INTRODUCTION
Industry Contribution Analysis (ICA) is a method used to estimate the value of an Industry or group of Industries in a Region, at their current levels of production. While the focus of the analysis still looks at backward linkages, the purpose of this analysis differs from the standard economic impact analysis. ICA shows the relative extent and magnitude of the Event in the study area.
ICA is a unique method which applies a constraint upon the model by removing feedback linkages (buybacks) to the Industry being analyzed. This method can also be used with single firms, but if/when it is, the results of this method should be considered conservative. What this basically means is IMPLAN will not allow the Industry being analyzed to get any larger than its current state in the Region.
ICA denotes that the study is looking at how the current state of an Industry supports other businesses in the local economy. When this involves a single firm, the analyst will need to determine if the Impact method or Industry Contribution Analysis method should be used. The results in either case should be described with words such as "contributes to" or "sustains".
| Event Type | Industry Contribution |
|---|---|
| Event Use | Estimating effect of an existing Industry’s production |
| Event Specification | Industry 1-546 for which the contribution is being measured |
| Event Value | Output or % of Industry |
EVENT TYPE DETAILS
Output is the only value for this Event Type, either total production dollars or as a percentage of the total Industry Output. For service Industries, Output equals sales. For manufacturing firms, Output equals sales +/- the change in inventory. For retailers and wholesalers, Output equals their gross margin or Marginal Revenue (not gross sales) and does not include the value of goods sold. By default, the Event Value of a retail or wholesale Industry specified in an ICA Event is interpreted as Producer Price (Marginal Revenue). Learn more about retail and wholesale margins in the article Retail and Wholesale: Industry Margins. IMPLAN will always use the Industry’s production function to estimate the Direct Effect for this Event Type.
INDUSTRY CONTRIBUTION ANALYSIS EVENT
In this example, we want to look at the contribution of the entire hotel Industry. To set up this activity using an Industry Contribution Event, first create a unique Title for the Event, then select Industry Contribution Analysis for the Event Type. Next, click on Specification. Use the dropdown menu to select Industry 507 - Hotels and motels, including casino hotels, the IMPLAN Industry that best matches the production activity.
The default Value for this Event Type is Output production in dollars. The buttons after the Event Value give users the choice between entering a dollar value or entering a percentage of the total Industry Output. In that we want to see the entire Industry, we will select the %, and set it to 100%.
ANALYZING AN INDUSTRY CONTRIBUTION EVENT
Now it is time to assign Events to Groups. To assign an Event, click the Drag Event icon, hold it, and drop it into the corresponding Group. The Multi-Select feature allows users to select more than one Event at a time.
Each Group will indicate the number of assigned Events in the upper right corner by showing a number indicating the number of Events in that Group. To double check if an Event was correctly added to a Group, use the drop down arrow to view the assigned Events. The Contribution Analysis icon will also appear, warning users that this Group contains an Industry Contribution Analysis Event. Any other Event assigned to this Group will have buybacks restricted from the ICA Industry.
Now click Run in the bottom right of the Impacts Screen.
When the analysis is finished, click View Results. For more information on how to interpret them, check out the article Examining Results & Interpreting Direct, Indirect, and Induced Effects.
To see how the constraints on the hotel Industry worked, navigate to the Output tab in the Results. The largest Industry in terms of Output was Industry 507 - Hotels and motels, including casino hotels with a total of $15,193,837,564.97. On the Industries by Impact table, the Direct Effect value matches total Industry Output while the Indirect and Induced Effects in this Industry are zero. If we had used a standard Industry Output Event, there would be additional Indirect and Induced Effects in our Results.
INDUSTRY DOES NOT EXIST
If an Industry does not exist within a Region being analyzed, a warning will appear indicating the Event and Group after selecting Run. If a user clicks Continue without making changes, those Events will not generate any results. Learn more about Adding an Industry to your Region.
RELATED ARTICLES
ICA: Introduction to Industry Contribution Analysis
Written August 30, 2023