Hello. I ran an analysis for a new sector by modifying sector 15. I added the employment, and intermediate Inputs and put zero in for Proprietor Employment (I left blank all others)
The result shows me a negative number in the DIRECT value added. I want to make sure that is correct. Does that have to do high value of intermediate inputs? I appreciate your help!
Hi,
While the calculations for an Industry Impact Analysis Event differ from the Standard Industry Output Events, both still use the Industry's Leontief Production Function (LPF). There are some Industries with a total negative Value Added due to negative TOPI and OPI values offsetting any Employee Compensation or Proprietor Income. It is also possible that the Industry in question does not have any Wage & Salary employees, so in turn the IIA Event does not have a value to calculate their wages.
You can explore your Industry's LPF and employment ratios in the Region screen by selecting Region Details. Use the Industry Balance Sheets (Value Added & Commodity Demand tables) under Social Accounts to get the LPF of your Industry. Use the Industry Detail Table under Study Area to find your Industry's split of Wage & Salary workers and Proprietors, and their earnings.
Lastly, remember that the Output equation (LPF) must balance to 100%. If your Intermediate Input value exceeds the Output value, then VA must be negative.
Output = Value Added + Intermediate Inputs
Where, Value Added = Employee Compensation + Proprietor Income + Other Property Income + Taxes on Production and Imports
Hope that helps!
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