input – output analysis mk geografi ekonomi dept. geografi fmipa ui
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Input Output AnalysisMK Geografi EkonomiDept. Geografi FMIPA UI
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Next
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A simple model of tradeExportsImportsInternal Goodsand Services
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The Economic Base ModelET = Total EmploymentEX = Export EmploymentEL = Local Employment
ET = EX + EL (1)
Define a = EL/ETMultiply by ET and substitute into (1): ET = EX + aETSolve for ET:
ET = ( 1/1-a)EX
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Example, Economic Base ModelIf a = .67
Then:( 1/1-.67) =( 1/.33) = 3
If EX = 500, then ET = 3 x 500 or 1500.
If EX rises to 750, ET becomes 3 x 750 or 2250
and if EX falls back to 400, ET declines to 1200
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Measurement of the Economic Base MultiplierDirect SurveysShort-cut Approaches:Assumption or AssignmentMinimum RequirementsLocation QuotientsIndustry Specific Models:Input-outputRegional econometric models
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Example of Minimum RequirementsIf total employment was 100,000, then minimum requirementsis 6%, or 6,000. If actual employment were 10,000, 4,000 wouldbe assigned to exports.Repeat for all industries, sum local shares to obtain a(Thousands)
Chart3
0.01192045020.0307840483
0.04644289350.0482464496
0.06131090050.0557670965
0.07617890750.0632877434
0.09583334370.0732294979
0.11070135070.0807501448
mfg85
mfg95
Total Employment
Minimum Requirements Manufacturing
Sheet1
19851995
agser85popagser95Logpop
0.0006016424100.00157017842.302585093
0.0011821667500.0022726983.9120230054populationagser85agser95
0.00143218491000.00257525684.60517018610.00060164240.0015701784
0.00168220312000.00287781555.2983173665100.00060164240.0015701784
0.00201270915000.00327777646.2146080984500.00118216670.002272698
0.002262727310000.00358033526.9077552791000.00143218490.0025752568
2000.00168220310.0028778155
agser85agser95pop5000.00201270910.0032777764
0.00060164240.00157017841010000.00226272730.0035803352
0.00118216670.00227269850
0.00143218490.0025752568100
0.00168220310.0028778155200
0.00201270910.0032777764500
0.00226272730.00358033521000
Populationmining85mining95
100.00001594380.0000646092
500.00018638320.0001618353
1000.00025978750.0002037083
2000.00033319180.0002455814
5000.0004302270.0003009345
10000.00050363130.0003428075
Populationconstr85constr95
100.01852498790.01940569
500.02349815110.0251272418
1000.02563997590.02759138
2000.02778180070.0300555182
5000.0306131390.0333129318
10000.03275496380.03577707
Populationmfg85mfg95
100.01192045020.0307840483
500.04644289350.0482464496
1000.06131090050.0557670965
2000.07617890750.0632877434
5000.09583334370.0732294979
10000.11070135070.0807501448
tcu85tcu95
0.01579263110.0144542028
0.0244658920.0229230651
0.02820126210.0265704055
0.03193663230.030217746
0.0368745230.0350392678
0.04060989320.0386866083
whole85whole95
0.00650729040.0110176949
0.0228752740.023403929
0.02992458080.0287383898
0.03697388760.0340728505
0.04629256440.0411246239
0.05334187120.0464590846
retail85retail95
0.15105701360.1504592879
0.15878553450.1591679565
0.16211402720.1629185759
0.165442520.1666691953
0.16984254810.1716272444
0.17317104080.1753778638
fire85fire95
0.01442355150.0131232989
0.02721858290.0246404366
0.0327291030.0296005979
0.03823962310.0345607591
0.04552413440.0411177356
0.05103465450.0460778968
bizser85bizser95
0.023153168-0.0160952026
0.04193530850.0100517257
0.05002433610.0213125948
0.05811336370.0325734639
0.06880647650.0474595232
0.07689550410.0587203923
legal85legal95
0.00090664840.0010830418
0.00237493860.00259704
0.00300729680.0032490836
0.00363965490.0039011271
0.0044755870.0047630818
0.00510794510.0054151254
Member85Member95
0.00641748990.0085341685
0.00859023110.0104445713
0.00952597980.011267337
0.01046172840.0120901027
0.01169872090.0131777398
0.01263446960.0140005055
health85health95
0.01928164610.0642552888
0.03107721660.0679215884
0.03615729230.0695005777
0.0412373680.071079567
0.04795286280.0731668772
0.05303293840.0747458665
educ85educ95
-0.0030768845-0.0012538486
0.00066827750.0017042983
0.0022812310.0029783028
0.00389418450.0042523073
0.0060263930.0059364497
0.00763934650.0072104542
social85social95
0.00351392340.007741353
0.0058942820.0096420992
0.00691944670.010460706
0.00794461140.0112793128
0.00929980540.0123614522
0.01032497010.013180059
othserv85othserv95
0.01601815160.018699433
0.02489098280.0283077773
0.02871230320.032445866
0.03253362360.0365839547
0.03758513440.0420542103
0.04140645490.046192299
unclass85unclass95
0.00951313890.0002603605
0.00903304350.0003309987
0.00882627770.0003614209
0.00861951190.0003918431
0.00834618240.0004320591
0.00813941660.0004624814
totalmin85totalmin95
0.29457079270.3241036047
0.42911915840.4369437109
0.48706598550.4855412995
0.54501281250.534138888
0.62161435120.5983814057
0.67956117820.6469789942
Sheet1
agser85
agser95
Sheet2
tcu85
tcu95
Sheet3
0.00650729040.0110176949
0.0228752740.023403929
0.02992458080.0287383898
0.03697388760.0340728505
0.04629256440.0411246239
0.05334187120.0464590846
whole85
whole95
0.15105701360.1504592879
0.15878553450.1591679565
0.16211402720.1629185759
0.165442520.1666691953
0.16984254810.1716272444
0.17317104080.1753778638
retail85
retail95
0.01442355150.0131232989
0.02721858290.0246404366
0.0327291030.0296005979
0.03823962310.0345607591
0.04552413440.0411177356
0.05103465450.0460778968
fire85
fire95
0.023153168-0.0160952026
0.04193530850.0100517257
0.05002433610.0213125948
0.05811336370.0325734639
0.06880647650.0474595232
0.07689550410.0587203923
bizser85
bizser95
0.00090664840.0010830418
0.00237493860.00259704
0.00300729680.0032490836
0.00363965490.0039011271
0.0044755870.0047630818
0.00510794510.0054151254
legal85
legal95
