Introducing Industry Impact Analysis (Detailed)

INTRODUCTION

IMPLAN is thrilled to present our newest Event Type: Industry Impact Analysis (Detailed). This is the first time in IMPLAN history that you can now enter Employment - Wage & Salary and Proprietor, Employee Compensation, Proprietor Income, Labor Income, Intermediate Inputs, Taxes on Production & Imports, Other Property Income, and Output. 

BASICS

IMPLAN has always allowed a user to enter values for Employment, Employee Compensation, Proprietor Income, or Output through the Industry Events. If you knew another value, say, Other Property Income, you were forced to use ABP.

But now, you can enter any value in the new Industry Impact Analysis (Detailed) Event. So, if the firm you are analyzing will have no Other Property Income, then add a zero in that box. 

Also, for the first time you can break out your Employment number between workers you know are Wage & Salary Employees separate from Proprietors.  You can also enter a total Labor Income Value instead of having to split it between Employee Compensation and Proprietor Income.

You can even edit the Spending Pattern from right inside the Industry Impact Analysis Event to customize the allocation of Intermediate Inputs! This will open up the familiar Spending Pattern pop up where you can add and delete Commodities, edit the percent spent on each, and adjust the Local Purchase Percentage (LPP) from the default SAM (Social Accounting Matrix) to a value of your choosing.

It’s that easy - add in whatever information you have, all from this single Event. Just remember that anything you leave blank will be estimated by IMPLAN. So be sure to enter a zero value for anything you know for sure should be excluded. In the example shown, values were entered for both Employee Compensation and Proprietor Income. If either had been set to "0", to indicate they did not exist, a warning would have appeared to inform you that IMPLAN is automatically setting the corresponding Employment to "0". 

DETAILS

Industry Events

First let’s go through how the four Industry Event Types handle data. This includes Industry Output, Industry Employment, Industry Employee Compensation, and Industry Proprietor Income. These Event Types do not rebalance the Leontief Production Function and will only change the Direct Effect in your Results. Also, they will always use Industry deflators (never Value Added deflators).

These four Event Types all behave in the same fashion. They will use values in the following order: Output, Employee Compensation, Proprietor Income, Employment. When calculating the remaining portions, IMPLAN will start again with Output, Employee Compensation, and Proprietor Income. It will then calculate Taxes on Production & Imports (TOPI) and Intermediate Inputs as fixed percentages based on the Leontief Production Function for the Industry. Next, it will force whatever is left into Other Property Income (OPI), even if that makes OPI negative. After all that, IMPLAN will look at the Output per worker ratio to fill in Employment. 

Industry Impact Analysis (Detailed)

So now on to the fun part and all improvements with the new Industry Impact Analysis (Detailed), or IIA, Event Type. Not only can you enter whatever value you like across the components of Output, but this Event Type is also going to rebalance the Leontief Production Function (LPF). The IIA Event will use whatever values are entered and then impute the remaining values based on the relationship between them mathematically, taking into account all the pieces of the LPF (so it’s not just hitting OPI with the balance). Also, the IIA Event uses Value Added deflators (same for each Industry) for EC, PI, LI, OPI, and TOPI and Industry deflators (specific to each Industry) for Intermediate Inputs and Output. This inflation/deflation is applied before the multipliers, so it will cause differences between your inputs and results. Note that if you run an Event just entering Output in the new IIA Event and the Industry Output Event, you will get slightly different results if there is any deflation/inflation applied (ie if you use a Dollar Year different than your Data Year on the Impacts or Results screen).

In the IIA Event, you have the option to tell IMPLAN how many employees are Wage & Salary and how many are Proprietors. If you don’t enter any details on Employment, IMPLAN will use the Values you enter for Proprietor Income and Employee Compensation to estimate employment. The IIA Event also allows you to enter a Labor Income Value instead of just Employee Compensation and/or Proprietor Income.

Any value left blank will be estimated by IMPLAN. However, if you know that there are no Proprietors and therefore no Proprietor Income, you can enter zeros in those boxes. If you enter zero in Proprietor Employment and $X in Proprietor Income, or zero in Wage & Salary Employment and $Y in Employee Compensation, IMPLAN will show you the results for an increase in wages without an increase in Employment.

