INTRODUCTION
IMPLAN’s innovative tool, Forward Linkages shows us two new and relevant perspectives of economic analysis. First, Forward Linkages identify how changes in commodity prices ripple into the supply chain of industries that use this commodity. This is particularly useful in applications like tariffs analyses and the effects of events like natural disasters that disrupt the supply chain. Second, they allow us to analyze the downstream contribution of industries, which is particularly relevant for industries that have stronger downstream linkages such as agriculture or oil and gas extraction.
Multi-regional Input-Output (MRIO), another of IMPLAN’s modeling capabilities, tracks how the impact of an industry disperses into other regions, affecting their industries and household spending. MRIO leverages IMPLAN’s commodity trade data and commuting flows to connect demand changes across regions. In contrast with single-region IO modeling, MRIO is a non-linear model as economic flows across regions are calculated until they reach a threshold, so impacts are generally larger than upstream and downstream IO impacts.
By bringing together Forward Linkages and MRIO analysis, IMPLAN now is able to trace not only the downstream contribution or price disruptions in the supply chain of a determined industry within the region of interest but also spillover effects nationwide. The result is an enhanced analytical picture, empowering users to model complex and real-world economic events with higher precision.
WHEN SHOULD YOU USE forward linkages WITH MRIO?
Projects that look into analyzing downstream ripple effects are the natural fit for forward linkages. Where a standard analysis traces the suppliers an industry buys from, forward linkages trace the opposite direction: the downstream industries that buy an industry’s output and put it into further use. The underlying model is supply-driven as it assumes an industry’s output drives demand further down the value chain.
But what if that downstream ripple does not stay within one region? Consider California’s fruit production industry. California accounted for about 89.3% of US grape production and about 84% of US citrus production (USDA NASS, 2025). However, not the entirety of that production is consumed within the state of California. In addition, uses of fresh fruits are diverse, including retail, food service, and both in-state and out-of-state food processing. Therefore, California’s fruit industry is a clear example of an industry whose downstream effects run nationwide.
On its own, a single region forward linkages analysis would treat every out of state buyer as a leakage. Adding MRIO lets those downstream effects follow the industry’s output into other regions where it is processed, sold, and consumed, capturing a nationwide chain of impact that a single-region model would not capture.
HOW DO WE IMPLEMENT MRIO IN A FORWARD LINKAGES ANALYSIS?
The General Set-Up
Forward Linkages-MRIO is now contained within the two guides available in the app:
- The Price Change (Cost-Push) Guide
- The Downstream Industry Contribution Guide.
These guides now include the option to analyze how the forward linkages events at the sub-national region level ripple to the rest of the nation.
As a starting point, IMPLAN allows you to choose either a state or county as the region in which the event originates. The platform then aggregates the remaining regions in which the spillover effects will be calculated.
Single-region Forward Linkages AND Forward Linkages MRIO SIDE-BY-SIDE
In order to highlight the contributions of MRIO methodology to forward linkages analysis we showcase two examples with both types of downstream analyses available at IMPLAN.
PRICE CHANGE (COST-PUSH) ANALYSIS
Let’s take a look at the first use-case mentioned above which is the fruit industry in California, and create an example of a possible use case using IMPLAN’s Price Change (Cost-Push) Guide.
Background:
The state of California is proposing a new rule in which fruit producers within the state have to comply with water use regulations in order to improve water quality in the state. Producers are expected to use newer irrigation technologies and establish water treatment capabilities within their production area.
Early analysis has concluded the cost of production for fruits in the state will rise about 5%. Legislators, producers, and food companies are interested in knowing the ripple effects of this increase in cost. Most food companies have their operations outside the state of California. Therefore, forward-linkages MRIO becomes a valuable tool to inform these stakeholders. We set up our price change (Cost-push) guide in IMPLAN, selecting the sub-national region with nationwide spillovers.
Results:
Without MRIO, the forward linkages analysis captures over $18 Million in downstream ripple effects in industry output. With MRIO, it captures indirect output downstream effects of more than $386 million. The model captures a massive output impact that would not be visible in a single-region model.
The direct effects of the price increase in the fruits sector in California account for about $146 million in increased output value across downstream industries. These direct effects are identical across the baseline forward linkages and the MRIO version. MRIO’s contributions are visible in the indirect effects, where it captures spillovers that occur in other regions.