0.00641748990.0085341685
0.00859023110.0104445713
0.00952597980.011267337
0.01046172840.0120901027
0.01169872090.0131777398
0.01263446960.0140005055
Member85
Member95
0.01928164610.0642552888
0.03107721660.0679215884
0.03615729230.0695005777
0.0412373680.071079567
0.04795286280.0731668772
0.05303293840.0747458665
health85
health95
-0.0030768845-0.0012538486
0.00066827750.0017042983
0.0022812310.0029783028
0.00389418450.0042523073
0.0060263930.0059364497
0.00763934650.0072104542
educ85
educ95
0.00351392340.007741353
0.0058942820.0096420992
0.00691944670.010460706
0.00794461140.0112793128
0.00929980540.0123614522
0.01032497010.013180059
social85
social95
00
00
00
00
00
00
othserv85
othserv95
00
00
00
00
00
00
unclass85
unclass95
00
00
00
00
00
00
totalmin85
totalmin95
agser85
agser95
Total Employment
Estimated Local Share
Agricultural Services, Forestry, Fishing
mining85
mining95
Total Employment
Minimum Requirements Mining
constr85
constr95
Total Employment
Minimum Requirements Construction
mfg85
mfg95
Total Employment
Minimum Requirements Manufacturing
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Example of Location QuotientApproach to Economic BaseIndustryJobsLQExportLocalAgriculture5000.80500Mining3005.024060Manufacturing10002.0500500Retail15001.001500Services30001.25002500
Total630012405060
a = 5060/6300 = .803, so (1/1-.803) = 5.08
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Size of Region and Size of MultiplierLog Population1.0World - Mult = .67Wn.StateMult. = 3IndividualSells all labora = 0, multiplier = 1.0
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Regional Input-Output ModelsTotal Sales = Total PurchasesTotal Sales = Intermediate Sales + Final SalesTotal Purchases = Intermediate Purchases + Value Added+ ImportsFinal Demand
Industry 1
Industry 2
Consump-tion
Invest-ment
Govt.
Exports
Total Sales
Industry 1
Industry 2
Labor Income
Other Value Added
Imports
Total Purchases
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Washington State Input-Output ModelHandouts: Transactions TableDirect Requirements MatrixDirect & Indirect Requirements MatrixDirect, Indirect, & Induced RequirementsMatrixInput-Output Notation
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Impact Analysis Using I/O Models=OutputDirect, Indirect& InducedRequirementsMatrixXFinal DemandEmployment Impacts calculated from Output Impacts
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Impact Analysis with I/O ModelsKey Inputs: Final Demand values for output, income, and jobs
Key modeling requirements: I/o model relevant to the problem
Results: usually reported for jobs, income, output, and taxes
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Direct & Indirect Output Multipliers
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Direct & Indirect Labor Income Per Dollar of Final Demand
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Direct & Indirect Jobs Per $ Million Final Demand
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Output Multipliers
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Labor Income MultipliersLabor IncomePer $ Final Demand
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Employment Multipliers
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Regional Models, continued Regional Econometric Models Interregional Input-output models
Structural Change
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Regional Econometric ModelsThe Washington Projection & Simulation ModelIncomeEmploymentand PopulationConsumptionExportsNationalEconometricModelState & LocalGovernmentInvestmentOutput(I/O Relations)ImportsCoefficientChangeProductivity RatesWage rates, tax rates, nonearnings income
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WPSM Simulation of Change in Aerospace Exports
Chart2
00000000
10011556218635993
100121631527264125
100121653387462139
1001256915277966151
1001226916227864150
1001166516167359145
1001116217117055137
100107591786652128
100103561676348120
100103531566145113
Aerospace Exports
Value-added
Consumption
State & Local Expenditures
Fixed Investment
Disposable Income
Persons Employed (hundreds)
Population (hundreds)
Sheet1
19751976197719781979198019811982198319841985
Aerospace Exports0100100100100100100100100100100
Value-added0115121121125122116111107103103
Consumption056636569696562595653
State & Local Expenditures021315161617171615
Fixed Investment018523827221611876
Disposable Income063727479787370666361
Persons Employed (hundreds)059646266645955524845
Population (hundreds)093125139151150145137128120113
Sheet1
Aerospace Exports
Value-added
Consumption
State & Local Expenditures
Fixed Investment
Disposable Income
Persons Employed (hundreds)
Population (hundreds)
Sheet2
Sheet3
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Multiregional ModelsRegion ARegion BRegion CRegion D
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Multiregional Input-Output Model(intermediate & final transactionsincluding interregional value added payments)Feedback Loops
A(A
A(B
A(C
A(D
B(A
B(B
B(C
B(D
C(A
C(B
C(C
C(D
D(A
D(B
D(C
D(D
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Simulation of Columbia Basin Irrigation Project DevelopmentProject RegionOther Washington
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Estimate of Employment Impacts from Multiregional Model
Chart5
0018710
0018710
10552948
102464240412
25511586231016
36816519301435
17950199110451806
3449913588901498
53215413314121421
75122017574701921
89926317663931994
111432719563352276
138641524313642833
154645524593262918
190354528772783529
201158430052973637
221865629961533696
22286562888783623
Local Agriculture
Local Food Products
Other Local Jobs
Project Construction
Other Washington Jobs
Project Year
Jobs
Sheet1
19751976197719781979198019811982198319841985
Aerospace Exports0100100100100100100100100100100
Value-added0115121121125122116111107103103
Consumption056636569696562595653
