Impacts of an export ban

Hello!

Industry Events are most appropriate to use when you know what Industry or Industries are experiencing a change in production. For example, a farmer in Industry Sector 2 - Grain Farming will produce $10m less the following year. You would use a Commodity Event Type if you knew there was a change in demand or production of a commodity but didn't know who would meet the demand. For example, you know the production of grains (Commodity sector 3002 – Grains) will decrease by $10m the following year. Since commodities can be produced by more than one industry and some being produced by institutions (governments), you wouldn’t just apply the -$10m to Industry 2. In IMPLAN, commodity events will redistribute the -$10m across all producing industries according to their Market Share, then run those as Industry events.

There is a third option for modeling production output in IMPLAN, called an Industry Contribution Analysis. This event is used to estimate the value of an Industry or group of Industries at their current levels of production. Contribution is used to denote that the study is looking at how the current state of the industry supports other businesses in the local economy, support that in your project, they would be losing. For example, if you want to know the economic impact of a 10% decrease of current production of the Grain Industry.

In regard to your specific project, IMPLAN - and I/O models in general - are fixed-price, fixed-input, and backward linkage models so they aren't used to directly evaluate the impacts of price changes or a ban on commodities. However, if you can speculate how businesses will respond to a ban on exports then you can evaluate the impacts of the changed businesses behavior. For example, you can't use IMPLAN to evaluate the question "What are the impacts if the price of grain falls by 10%?". However, you might conclude (by some means other than using IMPLAN) that local grain production will fall by $X if grain prices fall by 10% (perhaps you could use data from the past several years to establish a relationship). You could then use IMPLAN to evaluate the reduction in grain production. In other words, you need to provide the information about how businesses respond to the price change or ban itself and then use IMPLAN to evaluate the impacts of those behavioral responses.

There are several factors that an analyst must consider when estimating a ban on a specific commodity. Here are just a few that might help you determine how to set up your project:

• Who is affected by this ban? A producer or consumer?
• Are the bans foreign, domestic, or both? If the ban is only foreign, will there be any change in production or consumption domestically?
• What will happen to the banned commodity that is already produced? Is it impossible for farmers to find another buyer? The value of producing the commodities already occurred, but will the products be destroyed or resold to someone else?
• How will the business or industry respond to the ban?
  • If the ban results in a loss of revenue to the business, the business will need to absorb this loss. It is not likely they will change the inputs they use, but they may let go of employees, pay their employee less, or make less in profit. The first two could be modeled using an Industry Employment or Industry Employment Compensation event. The third would require customization of the industry.
  • Will the farmers switch production to another crop instead? You could redistribute the output lost, as an increase in production for other agriculture sectors in your region.
• Will there be any government subsidies to farmers/producers to offset the economic effects of the ban? If yes, then there is no economic change to model.
• Will the ban result in positive gains to other producers or consumers? If the decrease in the grain sector is paired with increases in another agriculture sector or savings to consumers, you should run a net analysis. A net analysis would require modeling both positive and negative impacts, then summing the results to arrive at a more accurate impact picture.

Here are some other IMPLAN articles to help you get started:

https://support.implan.com/hc/en-us/articles/360037695753-Net-Analysis-Considering-Both-Sides-of-an-Impact-

https://support.implan.com/hc/en-us/articles/1260804575049-Price-Changes-in-Input-Output

Hope this helps!

Michael Nealy