Figure 1 shows indirect output changes in a baseline forward linkages analysis versus an analysis capturing the spillover effects. Indirect output effects in the baseline forward linkages analysis in California show an increase of more than $18 Million in output. In the spillover analysis, the indirect output rises to more than $386 Million, of which about $22 Million occurs within California and $364 Million comes from nationwide spillovers. The change in indirect output from $18M to $22M in the state of California once MRIO is applied reflects the interstate feedback, as MRIO traces trade flows through downstream linked industries in other states that buy from California and, in turn, sell back into it.
Figure 1. Indirect output changes across baseline and MRIO forward linkages
DOWNSTREAM CONTRIBUTION ANALYSIS
Background:
For the downstream contribution guide example we turn to a different case: the downstream contribution of Indiana’s steel industry. Indiana accounted for 25% of the US total raw steel production (USGS, 2025). Steel is a highly interconnected industry, especially on the downstream side of the value chain, with applications in infrastructure construction, tools and hardware, transportation, appliances, and more.
An industry with production highly concentrated in a particular region and a rich downstream value chain represents a strong candidate for the downstream contribution guide, specifically combining forward linkages and MRIO. For this example, we activated nationwide spillover effects and analyzed 100% of the production of steel in Indiana.
Results:
The downstream contribution analysis of Indiana’s steel industry showcases high contributions to GDP by this industry through its forward linkages with downstream industries. In the baseline analysis, which excludes nationwide spillover effects, the contribution to GDP is about $1.2 billion; with spillover effects, it reaches $18.4 billion, of which about $1.3 billion is concentrated within Indiana, slightly higher than the $1.2 billion in-state contribution from the baseline, reflecting interstate feedback.
Figure 2 highlights the components of value added in the downstream contribution analysis, comparing the baseline forward linkages and the MRIO forward linkages. The components that rise most under spillover effects are Proprietor Income and taxes on production and imports net of subsidies (TOPI).
Figure 2. Components of value added in a baseline forward linkages analysis and in a MRIO forward linkages.
More revealing is what the spillover effects surface: industries highly linked to steel that are minor within Indiana but significant nationwide. The top industries contributing to the downstream value added of Indiana’s steel differ between the two scenarios. In the baseline forward-linkages analysis, construction machinery manufacturing indirectly contributes 0.8% of the downstream value added; once spillover impacts are included, that share rises to 2.7%. The jump shows that much of the construction machinery manufacturing linked to Indiana steel occurs outside of Indiana, which is activity that the single-region forward linkages analysis largely misses.
The same pattern appears in employment. Indiana’s steel industry contributes to 7,930 indirect jobs in the downstream value chain regionally, and 126,233 indirect jobs considering nationwide spillovers. In the single-region analysis, other real estate industries contribute to 115 indirect jobs downstream; the spillover scenario reveals this industry contributes 3,991 indirect jobs in which 128 are within Indiana, and 3,863 are nationwide.
LIMITATIONS
Currently the forward linkages with spillover effects guide only allows you to choose one region of interest (state or county) and it compiles the rest of the US at the state level. Therefore, when you filter your results you would have access to the region of interest, the rest of the state (if the chosen region is a county), and the remaining states. The picture below shows an example in which the region of interest is Mecklenburg County, NC. Additionally, the guide only allows you to choose one industry/commodity at a time.
CONCLUSION
The forward linkages with MRIO guide pairs two powerful economic modeling techniques to deepen your downstream value chain analysis. Forward linkages trace the industries that purchase an industry’s output and put it into further use, the downstream linkages, while MRIO extends that view across regions. Together, they capture not only the nationwide ripple effects that a change in price or an industry contribution generates, but also the inter-regional feedback that flows back to your region and industry of interest.
The two examples in this article illustrate the same underlying message: a single region model tells a fraction of the story. When an industry’s downstream value chain sits largely outside its region, a single-region forward linkages understates how far that industry’s influence actually reaches. The guide is best suited to industries with two characteristics: a strong downstream value chain, where the output is largely an intermediate input used in other industries; and geographic concentration in production but with out-of-region industries depending on that output. When both conditions hold, the difference between a single-region and an MRIO can be substantial.
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REFERENCES
U.S. Department of Agriculture, National Agricultural Statistics Service. (2025). Noncitrus fruits and nuts 2024 summary. USDA NASS.
U.S. Department of Agriculture, National Agricultural Statistics Service. (2025). Citrus fruits 2024 summary. USDA NASS.
U.S. Geological Survey. (2025). Iron and steel. In Mineral Commodity Summaries 2025 (pp. 96–97). U.S. Geological Survey. https://pubs.usgs.gov/periodicals/mcs2025/mcs2025-iron-steel.pdf