State & Local Expenditures021315161617171615
Fixed Investment018523827221611876
Disposable Income063727479787370666361
Persons Employed (hundreds)059646266645955524845
Population (hundreds)093125139151150145137128120113
IndustryYear 1Year 2Year 3Year 4Year 5Year 6Year 7Year 8Year 9Year 10Year 11Year 12Year 13Year 14Year 15Year 16Year 17Year 18
Local Agriculture0011025361793445327518991114138615461903201122182228
Local Food Products0002585099154220263327415455545584656656
Other Local Jobs18185546411581651199113581331175717661956243124592877300529962888
Project Construction7729240623930104589041247039333536432627829715378
Other Washington Jobs10104841210161435180614981421192119942276283329183529363736963623
total local jobs8571618112625326526912429319833213732459647865603589760235850
Sheet1
Aerospace Exports
Value-added
Consumption
State & Local Expenditures
Fixed Investment
Disposable Income
Persons Employed (hundreds)
Population (hundreds)
Sheet2
Local Agriculture
Local Food Products
Other Local Jobs
Project Construction
Other Washington Jobs
Project Year
Jobs
Sheet3
MBD00088B24.unknown
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Gross Output Levels Required to Deliver 1961 Final Demand19391947196137.6%GeneralIndustries
MaterialsMetalworking& Chemicals
All Other30.3%39.8%28.8%677Total GrossOutput68968640.8%28.5%18.5%13.6%17.0%14.7%14.5%16.0%
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Employment Required to Deliver 1961 Final Demand with earlier Technologies1018658Millions of man-yearsSource: A. Carter, Structural Change in the American Economy
Chart1
45.223.1141.116.1
46.923.19.11.519.4
53.414.99.81.420.3
General Industries
Materials
Metalworking
Chemicals
All Other
Sheet1
193919471961
General Industries45.246.953.4
Materials23.123.114.9
Metalworking149.19.8
Chemicals1.11.51.4
All Other16.119.420.3
Sheet1
General Industries
Materials
Metalworking
Chemicals
All Other
Sheet2
Sheet3
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662617523$ 1961 F.D.
Chart2
7012.73.6112.6
68.912.35.31.711.9
65.413.65.32.713.1
General Industries
Materials
Metalworking
Chemicals
All Other
Capital Stock Required to Deliver 1961 Final Demand
Sheet1
193919471961
General Industries45.246.953.4
Materials23.123.114.9
Metalworking149.19.8
Chemicals1.11.51.4
All Other16.119.420.3
Industry193919471958
General Industries7068.965.4
Materials12.712.313.6
Metalworking3.65.35.3
Chemicals11.72.7
All Other12.611.913.1
Sheet1
General Industries
Materials
Metalworking
Chemicals
All Other
Sheet2
General Industries
Materials
Metalworking
Chemicals
All Other
Capital Stock Required to Deliver 1961 Final Demand
Sheet3
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U.S. Structural Change - Output, GNP, Intermediate Production19391947196151.2%GrossNationalProductIntermediateSales48.8%50.7%49.3%270Total GrossOutput43568851.2%48.8%
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Input-Output Model BasicsTom HarrisUniversity of Nevada, RenoUniversity Center for Economic DevelopmentMS 204Reno, NV 89557-0105
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Gerald A. DoeksenOklahoma State UniversityOklahoma Cooperative Extension Service515 Ag HallStillwater, OK 74078Disadur dari bahan kuliah:
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Examples of Interrelationships Between Sectors:
Sectors purchase from other sectorsSectors sell to other sectorsSectors sell outside the local economySectors buy outside the local economy
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Overview of Community Economic System
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Input-Output analysis creates a picture of a regional economy describing flows to and from industries and institutions
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What Input-Output Analysis Can Do:Input-Output Analysis is an accounting frameworkInput-Output analysis can be used to predict changes in overall economic activity as a result of some change in the local economy
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Uses of Input-Output Analysis
Provides a description of a local economyPredictive model to estimate impacts
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3 Basic Components of Input-Output Models
Transactions TableDirect Requirements TableTotal Requirements Table
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Transactions TableA transactions table shows the monetary flows of goods and services in a local economyRepresents monetary flows for a given time period, usually one year
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Transactions Table FlowsTotal outlays = Total outputIntermediate purchases are goods and services purchased and used in the local production processFinal demands are purchases for final consumptionFinal payments are payments for factors or inputs outside intermediate production process
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Example Transactions Table
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Predictive Use of Input-Output AnalysisImpacts are tracked throughout the economyThe multipliers are derived from regional economic accountsOnly local transactions are used to create the multiplier effect
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Direct Requirements TableDirect requirements are the purchases of resources (inputs) by a sector from all sectors to produce one dollar of outputCreates a production recipe
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Selling Sectors Purchasing SectorsAgricultureHealthServices
Agriculture0.2780.1620.045Health0.1110.1080.068Services0.1670.0540.023Final Payments0.4440.6760.864
Total 1.0001.0001.000Direct Requirements Table
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What are Multipliers?Multipliers measure total change throughout the economy from one unit change for a given sector.
