OVERVIEW

Industry Value Added (VA) is a measure of an Industry’s contribution to Gross Domestic Product (GDP). It is the difference between an Industry’s total Output and the costs of its Intermediate Inputs. VA has four components: Employee Compensation (EC), Proprietor Income (PI), Other Property Income (OPI), and Taxes on Production and Imports net of subsidies (TOPI).

At the national-level, annual Value Added control values (i.e., without Industry specificity) come from the Bureau of Economic Analysis (BEA) National Income and Product Accounts (NIPA) tables. This data serves as the governing controls for all IMPLAN Industry-level and sub-national Value Added data. The BEA also releases Regional Economic Accounts (REA) that contain state- and county-level annual GDP, Employee Compensation, and Proprietor Income data by Industry. This data is lagged by one year and has a lower level of Industry detail (approximately at the 3-digit NAICS level).

IMPLAN uses these data sources as well as the Bureau of Labor Statistics’ Census of Employment and Wages (BLS CEW) data and other sources in the case of the farm Industries to develop sub-national estimates of the components of Value Added. The following article provides a summary of how Value Added is estimated.

EMPLOYEE COMPENSATION AND PROPRIETOR INCOME

BLS' CEW is our primary source of employment and income data; however, the CEW data undercovers some Industries and does not include Proprietors, Proprietor Income, employer-paid payroll taxes (social insurance, unemployment). Read more about how IMPLAN accounts for this in Accounting for Undercoverage in the BLS CEW Wage and Salary Income and Employment Data.

The CEW data also contains non-disclosures (i.e., records for which the employment and wage and salary income values associated with an establishment count in a given geography and NAICS code are not revealed). To get estimates for non-disclosed values, we use a tiered range of methods depending on the availability of each method for the given geography and NAICS code. More details can be found in Estimating Non-Disclosed Values in the Source Data for IMPLAN Employment and Labor Income.

After obtaining estimates for non-disclosed records and Industries not covered by CEW, we turn to the BEA's REA data series to get estimates for Employee Compensation (i.e., fully loaded payroll), Proprietor Income and Employment, and the Industries undercovered by CEW. Due to the REA data being lagged one year and in a more aggregate sectoring scheme, the CEW data are used to project the REA data to the current data year and to distribute them to the current IMPLAN Industry Scheme.

OPI AND TOPI

Initial estimates of national TOPI by IMPLAN Industry are generated by applying TOPI/Output ratios from the latest BEA Benchmark I-O table to current Output estimates. Initial estimates of national OPI by IMPLAN Industry are generated by subtracting Intermediate Inputs, Employee Compensation (EC), Proprietor Income, and TOPI from Output. These first estimates of national TOPI and OPI by IMPLAN Industry are then controlled to the BEA's GDP-by-Industry data.

To distribute the national data to the states, we turn to the BEA's GDP by State data. State-level OPI-to-EC and TOPI-to-Employment ratios are used with each county's EC and Employment estimates for each IMPLAN Industry to calculate county-level first estimates of OPI and TOPI by IMPLAN Industry. County-level OPI and TOPI estimates by IMPLAN Industry are then forced to sum to the state level OPI and TOPI estimates. More detailed information about this process can be found in Other Property Income Data and Taxes on Production and Imports Net of Subsidies Data.

ESTIMATION AND DISTRIBUTION PROCESS

We start with the raw Value Added data from the BEA, which provides Total GDP, Employee Compensation (EC), Gross Operating Surplus (GOS), Gross TOPI, and Subsidies. These data do not separate out PI from OPI but rather report the combination of the two as GOS.

To get OPI, we subtract our own PI estimates (for which we have a separate process) for the sector and state and year.

The next task is to distribute this value among the IMPLAN Industries that map to the more aggregate BEA sectors. To do this, we rely on the U.S. values, for which we have other data sources that give more sector detail, including the BEA Benchmark, which comes out every 5 years.

IMPLAN Value Added data isn't directly comparable to BEA data for GDP. We do not use the Total GDP data from the BEA since it is lagged a year relative to the IMPLAN data year. However, we do use that data set for some of the components of GDP.

RELATED ARTICLES

Understanding Value Added

Other Property Income Data

Taxes on Production and Imports Net of Subsidies Data

 

Written April 18, 2024