2003 econimpacts doeksen inputoutput

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Input-Output Model Basics

Tom HarrisUniversity of Nevada, Reno

University Center for Economic evelopment

M! "#$

Reno, N% &'(()-#*#(

and

+erald oe.sen

O.la/oma !tate UniversityO.la/oma Cooperative E0tension !ervice

(*( 1 Hall

!till2ater, O3 )$#)&



E0amples of Interrelations/ips

Bet2een !ectors4

• !ectors purc/ase from ot/er sectors

• !ectors sell to ot/er sectors

• !ectors sell outside t/e local economy

• !ectors 5uy outside t/e local economy



Households

Industry

Basi

c

Services

Goods &

$

Inputs

Products

Inputs

$ $

$

$

Services

$ $

Labor

Overvie2 of

Community

Economic

!ystem



Input-Output analysis creates a picture

of a re1ional economy descri5in1 flo2sto and from industries and institutions



6/at Input-Output nalysis Can o4

• Input-Output nalysis is an accountin1

frame2or. • Input-Output analysis can 5e used to

predict c/an1es in overall economic

activity as a result of some c/an1e in t/e

local economy



Uses of Input-Output nalysis

• 7rovides a description of a local economy

• 7redictive model to estimate impacts



8 Basic Components of

Input-Output Models

• Transactions Ta5le

• irect Re9uirements Ta5le

• Total Re9uirements Ta5le



Transactions Ta5le

• transactions ta5le s/o2s t/e monetary

flo2s of 1oods and services in a local

economy

• Represents monetary flo2s for a 1iven

time period, usually one year



Transactions Ta5le :lo2s

• Total outlays ; Total output

• Intermediate purc/ases are 1oods and services

purc/ased and used in t/e local productionprocess

• :inal demands are purc/ases for final

consumption

• :inal payments are payments for factors or

inputs outside intermediate production process



E0ample Transactions Ta5le

S e l l i n g S e c t or s

( $

mi l l i on )

Purchasing Sectors ($million)

1riculture Healt/ !ervices :inal Total

emands Output

1riculture *# < " *& 8<

Healt/ $ $ 8 "< 8)

!ervices < " * 8( $$

:inal *< "( 8& # )'

7ayments

Total Input 8< 8) $$ )' *'<



7redictive Use

of Input-Output nalysis

• Impacts are trac.ed t/rou1/out t/e

economy

• T/e multipliers are derived from re1ional

economic accounts

• Only local transactions are used to create

t/e multiplier effect



irect Re9uirements Ta5le

• irect re9uirements are t/e purc/ases of

resources =inputs> 5y a sector from all

sectors to produce one dollar of output

• Creates a production recipe



S e l l i n g S e c t or s

Purchasing Sectors

1riculture Healt/ !ervices

1riculture #")& #*<" ##$(

Healt/ #*** #*#& ##<&

!ervices #*<) ##($ ##"8

:inal 7ayments #$$$ #<)< #&<$

Total *### *### *###

irect Re9uirements Ta5le



What are Multipliers?

Multipliers measure total change

throughout the economy

from one unit change

for a given sector.



T/ree Types of Multipliers

are calculated from Model

* Output

" Employment

8 Income



T/ree levels of Multipliers

Type I Multipliers

Type II Multipliers

Type III Multipliers



Type I Multipliers

• Include direct or initial spendin1

• Include indirect spendin1 or 5usinesses

5uyin1 and sellin1 to eac/ ot/er

• T/e multiplier is direct plus indirect

effect divided 5y direct effect



Type II Multipliers

• Includes Type I Multiplier effects

• 7lus /ouse/old spendin1 5ased on t/e

income earned from t/e direct and

indirect effects ? t/e induced effects



T@7E III MUATI7AIER!

• Type III Multipliers are modified Type II

multipliers

• T/erefore, Type III Multipliers also include

t/e direct, indirect, and induced effects

• Type III Multipliers adust Type IIMultipliers 5ased on spendin1 patterns

amon1st different income 1roups



Type I Multipliers include4

• Direct

• Inirect (!usiness Spening)

"ype I Multipliers are erive from the

"otal #euirements "a%le

In mat/, t/is is4 ; =*->-* @



S e l

l i n g S e c t or s

( $

mi l l i on )