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Three Types of Multipliersare calculated from Model1.Output2.Employment3.Income
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Three levels of MultipliersType I MultipliersType II Multipliers Type III Multipliers
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Type I MultipliersInclude direct or initial spendingInclude indirect spending or businesses buying and selling to each otherThe multiplier is direct plus indirect effect divided by direct effect
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Type II MultipliersIncludes Type I Multiplier effectsPlus household spending based on the income earned from the direct and indirect effects the induced effects
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TYPE III MULTIPLIERSType III Multipliers are modified Type II multipliers.Therefore, Type III Multipliers also include the direct, indirect, and induced effects.Type III Multipliers adjust Type II Multipliers based on spending patterns amongst different income groups.
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Type I Multipliers include:DirectIndirect (Business Spending)Type I Multipliers are derived from theTotal Requirements TableIn math, this is: X = (1-A)-1 Y
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Selling Sectors ($ million)Purchasing Sectors ($ million)AgricultureHealthServices
Agriculture1.4460.2680.085Health0.1991.1630.090Services0.2580.1101.043Total 1.9031.5411.218Total Requirements Table
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Explaining the Health Sector Type I Multiplier
For a $1.00 change in final demand sales in the local economy, the total direct and indirect impacts are $1.541
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Type II Multipliers include:DirectIndirect (Businesses)Induced (Households)
Type II Multipliers are derived from the Total Requirements Table withHouseholds
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Transactions Table with Households
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Total Requirements Table with Households Selling SectorsPurchasing SectorsAgricultureHealthServicesHouseholds Agriculture1.5360.3690.1970.429Health0.3861.3700.3180.879Services0.3880.2561.2030.619Households0.2790.3110.3411.319
Total2.5892.3072.0593.245
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Explaining the Health Sector Type II MultiplierFor a $1.00 change in final demand sales in the local economy, the total direct, indirect and induced impacts are $2.307
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MultipliersDirect requirements represent direct or initial spendingDirect and indirect effects include the direct spending plus the indirect spending or businesses buying and selling to each otherDirect, indirect and induced effects include direct and indirect plus household spending earned from direct and indirect effects
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Other MultipliersEmployment MultipliersType IType IIType IIIIncome MultipliersType IType IIType III
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Example -Type I Employment Multiplier
Agricultural Sector Type I Employment Multiplier = 1.43When the Agricultural Sector realizes a 1 employee change, total employment in the study area changes by 1.43 jobs from direct and indirect linkages
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Example Type II Employment Multiplier
Agricultural Sector Type II Employment Multiplier = 2.25
When the Agricultural Sector realizes a 1 employee change, total employment in the study area changes by 2.25 jobs from direct, indirect and induced linkages
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Breakdown of Type II Employment Multiplier -Agricultural Sector
Direct Effects = 1.00Indirect Effects = 0.43Induced Effects = 0.82
Total= 2.25
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Example Type I Income Multiplier
Agricultural Sector Type I Income Multiplier = 1.96
When the Agricultural Sector realizes a $1.00 change in income, total income in the study area changes by $1.96 from direct and indirect linkages
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Example -Type II Income Multiplier
Agricultural Sector Type II Income Multiplier = 2.50 When the Agricultural Sector realizes a $1.00 change in income, total income in the study area changes by $2.50 from direct, indirect and induced linkages
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Breakdown of Type II Income Multiplier -Agricultural SectorDirect Effects =$1.00Indirect Effects =$0.96Induced Effects =$0.54
Total=$2.50
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Caution When Using MultipliersMultiplier values include direct effectsDo not aggregate sector multipliers to derive an aggregate multiplierBe cautious of large multipliersBe cautious in using a multiplier from another study area
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Procedures Used For This AnalysisIMPLAN (IMPact analysis for PLANning)* Geographical database* Software and data for model construction and impact analysis* History of IMPLAN
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IMPLAN USE FOR HEALTH SECTOR ANALYSISDevelop county-wide input-output modelFrom State Employment Security Offices derived health sector employmentUse IMPLAN to derive county-wide output, employment, income and sales tax impacts from the local health sector
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Database of IMPLAN
528 Industrial SectorsMost 3 or 4 digit SICAll standard counties in the U.S.Now available at zip code level
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Any Questions?
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Econ Base vs Input-Output ModelsLeontief developed an input-output method for estimating economic impacts and tracing the flows of dollars. Leontief later won the Nobel Prize in 1973, largely related to this work.Input-Output expands heavily upon the economic base model of the economy.
Input-Output AnalysisMany different industries/sectorsRipple (multiplier) effects contained in the interindustry transactionsAnalyzes changes and impacts at a sector by sector level, tracing flows of dollars between industriesMuch more precise, but Economic Base TechniquesBasic and Non-basic sectorsRipple (multiplier) effects analyzed at the B/NB levelAnalyzes changes and impacts at a gross B/NB levelVery general, but
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The Economic Base Theoretical ModelThe EB model assumes that the basic sector is the primary cause of local economic growth; that is, it is the economic base of the local economy. Non-Local $$$sBasic Sector EmploymentNon-Basic Sector EmploymentLocal $$$sThe Local Economy
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Input-Output ModelThe IO model is centered on the idea of inter-industry transactions: Industries use the products of other industries to produce their own products.For example - automobile producers use steel, glass, rubber, and plastic products to produce automobiles.Outputs from one industry become inputs to another.When you buy a car, you affect the demand for glass, plastic, steel, etc.Taken from a Power Point presentation prepared by Pam Perlich at the University of Utah. http://www.business.utah.edu/~bebrpsp/IO/IO.ppt
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Basic Input-Output LogicAutomobile Factory
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From the Tire Producers PerspectiveTire FactorySchool DistrictsTrucking CompaniesAutomobile FactoryIndividual ConsumersINTER-MEDIATE DEMANDFORTIRESFINAL DEMANDFOR TIRES
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Input-Output Analysis: The BIG PointThe implicit assumption in economic base techniques is that each basic sector job has a multiplier (or ripple) effect on the wider economy because of purchases of non-basic goods and services to support the basic production activity. (the Basic Sector drives the Non-basic Sector)However, we know that Non-basic sector businesses purchase Non-basic goods and services and Basic sector businesses purchase Basic sector goods and services. There are inter-industry linkages not contained within the Economic Base model. The economy is much more complex than the economic base techniques allow or attempt to model.The central advantage of Input-Output analysis is that it tries to estimate these inter-industry transactions and use those figures to estimate the economic impacts of any changes to the economy. Instead of assuming a change in a basic sector industry having a generalized multiplier effect, the IO approach estimates how many goods and services from other sectors are needed (inputs) to produce each dollar of output for the sector in question. Therefore it is possible to do a much more precise calculation of the economic impacts of a given change to the economy.
