Interpretation of results

I provided my client with a table showing estimated outputs for a construction phase of a new hotel project, and included the following text. "Construction Phase – The project construction budget is estimated to be $2,160,000. IMPLAN use national models to estimate employment and income levels for different construction types, in this case I have used “construction of new, non-residential commercial and healthcare facilities”. For this analysis, labor income is estimated to be about 26% of the total construction budget. The construction phase of the project could add an estimated $3.4 million to the local economy. The estimated 27 construction jobs require about 8 supporting jobs (i.e. truckers, clerks in the local supermarket, or waitresses at the family restaurant). These supporting jobs generate an additional $205,000 in labor income that then circulates through the local economy. Impact Type Labor Labor Income Value Added Output Direct Effect 27 $563,842 $1,334,418 $2,622,403 Indirect Effects 8 $205,720 $481,813 $824,078 Total Effect 35 $769,562 $1,816,231 $3,446,481 Value Added is the difference between an industry’s total output (sales) minus the costs of goods and services purchased from other industries, or imported. Output represents the value of industry production. In IMPLAN these are annual production estimates for the year of the data set and are in producer prices. For service sectors production = sales. For manufacturers this would be sales plus/minus change in inventory. For Retail and wholesale trade, output = gross margin and not gross sales." My clients question is - why don't the numbers directly add up. Do you think I should add another column showing the cost of intermediate inputs, with a definition of what that is. Please look at the attached table to see what these are. My real problem here is that I am trying to simplify the numbers ( and concepts) so that a non-economist can see what is going on. If you were going to present this to your city council how would you make it more understandable??
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Comments

5 comments

  • There is a difference between looking at a single industry's production function. A single industry has intermediate purchases plus value added which equals output. The intermediate purchases are actually the first round of the indirect effect so you would not want to display that as a separate column. The impacts are the results of rounds of purchases by businesses and consumers. At each turn there is leakage of dollars due to imports. A graphic showing that spending does help describe that. The bottom line is that they are not supposed to add up.
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  • Do you have a graphic that I might be able to use? Just curious - how do other IMPLAN users present simplified results to their clients. Do you have a standard table format with accompanying text?
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  • We don't have a standard format yet but are planning on it. I've attached a graphic showing the impact calculation process.
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  • Thank you Scott - when you do develop a format could you include me on your list to receive the info?
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  • Will do. We will publicize this.
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