Economic Impact of New Households?

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    IMPLAN Support
    Hi Jed, Certainly you can use the CES data to create your own expenditure patterns but we do have PCE spending patterns built into the Model for each of the 9 household income classes. A couple of things to consider in doing this: 1. You'll want to be sure that you set the LPP is set the SAM Model Value if you are building a custom spending pattern because otherwise you are assuming that all the household purchases are done by local providers. 2. If the 120K represents the Labor Income you are anticipating those households to be earning then neither of these methods is completely correct. If it's Household Income then the Household Income Change would be appropriate. The reason for this is that not all income is spent, some is saved, some is paid as taxes, etc. The Labor Income Change removes payroll taxes, income taxes, and savings. The Household Income Change removes income taxes and savings. For a spending pattern analysis (custom from CES or one ours) the full value is spent so it would need to be pre-netted of savings and taxes. If you are using CES income data as the base then savings is already removed. 3. In terms of the results reporting, by definition spending of income drives Induced Effects which is the result of the Household Income Change. But household spending is Institution spending so it has Direct, Indirect, Induced and Total effects. Neither result report is more or less correct, just different definitions. 4. CES values are not Margined and include sales tax. These are issues that should be resolved from the CES spending pattern, but are already taken into account in the IMPLAN PCE spending patterns. Your point about summing all the households at that income value is great...feel free to use your wording for the above points if you like as well.
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    IMPLAN Support
    HI Jed! Thank you for your forum post. In regards on how to setup this analysis, you can do it in several different manners. This in large depends on what you are trying to analyze. For your first method of setup, we recommend a Commodity Change rather than an Industry Change. As households purchase Commodities but unless you know exactly where those Households are purchasing from, it is best to use the Commodity Change Activity Type. Certainly you can use the CES data to create your own expenditure patterns but we do have PCE spending patterns built into the Model for each of the 9 household income classes. You'll want to be sure that you set the LPP is set the SAM Model Value if you are building a custom spending pattern because otherwise you are assuming that all the household purchases are done by local providers. CES values are not Margined and include sales tax. These are issues that should be resolved from the CES spending pattern, but are already taken into account in the IMPLAN PCE spending patterns. If you are not sure about all Commodities that Households purchase, you could use your 2nd method. The Household Spending Pattern uses a pre-determined spending pattern that households in $100K- $150K spend. With that said though, since you are not impacting a sector or commodity; as this is only looking at the impact of spending of wages; you will only get an induced impact. An additional thought about this method is that when entering the Household Income Value in your Event, this will need to be stripped of taxes and benefits. Also, the Household Income Change field in the Event should indicate the total Household Incomes. As the example in your post would indicate an analysis on 1 household. A couple of things to consider in doing this: 1. If the 120K represents the Labor Income you are anticipating those households to be earning then neither of these methods is completely correct. If it's Household Income then the Household Income Change would be appropriate. The reason for this is that not all income is spent, some is saved, some is paid as taxes, etc. The Labor Income Change removes payroll taxes, income taxes, and savings. The Household Income Change removes income taxes and savings. For a spending pattern analysis (custom from CES or one ours) the full value is spent so it would need to be pre-netted of savings and taxes. If you are using CES income data as the base then savings is already removed. 2. In terms of the results reporting, by definition spending of income drives Induced Effects which is the result of the Household Income Change. But household spending is Institution spending so it has Direct, Indirect, Induced and Total effects. Neither result report is more or less correct, just different definitions. Thanks! IMPLAN Staff
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