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IO Conceptualization of the EconomyThe major conceptual step is to divide the economy into purchasers and suppliers.--Primary Suppliers: They sell primary inputs (labor, raw materials) to other industries. Payments to these suppliers are primary inputs because they generate no further sales. (example: Households)--Intermediate Suppliers: They purchase inputs for processing into outputs they supply to other firms or to final purchasers. (example: Automaker)--Intermediate Purchasers: They purchase outputs of suppliers for use as inputs for further processing. (example: Automaker)--Final Purchasers: Purchase the outputs of suppliers in their final form and for final use. (example: Households)Intermediate Suppliers and Intermediate Purchasers are the same thing!Primary Suppliers and Final Purchasers may or may not be the same entities. When they are the same (households), these activities are understood as separate activities.
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Simplified Circular Flow View of The EconomyHouseholds buy the output of business: final demand or Yi
BusinessesBusinesses purchase from other businesses to produce their own goods / services. This is intermediate demand or xij (output of industry i sold to industry j)
Households sell labor & other inputs to business as inputs to productionTaken from a Power Point presentation prepared by Pam Perlich at the University of Utah. http://www.business.utah.edu/~bebrpsp/IO/IO.ppt
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The Structure of IO AnalysisThe ultimate goal of the Input-Output Analysis technique is to generate a Total Requirements Table that shows the flows of dollars between industries in the production of output for a given sector.To arrive at this final result, IO Analysis requires two earlier steps:1) Transactions table: Contains basic data on the flows of goods and services among suppliers and purchasers during a study year.2) Direct requirements table: Derived from the transactions table, this shows the inputs required directly from different suppliers by each intermediate purchaser for each unit of output that purchaser produces.Input output analysis can be thought of as documenting and exploring the precise systems of interindustry exchange through which different components of regional product become different components of regional income. (Bendavid-Val, p. 87-88)Lets review Bendavid-Vals Islandia example.
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The Transaction Table and Direct Reqs Tables
IO Example
Bendavid-Val's Example of Islandia
The Transactions Table
(in thousands of units)Total Direct and Indirect Requirements Calculation
Intermediate PurchasersFinal PurchasersTotal(in thousands of units)
--Agriculture--Manufacturing--HouseholdsSales (outputs)Sales to FinalTotalTotalTotal
Intermediate SuppliersPurchasersDirect SalesIndirect SalesSales
--Agriculture103060100Agriculture200.0080.0038.69318.69
--Manufacturing5103550Manufacturing100.0030.0014.87144.87
Primary SuppliersHouseholds--190.00109.57299.57
--Households851015110
Total300.00300.00163.13763.13
Total Purchases (inputs)10050110260
Total Requirements Table
Every Unit in Final Demand by
Direct Requirements TableRequires Total Sale byAgricultureManufacturing
(in thousands of units)Agriculture1.150.86
PurchasersManufacturing0.071.29
--Agriculture--ManufacturingHouseholds1.001.00
Intermediate SuppliersEvery unit of output
--Agriculture0.100.60requires inputs of a certainTotal2.223.15
--Manufacturing0.050.20amount from other areas
Primary Suppliersof the economy.For Agriculture1.00Sales to Final Purchasers
--Households0.850.201.00Sales by Primary Suppliers
0.22Interindustry transactions
Total Purchases (inputs)1.001.00Similar to our Base Multiplier in Econ Base Theory
A 1.0 unit increase in demand for agriculture leads to
Total Requirements Calculation (First Round)a total of 2.22 of sales.
(in thousands of units)
Sales toSales as Direct InputsFor Manufacturing1.00Sales to Final Purchasers
Final Purch.To AgrTo ManuTotal1.00Sales by Primary Suppliers
By Agriculture2002060801.15Interindustry transactions
By Manufacturing100102030Similar to our Base Multiplier in Econ Base Theory
By Households017020190A 1.0 unit increase in demand for manufacturing leads to
a total of 3.15 of sales.
