INTRODUCTION
There are three possible types of Effects included in the Results of each analysis performed in IMPLAN: Direct, Indirect, and Induced. Direct Effects are the initial Final Demand Effect. Indirect Effects are generated due to demands from the regional supply chain to produce the final goods & services in the analysis, while Induced Effects are generated due to demands from households whose income is earned directly or indirectly due to their job activity in production being analyzed.
EFFECTS BY EVENT TYPE
Events that are designed to analyze Final Demand including Industry Events (Output, Employment, Employee Compensation and Proprietor Income), Industry Contribution Events, Commodity Output Events, and Institutional Spending Pattern Events. These will each have a Direct, Indirect, and Induced Effect. As shown in the table below this is not the case with all Event Types.
|
Direct, Indirect, & Induced |
Indirect & Induced Only |
Induced Only |
|
Industry Events |
Industry Spending Pattern Events |
Labor Income Events |
|
Industry Contribution Events |
Household Income Events |
|
|
Commodity Output Events |
||
|
Institutional Spending Pattern Events |
Industry Spending Pattern Events are designed to analyze effects due to the regional supply chain of the specified Industry. Industry Spending Patterns are made up of the Intermediate Inputs for the Industry and produce only Indirect and Induced Effects. Labor Income and Household Income Events are only designed to capture effects due to income earned in the analysis, producing Induced Effects only. Because Industry Spending Patterns Events and the two Income Events do not specify the exogenous change in Final Demand, these Event Types will not have a Direct Effect.
These categorization of Effects by Event Type are by design in IMPLAN and cannot be adjusted internally in the IMPLAN application. That being said, there are cases where it is appropriate to add in the “missing” Direct Effect or recategorizing Effects in the Results produced in IMPLAN.
DOWNLOAD RESULTS IN EXCEL
If manipulation of your Results is appropriate, start by downloading the results in the Results screen for whichever table you’d like to report. According to the following scenarios, adjust your Results accordingly. Remember to make the corresponding changes made in the Summary Results to any other Results tables you’ll be reporting.
THERE IS AN EASIER WAY!
There is an Event Type in IMPLAN called Industry Impact Analysis (detailed) where you can enter values you may have for Wage & Salary Employment, Employee Compensation, and spending on Intermediate Inputs (and also edit the Spending Pattern) or Output. Then, you can enter a zero for Proprietor Employment, Proprietor Income, Taxes on Production & Imports, and Other Property Income to reflect that public and nonprofit organizations are not paying these. And that's it. IMPLAN will calculate the Direct Effect for you!
RECATEGORIZING EFFECTS
Analysis-by-Parts: Industry Spending Pattern
Analyzing an Industry using Analysis-by-Parts is a workaround for the customization limitations in a single Industry Event. For this reason, the Results are not as straightforward as the Results produced in an Industry Event. When using an Industry Spending Pattern in your ABP, there will be only Indirect and Induced Effects. According to the IMPLAN Results, there is no Direct Effect, but adding in the known Direct Effect can be important for communicating the Total Effects of your analysis. If you’ve completed an ABP, you already have information on the Direct Labor Income, which should be included in the calculation of Direct Value Added and Direct Output. For an ABP you also must know either Direct Output or Direct Intermediate Inputs. Remember how Output breaks down:
If not all the Direct factors are known, estimates of these factors can be made from the underlying Study Area Data using the information found in:
> Customize Region
> Filter for Industry
You will find Output value ratios for the Industry you want to use. If the Industry does not exist in the Region, the Proxy region information must be used. Employment can be estimated using the Output per Worker ratios that are provided in:
> Study Area Data
> Industry Averages
The Direct Effect you produce should replace the effects of all zeros in the downloaded Excel format Results. The existing Indirect and Induced Effects are correct as is. The added Direct Effects can be summed with the existing Indirect and Induced Effects by column to produce the accurate Total Effects.
Analysis-by-Parts: Bill of Goods Approach
When applying the Analysis-by-Parts technique using the Bill of Goods (BOG) Approach you are using a series of Commodity and/or Industry Effects instead of an Industry Spending Pattern. In the Results, your Direct Effects are from the Commodity/Industry Events, which actually reflect the Intermediate Input purchases made by the true Direct business. The Results should be modified such that these Direct Effects are reclassified as Indirect Effects. Once this step is completed, you should have only Indirect and Induced Effects, similar to the results when using an Industry Spending Pattern in an ABP as shown above. You can then add in the true Direct Effect as described in the previous section. Don’t forget to sum a new Total Effect.
Remember, if you’ve completed an ABP, you already have information on the Direct Labor Income, which should be included in the calculation of Direct Value Added and Direct Output. In this ABP approach, you also have information on the Direct Intermediate Inputs, which were analyzed as Commodity Events. If you've analyzed Commodity Output values that equal the total spending on each Commodity (locally and non-locally) by the Direct business, then the sum of Commodity Output values in all Commodity Output Events is equal to Direct Intermediate Inputs and can be summed with Direct Value Added to produce Direct Output.
If you are using this analysis approach because the Industry you are analyzing is not an Industry in the IMPLAN Industry Scheme and you are missing information about the Direct Effect, we recommend basing the Direct Effect calculations on the Industry that is most similar to the Industry you are analyzing with the BOG Approach.
Internalizing Other Institutional Effects
When analyzing Events in a single Region in IMPLAN, the application will generate effects due to spending by only one Institution: Households (in a Multi-Regional analysis trade “spending” is also internalized). Revenue for other Institutions can also be affected. For example, the Tax tab of your Results displays all the fiscal revenue supported by your analysis, but there will be no Direct, Indirect, or Induced Effects due the estimated tax collection being spent by the different levels of government.
Additional Events can be analyzed to produce these effects if enough information is known on how the Institution’s spending will be affected. In any analysis that includes Institution spending of revenue derived from an already present Direct Effect, you should treat all effects of that spending as Induced. Direct, Indirect, and Induced Effects should be summed and recategorized as Induced Effects when using an Institutional Spending Pattern or any other Event Type to manually internalize the effects of secondary demands from Institutions (other than Households) expected to be supported by the other Events being analyzed.
These Induced Institutional Effects can be combined with the original Effects produced by the Event. In which case a new Total Effect would need to be calculated.
RELATED ARTICLES
ABP: Using an Industry Spending Pattern
ABP: Bill of Goods Using Commodity or Industry Events
Written June 25, 2020
Updated October 7, 2021
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