1riculture Healt/ !ervices

1riculture *$$< #"<& ##&(

Healt/ #*'' **<8 ##'#

!ervices #"(& #**# *#$8

Total *'#8 *($* *"*&

Total Re9uirements Ta5le



E0plainin1 t/e Healt/ !ector

Type I Multiplier

• :or a D*## c/an1e in final demand sales

in t/e local economy, t/e total direct and

indirect impacts are D*($*



Type II Multipliers include4

irect

Indirect =Businesses>

Induced =House/olds>

Type II Multipliers are derived fromt/e Total Re9uirements Ta5le 2it/

House/olds



S e l


( $

mi l l i on )


1 Healt/ !ervices House- :inal Total

/olds emands Output

1 *# < " " *< 8<

Healt/ $ $ 8 *# *< 8)

!ervices < " * ) "& $$

House/olds 8 < *# # # *'

:inal *8 *' "& # # <#

7ayments

Total Input 8< 8) $$ *' <# *'<

Transactions Ta5le 2it/ House/olds



S e l


Purchasing Sectors

1riculture Healt/ !ervices House/olds

1riculture *(8< #8<' #*') #$"'

Healt/ #8&< *8)# #8*& #&)'

!ervices #8&& #"(< *"#8 #<*'

House/olds #")' #8** #8$* *8*'

Total "(&' "8#) "#(' 8"$(

Total Re9uirements Ta5le

2it/ House/olds



E0plainin1 t/e Healt/ !ector

Type II Multiplier

:or a D*## c/an1e in final demandsales in t/e local economy, t/e total

direct, indirect and induced

impacts are D"8#)



Multipliers

• irect re9uirements represent direct or initial

spendin1

• irect and indirect effects include t/e directspendin1 plus t/e indirect spendin1 or

5usinesses 5uyin1 and sellin1 to eac/ ot/er

• irect, indirect and induced effects include

direct and indirect plus /ouse/old spendin1

earned from direct and indirect effects



Ot/er Multipliers

• &mployment Multipliers

"ype I

"ype II"ype III

• Income Multipliers

"ype I"ype II

"ype III



E0ample -

Type I Employment Multiplier

• 1ricultural !ector Type I Employment

Multiplier ; *$8

6/en t/e 1ricultural !ector realies a *

employee c/an1e, total employment in t/estudy area c/an1es 5y *$8 o5s from direct

and indirect lin.a1es



E0ample ?

Type II Employment Multiplier

• 1ricultural !ector Type II Employment

Multiplier ; ""(

6/en t/e 1ricultural !ector realies a *

employee c/an1e, total employment in t/e studyarea c/an1es 5y ""( o5s from direct, indirect

and induced lin.a1es



Brea.do2n of

Type II Employment Multiplier -

1ricultural !ector

irect Effects ; *##

Indirect Effects ; #$8

Induced Effects ; #&"

Total ; ""(



E0ample ?

Type I Income Multiplier

• 1ricultural !ector Type I Income

Multiplier ; *'<

6/en t/e 1ricultural !ector realies a

D*## c/an1e in income, total income in t/estudy area c/an1es 5y D*'< from direct and

indirect lin.a1es



E0ample -

Type II Income Multiplier

• 1ricultural !ector Type II Income

Multiplier ; "(#

6/en t/e 1ricultural !ector realies a

D*## c/an1e in income, total income in t/estudy area c/an1es 5y D"(# from direct,

indirect and induced lin.a1es



Brea.do2n of

Type II Income Multiplier -

1ricultural !ector

irect Effects ; D*##

Indirect Effects ; D#'<

Induced Effects ; D#($

Total ; D"(#



Caution 6/en Usin1 Multipliers

• Multiplier values include direct

effects

• o not a11re1ate sector multipliers to

derive an a11re1ate multiplier

• Be cautious of lar1e multipliers

• Be cautious in usin1 a multiplier

from anot/er study area



7rocedures Used

:or T/is nalysis• IM7AN =IM7act analysis for 7ANnin1>

F +eo1rap/ical data5ase

F !oft2are and data for model

construction and impact analysis

F History of IM7AN



IM7AN U!E :OR HEATH

!ECTOR NA@!I!

• evelop county-2ide input-output model

• :rom !tate Employment !ecurity Officesderived /ealt/ sector employment

• Use IM7AN to derive county-2ide

output, employment, income and salesta0 impacts from t/e local /ealt/ sector



ata5ase of IM7AN

• ("& Industrial !ectors

• Most 8 or $ di1it !IC

• ll standard counties in t/e U!

• No2 availa5le at ip code level



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2003 econimpacts doeksen inputoutput

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