Total indirect rounds
So, when Agr sales = 200 and Manu sales = 100
By All Supliers300300we would expect the following economic activity
Total Requirements Computations Using the Total Requirements Table
Total Requirements Calculation (Second Round)Final Delivery by
(in thousands of units)Requires Total Sale byAgricultureManufacturingTotal
Sales as Direct InputsAgriculture23086316
To AgrTo ManuTotalManufacturing14129143
By Agriculture8.018.026.0Households200100300
By Manufacturing4.06.010.0
By Households68.06.074.0Total444315759
WhereAgriculture Sales =200
Total indirect rounds110.0Manufac Sales =100
Total Requirements Calculation (Third Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture2.66.08.6
By Manufacturing1.32.03.3
By Households22.12.024.1
Total indirect rounds36.0
Total Requirements Calculation (Fourth Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture0.861.982.84
By Manufacturing0.430.661.09
By Households7.310.667.97
Total indirect rounds11.90
Total Requirements Calculation (Fifth Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture0.280.650.94
By Manufacturing0.140.220.36
By Households2.410.222.63
Total indirect rounds3.93
Total Requirements Calculation (Sixth Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture0.090.220.31
By Manufacturing0.050.070.12
By Households0.800.070.87
Total indirect rounds1.30
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The First Round of Economic Impacts
IO Example
Bendavid-Val's Example of Islandia
The Transactions Table
(in thousands of units)Total Direct and Indirect Requirements Calculation
Intermediate PurchasersFinal PurchasersTotal(in thousands of units)
--Agriculture--Manufacturing--HouseholdsSales (outputs)Sales to FinalTotalTotalTotal
Intermediate SuppliersPurchasersDirect SalesIndirect SalesSales
--Agriculture103060100Agriculture200.0080.0038.69318.69
--Manufacturing5103550Manufacturing100.0030.0014.87144.87
Primary SuppliersHouseholds--190.00109.57299.57
--Households851015110
Total300.00300.00163.13763.13
Total Purchases (inputs)10050110260
Total Requirements Table
Every Unit in Final Demand by
Direct Requirements TableRequires Total Sale byAgricultureManufacturing
(in thousands of units)Agriculture1.150.86
Intermediate PurchasersManufacturing0.071.29
--Agriculture--ManuHouseholds1.001.00
Intermediate Suppliers
--Agriculture0.100.60Total2.223.15
--Manufacturing0.050.20
Primary SuppliersFor Agriculture1.00Sales to Final Purchasers
--Households0.850.201.00Sales by Primary Suppliers
0.22Interindustry transactions
Total Purchases (inputs)1.001.00Similar to our Base Multiplier in Econ Base Theory
A 1.0 unit increase in demand for agriculture leads to
Total Requirements Calculation (First Round)a total of 2.22 of sales.
(in thousands of units)
Sales toSales as Direct InputsFor Manufacturing1.00Sales to Final Purchasers
Final Purch.To AgrTo ManuTotal1.00Sales by Primary Suppliers
By Agriculture2002060801.15Interindustry transactions
By Manufacturing100102030Similar to our Base Multiplier in Econ Base Theory
By Households017020190A 1.0 unit increase in demand for manufacturing leads to
a total of 3.15 of sales.
Total indirect rounds
So, when Agr sales = 200 and Manu sales = 100
By All Supliers300300we would expect the following economic activity
Total Requirements Computations Using the Total Requirements Table
Total Requirements Calculation (Second Round)Final Delivery by
(in thousands of units)Requires Total Sale byAgricultureManufacturingTotal
Sales as Direct InputsAgriculture23086316
To AgrTo ManuTotalManufacturing14129143
By Agriculture8.018.026.0Households200100300
By Manufacturing4.06.010.0
By Households68.06.074.0Total444315759
WhereAgriculture Sales =200
Total indirect rounds110.0Manufac Sales =100
Total Requirements Calculation (Third Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture2.66.08.6
By Manufacturing1.32.03.3
By Households22.12.024.1
Total indirect rounds36.0
Total Requirements Calculation (Fourth Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture0.861.982.84
By Manufacturing0.430.661.09
By Households7.310.667.97
Total indirect rounds11.90
Total Requirements Calculation (Fifth Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture0.280.650.94
By Manufacturing0.140.220.36
By Households2.410.222.63
Total indirect rounds3.93
Total Requirements Calculation (Sixth Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture0.090.220.31
By Manufacturing0.050.070.12
By Households0.800.070.87
Total indirect rounds1.30
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The Second-Fourth Rounds of Econ. Impactsand so onuntil the mult.effect ends
IO Example
Bendavid-Val's Example of Islandia
The Transactions Table
(in thousands of units)Total Direct and Indirect Requirements Calculation
Intermediate PurchasersFinal PurchasersTotal(in thousands of units)
--Agriculture--Manufacturing--HouseholdsSales (outputs)Sales to FinalTotalTotalTotal
Intermediate SuppliersPurchasersDirect SalesIndirect SalesSales
--Agriculture103060100Agriculture200.0080.0038.69318.69
--Manufacturing5103550Manufacturing100.0030.0014.87144.87
Primary SuppliersHouseholds--190.00109.57299.57
--Households851015110
Total300.00300.00163.13763.13
Total Purchases (inputs)10050110260
Total Requirements Table
Every Unit in Final Demand by
Direct Requirements TableRequires Total Sale byAgricultureManufacturing
(in thousands of units)Agriculture1.150.86
Intermediate PurchasersManufacturing0.071.29
--Agriculture--ManufacturingHouseholds1.001.00
Intermediate Suppliers
--Agriculture0.100.60Total2.223.15
--Manufacturing0.050.20
Primary SuppliersFor Agriculture1.00Sales to Final Purchasers
--Households0.850.201.00Sales by Primary Suppliers
0.22Interindustry transactions
Total Purchases (inputs)1.001.00Similar to our Base Multiplier in Econ Base Theory
A 1.0 unit increase in demand for agriculture leads to
Total Requirements Calculation (First Round)a total of 2.22 of sales.
(in thousands of units)
Sales toSales as Direct InputsFor Manufacturing1.00Sales to Final Purchasers
Final Purch.To AgrTo ManuTotal1.00Sales by Primary Suppliers
By Agriculture2002060801.15Interindustry transactions
By Manufacturing100102030Similar to our Base Multiplier in Econ Base Theory
By Households017020190A 1.0 unit increase in demand for manufacturing leads to
a total of 3.15 of sales.
