Industry Impact Analysis (Detailed) Events

INTRODUCTION

An Industry is a group of establishments (businesses) engaged in the same or similar types of economic activity. Industry Impact Analysis (Detailed) is an Event Type in IMPLAN that allows you to enter any piece of the Leontief Production Function (LPF) to analyze a change in Production. If the type of business is known to the analyst and the operations require customizations to the LPF, then an Industry Impact Analysis (Detailed) Event is most appropriate to model the impact as it allows for more control over the inputs. 

EVENT TYPE DETAILS

The Industry Impact Analysis (Detailed), or IIA, Event Type is recommended when a user has more detailed information on the business or Industry they would like to specify. 

Not only can users enter any value across the components of Output, but this Event Type is also going to rebalance the Leontief Production Function (unlike the standard Industry Events). 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 components of the LPF. Any value left blank will be estimated by IMPLAN. However, users can enter zeros in any field to signify they do not exist for that business or Industry. Users can also edit the Spending Pattern to customize the allocation of Intermediate Inputs.

IMPLAN will always use the Industry’s LPF to estimate the Direct Effect for this Event Type, but will prioritize the Event Values in a certain order. IMPLAN will first look at Employment, Labor Income, and Output, then Intermediate Inputs, TOPI, and OPI. The calculation steps for this Event can be found in the Detailed Event Calculations section below.

INDUSTRY IMPACT ANALYSIS (DETAILED) EVENT

In this example, we know a new firm, Red Paper Co., opened up in 2020 in North Carolina. They have 100 employees, 2 proprietors, a total Labor Income of $7.5M, a total Output of $50M, and earned no profit in the first year (Other Property Income).

To set up this activity using an Industry Impact Analysis or IIA Event, first create a unique Title for the Event, then select Industry Impact Analysis (Detailed) for the Event Type. Next, click on Specification. Use the dropdown menu to select Industry 145 - Paper Mills, the IMPLAN Industry that best matches the production activity. 

This Event Type will automatically expand to display all available fields. Enter the Wage & Salary Employment Value as 100, Proprietor Employment Value as 2, total Labor Income as $7,500,000, Other Property Income as $0, and Output as $50,000,000.

In this example, values were entered for both Wage & Salary Employment and Proprietor Employment. If either had been set to "0", to indicate they did not exist in this example, a warning would appear informing the user that IMPLAN is automatically setting the corresponding Labor Income to "0". 

ANALYZING AN INDUSTRY IMPACT 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.

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.

Our Results show us the 102 total employees, the $7.5M in Labor Income, and the $50M in Output. IMPLAN utilized the Industry’s production function to distribute the remaining $42.5M to the other components of the LPF (Taxes on Production & Imports and Intermediate Inputs).

NOTE OF CAUTION 

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.

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.

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.

DETAILED EVENT CALCULATIONS 

To calculate the Direct Effects of an IIA Event, IMPLAN will first look at Employment, Labor Income, and Output, then Intermediate Inputs, TOPI, and OPI. 

Based on what you enter, IMPLAN will follow this 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. Total Emp / W&S = 85% & Total Emp / Proprietor = 15%

• 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. Total Labor Income / EC = 80% & Total Labor Income / PI = 20%

• 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 or calculate 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

RELATED ARTICLES

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

Written August 30, 2023