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Impacts of Irrigation

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dbangsund
Hello, I am evaluating the economic effects of expanding irrigation in North Dakota using model ver 3.1. The analysis is modeling the impacts of infrastructure development associated with irrigation and the annual economic effects of a change in dryland to irrigated crop production. I have two primary questions related to modeling the economic effects of converting crop land from dryland to irrigated production. Question 1: IMPLAN sector 319 appears to be the appropriate category to place the value of irrigation equipment necessary for development of irrigated land--the purchases represent the cost to farmers/producers of acquiring center pivot equipment (pumps, nozzles, pipe). When entering those values into sector 319, the model asks to distinguish between gross retail sales vs gross retail margin. Which is the most appropriate to use? As a follow-up, the direct effect, when using gross retail sales is a small percentage of the value inputted into that sector--why are the direct impacts so small relative to the cost of the equipment when using gross retail sales? Would another Implan sector be more appropriate for the cost of irrigation equipment? Question 2: My second question relates to the most appropriate manner to model the economic impacts of irrigated crop production. We have crop enterprise budgets that itemize revenues, costs, and net returns from dryland crop production and irrigated crop production. Currently, the net change in crop sales receipts are being placed into IMPLAN sector 2-grain farming. An alternative approach is to place the change in crop inputs (expenditures) into the appropriate economic sectors and model the change in producer net returns as a change in household income. I have attempted to model both approaches but get different results. Much of the change in crop input expenditures ends up in sector 319. If the inputs to sector 319 are modeled as gross retail sales, the direct impacts are greatly reduced (see question 1 above) and if the inputs to sector 319 are modeled as gross retail margin, then the results show large sales tax receipts in the state and local government revenues--however, purchases of fertilizer, herbicide, insecticide, seed, and most other inputs by farmers are exempt from sales taxes in North Dakota. Which approach to measuring impacts of expanded irrigation is the most appropriate--cash receipts or input expenditures/net returns? Thanks, Dean
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    IMPLAN Support
    Hello Dean, Question #1: There is a possibility that some of the irrigation equipment is manufactured locally. If so, you will miss that portion of economic activity. If you know there isn't then applying to the wholesale sector and setting to Gross Retail Sales is the correct method. If the manufacturing sector exists locally you can: 1) Choose the manufacturing sector and set the Industry Sales value to total value spent on that type of irrigation equipment. 2) Set Margins, using the [url=https://implan.com/v4/index.php?option=com_multicategories&view=article&id=567:567&Itemid=71]Event Options> Edit Event Properties>Margins> Yes[/url] 3) Set the LPP to the SAM Model Value via [url=https://implan.com/v4/index.php?option=com_multicategories&view=article&id=567:567&Itemid=71#lpp]Event Options> Edit Event Properties>Set Local Purchase Percentage> SAM Model Value[/url] 4)Go into the Margin>Edit screen via Event Options> Edit Event Properties>Margins> Edit. 5)Here you need to make an assumption. Based on what you believe is most likely to be the case, will the retail Margin best be distributed to the transport, wholesale and production, or should the difference between the retail cost and the wholesale cost basically be distributed all back to the wholesaler, or producer. [ul] [li]If you think it should be distributed across the remaining Sectors, zero out the retail Margin and click "Rebalance"[/li] [li]If you think the difference in the value should all go to the wholesaler, zero of the retail Margin and then click into the fix rows for the producer and transport Sectors then "Re-balance".[/li] [li] If you think the difference in the value should all go to the producer, zero of the retail Margin and then click into the fix rows for the wholesaler and transport Sectors then "Re-balance".[/li] [li]In this same vein, if you want the difference in the value to distribute to the wholesaler and the producer than you can, zero of the retail Margin and then click into the fix rows for the transport Sectors then "Re-balance".[/li] [/ul]The decision on which method to us is up to you. As regards the reduction in value, when applying Gross Retail Sales to the Sector, this is the result of not only specifying the wholesale Sector rather than Margining a producing Sector. The wholesale Sector, regardless of which option you choose (Gross Retail Sales or Gross Retail Margin) can only apply spending to the wholesaler's operations, thus is has to 'leak' the proportion of the wholesale value that would go to transport and production if these factors are unknown (hence using Gross Retail Sales is the correct option). The only time you would use Gross Retail Margin, is if you knew the value of wholesale operations rather than the value of an item sold via wholesale. Question #2: The simplest approach would be to enter cash receipts into Sector #2, but this sector represents a national industry average relative to spending pattern purchases and is for all grains. Since you have enterprise budgets specific to your local region, I would also suggest considering analysis-by parts. It's more involved, but will also allow you to more accurately model the Agricultural expenditures that take place in your region. Please see the [url=http://implan.com/v4/index.php?option=com_multicategories&view=article&id=730:case-study-analysis-by-parts&Itemid=71]following link [/url]for further explanation of Analysis-by-Parts. Please let us know if this addresses your concern or if you have any additional questions.
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