Total indirect rounds
So, when Agr sales = 200 and Manu sales = 100
By All Supliers300300we would expect the following economic activity
Total Requirements Computations Using the Total Requirements Table
Total Requirements Calculation (Second Round)Final Delivery by
(in thousands of units)Requires Total Sale byAgricultureManufacturingTotal
Sales toSales as Direct InputsAgriculture23086316
Final Purch.To AgrTo ManuTotalManufacturing14129143
By Agriculture808.018.026.0Households200100300
By Manufacturing304.06.010.0
By Households068.06.074.0Total444315759
WhereAgriculture Sales =200
Total indirect rounds110.0Manufac Sales =100
Total Requirements Calculation (Third Round)
(in thousands of units)
Sales toSales as Direct Inputs
Final Purch.To AgrTo ManuTotal
By Agriculture262.66.08.6
By Manufacturing101.32.03.3
By Households022.12.024.1
Total indirect rounds36.0
Total Requirements Calculation (Fourth Round)
(in thousands of units)
Sales toSales as Direct Inputs
Final Purch.To AgrTo ManuTotal
By Agriculture8.60.92.02.8
By Manufacturing3.30.40.71.1
By Households07.30.78.0
Total indirect rounds11.9
Total Requirements Calculation (Fifth Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture0.280.650.94
By Manufacturing0.140.220.36
By Households2.410.222.63
Total indirect rounds3.93
Total Requirements Calculation (Sixth Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture0.090.220.31
By Manufacturing0.050.070.12
By Households0.800.070.87
Total indirect rounds1.30
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The Total Requirements ResultsWhen: there are Final Sales of Agriculture = 200 and Final Sales of Manufacturing = 1002) we see a Total Economic Impact = 763.1, with that impact broken down as:1) 300.0 in Initial Sales to Final Purchasers2) 300.0 in Total Direct Sales3) 163.1 in Total Indirect SalesThe 300 units in Final Sales generate an additional 463.1 units of economic activity. This illustrates the multiplier effect captured by IO models.
IO Example
Bendavid-Val's Example of Islandia
The Transactions Table
(in thousands of units)Total Direct and Indirect Requirements Calculation
Intermediate PurchasersFinal PurchasersTotal(in thousands of units)
--Agriculture--Manufacturing--HouseholdsSales (outputs)Sales to FinalTotalTotalTotal
Intermediate SuppliersPurchasersDirect SalesIndirect SalesSales
--Agriculture103060100Agriculture200.080.038.7318.7
--Manufacturing5103550Manufacturing100.030.014.9144.9
Primary SuppliersHouseholds--190.0109.6299.6
--Households851015110
Total300.0300.0163.1763.1
Total Purchases (inputs)10050110260
Total Requirements Table
Every Unit in Final Demand of
Direct Requirements TableRequires Total Sales byAgricultureManufacturing
(in thousands of units)Agriculture1.150.86
Intermediate PurchasersManufacturing0.071.29
--Agriculture--ManufacturingHouseholds1.001.00
Intermediate Suppliers
--Agriculture0.100.60Total2.223.15
--Manufacturing0.050.20
Primary SuppliersFor Agriculture1.00Sales to Final Purchasers
--Households0.850.201.00Sales by Primary Suppliers
0.22Interindustry transactions
Total Purchases (inputs)1.001.00Similar to our Base Multiplier in Econ Base Theory
A 1.0 unit increase in demand for agriculture leads to
Total Requirements Calculation (First Round)a total of 2.22 of sales.
(in thousands of units)
Sales toSales as Direct InputsFor Manufacturing1.00Sales to Final Purchasers
Final Purch.To AgrTo ManuTotal1.00Sales by Primary Suppliers
By Agriculture2002060801.15Interindustry transactions
By Manufacturing100102030Similar to our Base Multiplier in Econ Base Theory
By Households017020190A 1.0 unit increase in demand for manufacturing leads to
a total of 3.15 of sales.
Total indirect rounds
So, when Agr sales = 200 and Manu sales = 100
By All Supliers300300we would expect the following economic activity
Total Requirements Computations Using the Total Requirements Table
Total Requirements Calculation (Second Round)Final Delivery by
(in thousands of units)Requires Total Sale byAgricultureManufacturingTotal
Sales toSales as Direct InputsAgriculture23086316
Final Purch.To AgrTo ManuTotalManufacturing14129143
By Agriculture808.018.026.0Households200100300
By Manufacturing304.06.010.0
By Households068.06.074.0Total444315759
WhereAgriculture Sales =200
Total indirect rounds110.0Manufac Sales =100
Total Requirements Calculation (Third Round)
(in thousands of units)
Sales toSales as Direct Inputs
Final Purch.To AgrTo ManuTotal
By Agriculture262.66.08.6
By Manufacturing101.32.03.3
By Households022.12.024.1
Total indirect rounds36.0
Total Requirements Calculation (Fourth Round)
(in thousands of units)
Sales toSales as Direct Inputs
Final Purch.To AgrTo ManuTotal
By Agriculture8.60.861.982.84
By Manufacturing3.30.430.661.09
By Households07.310.667.97
Total indirect rounds11.90
Total Requirements Calculation (Fifth Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture0.280.650.94
By Manufacturing0.140.220.36
By Households2.410.222.63
Total indirect rounds3.93
Total Requirements Calculation (Sixth Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture0.090.220.31
By Manufacturing0.050.070.12
By Households0.800.070.87
Total indirect rounds1.30
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The Total Requirements Table
IO Example
Bendavid-Val's Example of Islandia
The Transactions Table
(in thousands of units)Total Direct and Indirect Requirements Calculation
Intermediate PurchasersFinal PurchasersTotal(in thousands of units)
--Agriculture--Manufacturing--HouseholdsSales (outputs)Sales to FinalTotalTotalTotal
Intermediate SuppliersPurchasersDirect SalesIndirect SalesSales
--Agriculture103060100Agriculture200.0080.0038.69318.69
--Manufacturing5103550Manufacturing100.0030.0014.87144.87
Primary SuppliersHouseholds--190.00109.57299.57
--Households851015110
Total300.00300.00163.13763.13
Total Purchases (inputs)10050110260
Total Requirements Table
Every Unit in Final Demand of
Direct Requirements TableRequires Total Sales byAgricultureManufacturing
(in thousands of units)Agriculture1.150.86
Intermediate PurchasersManufacturing0.071.29
--Agriculture--ManufacturingHouseholds1.001.00
Intermediate Suppliers
--Agriculture0.100.60Total2.223.15
--Manufacturing0.050.20
Primary SuppliersFor Agriculture1.00Sales to Final Purchasers
--Households0.850.201.00Sales by Primary Suppliers
0.22Interindustry transactions
Total Purchases (inputs)1.001.00Similar to our Base Multiplier in Econ Base Theory
A 1.0 unit increase in demand for agriculture leads to
Total Requirements Calculation (First Round)a total of 2.22 of sales.
