Construction Impacts in Small Rural Areas

In analyzing the economic impacts of the construction of a relatively complex project (alternative energy) in a small rural area - do you need to (and how do you?)adjust the spending to address the local capacity to supply the needed construction services. I was only going to model the local installation costs in the construction budget - but what if these some of these services are specialized (i.e. power lines, structural steel work etc). According to your training manual "Local workers may not have the advanced training, technology or skills, required for some construction projects (like a suspensory bridge), or a company outside the Study Area may be contracted to manage the construction work. If construction labor is imported, labor income impacts are reduced." Does IMPLAN address this with its commuting patterns / local purchases estimation or is it best to scale back even the local installation costs to reflect the local capacity to supply the needed services. I had conceptually thought of the construction direct impacts as construction value put in place locally (i.e. $ spent in the jurisdiction - if you install it there it’s obviously spent there) - with indirect and induced impacts being determined by the ability to supply the needed inputs and labor.
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  • Hi Richard, You will want to leave the Industry Sales value at the full construction cost and the Employment at the IMPLAN estimations (unless you happen to have a known Employment value) because all the construction building value and employment are at the site regardless of whether the workers are resident or temporary. The software will make purchases of local materials on the basis of regional availability. If you feel that 'no supply constraints' of I-O will still be an issue, (i.e. even taking into account local availability of items total purchases related to the industry may be larger than local production) you can always import the spending pattern for the construction Sector you are working with, and make additional reduction to LPP values. As you mentioned below, if a large number of your workers will be from outside the region, you will definitely want to reduce the value of Labor Income that is spent in the region, by reducing the Employment Compensation and Proprietor Income values in the Event. Ideally you will have some knowledge of the number of local workers or the amount of income that remains local, however, if you have a local vs. non-local employee count but no salary estimate you can use the default Employment Compensation/worker and Proprietor Income/worker values to estimate the reduction. You will also want to consider how much the model may be removing for the region as a commuting factor as well, you can do this as described below: To determine what amount to decrease Employee Compensation by, you can use the following equation: newEC = EC*[(1-userCR)/(1-samCR)] where: EC = original, unmodified employee compensation userCR = your known commuting rate samCR = commuting rate reported in the SAM newEC = the EC value you want to use when running the analysis So, for example, if the SAM shows that the average commuting rate in your region is 10% but you know that for your industry it is 20%, then: newEC = $1,000,000*(0.8/0.9) = $1,000,000*(0.88888) = $888,888 After the scenario has been run, add the difference (EC - newEC) back to your direct EC effect since by definition EC occurs at the site of employment. This way, you correctly account for the in-commuters' direct effect, but you have made sure that they did not generate any further local impact. You may also want to add a little income back in to account for anticipated expenses that non-local workers may have in the region, such as hotels and restaurant spending.

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