences between Commodity and Industry deflators/inflators.

 

Updated August 30, 2023