(in thousands of units)
Sales toSales as Direct InputsFor Manufacturing1.00Sales to Final Purchasers
Final Purch.To AgrTo ManuTotal1.00Sales by Primary Suppliers
By Agriculture2002060801.15Interindustry transactions
By Manufacturing100102030Similar to our Base Multiplier in Econ Base Theory
By Households017020190A 1.0 unit increase in demand for manufacturing leads to
a total of 3.15 of sales.
Total indirect rounds
So, when Agr sales = 200 and Manu sales = 100
By All Supliers300300we would expect the following economic activity
Total Requirements Computations Using the Total Requirements Table
Total Requirements Calculation (Second Round)Final Delivery by
(in thousands of units)Requires Total Sale byAgricultureManufacturingTotal
Sales toSales as Direct InputsAgriculture23086316
Final Purch.To AgrTo ManuTotalManufacturing14129143
By Agriculture808.018.026.0Households200100300
By Manufacturing304.06.010.0
By Households068.06.074.0Total444315759
WhereAgriculture Sales =200
Total indirect rounds110.0Manufac Sales =100
Total Requirements Calculation (Third Round)
(in thousands of units)
Sales toSales as Direct Inputs
Final Purch.To AgrTo ManuTotal
By Agriculture262.66.08.6
By Manufacturing101.32.03.3
By Households022.12.024.1
Total indirect rounds36.0
Total Requirements Calculation (Fourth Round)
(in thousands of units)
Sales toSales as Direct Inputs
Final Purch.To AgrTo ManuTotal
By Agriculture8.60.861.982.84
By Manufacturing3.30.430.661.09
By Households07.310.667.97
Total indirect rounds11.90
Total Requirements Calculation (Fifth Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture0.280.650.94
By Manufacturing0.140.220.36
By Households2.410.222.63
Total indirect rounds3.93
Total Requirements Calculation (Sixth Round)
(in thousands of units)
Sales as Direct Inputs
To AgrTo ManuTotal
By Agriculture0.090.220.31
By Manufacturing0.050.070.12
By Households0.800.070.87
Total indirect rounds1.30
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RIMS MultipliersThe Bureau of Economic Analysis (BEA) produces State Level Regional Input-Output Multipliers by industrial sector which are often used as the basis for constructing an IO model. Originally developed in the 1970s, RIMS (Regional Industrial Multiplier System) multipliers are used for impact analysis for a given economy.RIMS II data were developed in the 1980s (latest version is 1998) Users can purchase data from BEA for $275 per region. BEA provides handbooks for the use of this data. County or multi-county regional RIMS data come in two series Series I: for 490 detailed industries Series II: for 38 industry aggregationsEmpirical analysis shows that RIMS II data is accurate within 5% of locally developed industry multipliers.Advantages of the RIMS Multipliers: 1) Cheap2) Can be compared across regions 3) Detailed industries4) Updated regularly to reflect new data
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Example RIMS Multipliers1Total dollar impact due to $1 in output in the industry. 2Change in earnings due to $1 change in industry. 3Change in employment resulting from $1 million increase in output delivered to final demand.
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For More Info on RIMS MultipliersThe Bureau of Economic Analysis (BEA) has several web resources on RIMS Multipliers and how they are prepared:RIMSII Home Pagehttp://www.bea.doc.gov/bea/regional/rims/
Brief Description of RIMS IIhttp://www.bea.doc.gov/bea/regional/rims/brfdesc.cfm
RIMSII Users Handbookhttp://www.bea.doc.gov/bea/ARTICLES/REGIONAL/PERSINC/Meth/rims2.pdf
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The Problems with IO AnalysisPractical IssuesData needs and complexity: IO models are tremendously complex and very data hungry. This typically places these models in the hands of experts.Theoretical IssuesTime/Data issues: Usually a single years data are used to develop the Total Requirements Table. But 1) purchases may actually reflect a longer term investment and 2) short term trends may impact the data.Stability of the technical coefficients over time: Technology changes, prices change, and demand changes, all affecting the coefficients in the Tot Reqs Table. This can impact the results if the coefficients are out of date.IO assumes a linear relationship between increasing demand for inputs and outputs: This assumes away 1) externalities and 2) increasing/ decreasing returns to scale.Industrial categorization: IO models still assume that each industry 1) has a single, homogeneous production function and 2) each produces one product. These assumptions do not reflect the real economy very well.
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The Power of IO ModelsDespite these problems IO analysis is a tremendously popular and powerful analytical tool.The chief value of regional input-output analysis is in its descriptive analytical power. (Bendavid-Val, p.113)As a descriptive tool, input-output tables:-present an enormous quantity of information in a concise, orderly, and easily understood fashion; -provide a comprehensive picture of the interindustry structure of the regional economy; -point up the strategic importance of various industries and sectors; -highlight possible opportunities for strengthening regional income and employment multiplication. (Bendavid-Val, p.113)Urban Planners should be capable of understanding the structure, assumptions, and data requirements of Input-Output Analysis. While you may not be performing this analysis in your jobs, you almost certainly will come across this type of work sometime in your career.
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