The logic flow of the IIA is as follows. IMPLAN will first look at Labor Income, Employment, Output, then Intermediate Inputs, TOPI, and OPI. Based on what you enter, IMPLAN will follow a certain logic.

Step 1: Check for Employment (If no values are entered, move to Step 2)

• If a value is entered in two of the three boxes: Wage & Salary Employment, Proprietor Employment, or Total Employment
• IMPLAN will use entered values to calculate remaining value based on formula:      

                          Wage & Salary + Proprietor = Total Employment

• If a value is only entered for Total Employment: 
• IMPLAN will calculate remaining values based on split between Wage & Salary and Proprietors in the Region 

                       e.g. 85% / 15% of Total Employment

• In all other scenarios, IMPLAN makes no calculation and moves to Step 2

Step 2: Calculate Labor Income (If no values are entered in Step 2, move to Step 3)

• If a value is entered in two of the three boxes: Employee Compensation, Proprietor Income, or Labor Income
• IMPLAN will use entered values to calculate a remaining value based on formula: 

                          Employee Compensation + Proprietor Income = Labor Income

• If a value is only entered for Total Labor Income: 
• IMPLAN will calculate remaining values using split between Employee Compensation and Proprietor Income in the Region

                       e.g. 80% / 20% of Total Labor Income

• If no value is entered for Employee Compensation, Proprietor Income, or Labor Income, IMPLAN will check Employment values from Step 1
• IMPLAN will calculate Employee Compensation by multiplying the number of Wage & Salary employees in Step 1 by the Average EC per W&S employee
• IMPLAN will calculate Proprietor Income by multiplying the number of Proprietors in Step 1 by the Average PI per Proprietor
• If no value Employment values were entered or calculated in Step 1, move to Step 3

Step 3: Check for Output

• If a value is entered for Total Output:
• IMPLAN will use the value as the total sum for the LPF equation calculations in Step 4

                     Employee Compensation + Proprietor Income + Intermediate Inputs + TOPI + OPI = Output

• If no value is entered for Output:
• IMPLAN will calculate Output by summing all the entered values from the LPF equation: Employee Compensation + Proprietor Income + Intermediate Inputs + TOPI + OPI = Output, then dividing by the sum of each component’s ratio to the Industry’s Output in the Region 

                    e.g. entered values: $10 EC + $5 PI + $15 OPI = $30 / (10% + 5% +15%) = $100 = Output

Step 4: Balance the Leontief Production Function 

• If there are any remaining values: Intermediate Inputs, TOPI, OPI, Employee Compensation, and/or Proprietor Income
• IMPLAN calculates each value by creating a new LPF from the residual of total entered values, divided by the sum of each residual component’s ratio to the Industry’s Output in the Region 

                      e.g. EC+PI+OPI = $30, Output = $100, remaining $70 goes toward II & TOPI based

                             on new LPF % of total                 

Step 5: Estimate Employment (Round 2)

• If any employment value was not entered or calculated in Round 1
• Wage & Salary Employment will be calculated from average Employee Compensation per Employee and Proprietor Employment will be calculated on average Proprietor Income per Proprietor

The following table outlines the key differences between these two Event Types.

Rest in Peace ABP.

NOTE

The Industry Impact Analysis (IIA) Event Type is a powerful tool used to model impacts from Industry production. As users are able to enter any portion of the production function for an Industry in IMPLAN, there are certain instances when this can cause unexpected results. This typically occurs when an Industry has an abnormal production function where individual components can be greater than 100% or less than 0%. This often occurs for Industries receiving subsidies or with unusual labor requirements. As all production functions must balance to 100% for an Industry, this can sometimes result in negative percentage values for individual components, which may produce negative effects for the modeled Industry.

For best results, we recommend limiting your projects to include no more than six IIA Events. We are always working to increase the capacity so stay tuned!

NEGATIVE EVENT VALUE WARNING

If the sum of the entered event values in the Industry Impact Analysis (Detailed) Event result in a negative Output or you enter a negative Output value, IMPLAN will show an error message to confirm this was intentional. Running an Industry Impact Analysis (Detailed) Event with a negative Output value will result in negative Impact Results. The warning will persist even after running the Impacts through an analysis.

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College: Analyzing a Public College using Industry Impact Analysis (Detailed)

Written October 6, 2021

Updated August 16, 2022