IMPLAN Pro: User’s Guide
Minnesota IMPLAN Group (MIG), provided an IMPLAN Professional Reference Guide (PDF), which although dated, still can answer many questions about inpact analysis. It includes: User’s Guide, Analysis Guide, and Data Guide.
For a more detailed explanation of Input-Output Analysis see: Input-Output Analysis: Foundations and Extensions, by Miller and Blair. (Amazon)
Skewed Employment Impacts
Issue
The truth concerning some economic impact models is seldom revealed in the media, much less a publication such as The Washington Post. The Post recently printed an article (PDF) on organizations overstating their employment economic impacts. In the case cited, the numbers are made up to persuade gullible lawmakers to reduce regulation to create more jobs.
Employment Impacts
In all fairness to the economists who manufacture numbers, if lawmakers do not take the time to understand the data they use to make policy decisions, who is at fault? In the article some analysts published their model methods, and I applaud that. You may not agree with what they have done, but at least you can evaluate the model accuracy.
Employment impacts include:
- Direct – The actual number the company will supposedly hire.
- Indirect – The number of employees other businesses will hire as a result of direct hiring.
- Induced – The number of employees hired as a result of a rising economic tide in the study area.
Often the numbers are summed and presented as direct impact. In the article, one economist argues that induced jobs are accurate, and they are if you count food service and lawn care workers. But let’s not confuse those jobs with high-paying drilling jobs by providing a total without accompanying employment detail.
Assumption Pitfalls
It is the assumptions, then, that are at the heart of the debate. Two common mythological tweaks that significantly change employment impacts are geography selected (not discussed), and initial direct impact calculations. The article provides an example of a flawed direct assumption:
“The Wood Mackenzie study also makes assumptions about current policy. For example, it assumes that current regulations limit the number of Gulf of Mexico exploratory wells to 20 a year. But the number of exploration wells being drilled now is already well above that. As a result, gulf exploration would have little effect on job creation.”
This results in an estimate that is the equivalent to taking a 10 year old employment number, taking the difference from that time period to present and stating it as the new impact!
Conclusion
Currently firms that sell impact software have been unwilling to set guidelines for appropriate use of their software. A simple one is to require publishing model assumptions. It is true that some information is confidential to organizations. But on the other hand, if one is asking for public support to do something that benefits your organization, is it not reasonable to provided the data behind your model? Kudos to The Washington Post for publishing this piece. It is clear we need more transparency in the impact business.
Economic-Ecologic Commodity Flow Impact
Detailed Example of Economic-Ecologic Commodity Flows
The ‘TEAM’ model has done the heavy lifting calculating coefficients for a ecologic commodity flows. The classification was first created by Johnson and Bennett (1981). They used the ecologic terms commodities for inputs and sinks for discharges or outputs. Miller and Blair (2009)
The ecologic matrix is defined using matrix algebra. In example (econ_ecol) (pdf), matrices A, R and Q are created from the table of commodity flows. Matrices R* and Q* are calculated using the following formula:
R* =R(I – A)ˉ¹ Reflect the amount of ecologic inputs required directly and indirectly to deliver a dollar’s worth of industry output. In the example, 0.455 represents 0.455 units of water required to deliver a dollar’s worth of agricultural products!
Q* =Q(I – A)ˉ¹ Reflect the amount of ecologic output associated directly and indirectly with a dollar of industry output. In the example, 0.358 means that associated with one dollar’s worth of manufacturing goods to final demand is production of 0.358 units of hydrocarbon pollutants!
Industry may shy from these formula. The opportunity for industry however is to review manufacturing processes using these data to uncover opportunities to reduce waste or identify material/process substitutions (cost savings). For those interested in economic-ecologic impact, this opens, for the first time through the TEAM model, the capability for applied analysis in both industry and transportation development projects.
Travel (Tourism) Impact in South Carolina
South Carolina Parks and Recreation and Tourism, completed their 2008 economic impact of travel in South Carolina. The project was completed by the U.S. Travel Association. This report is based on well established current third part data, including Smith Travel Research (STR Global), BEA and BLS data sets.
Appendix A of the report details the method used to calculate impacts. U.S. Travel Association uses their proprietary Travel Economic Impact Model (TEIM) program which calculates impacts based on a number of inputs. What is intersting about these data is their method of estimating impacts based on travel generated business receipts, employment, and payroll for 16 travel sectors. The data combined then generate a total impact and dollars/job created.
One criticism of these findings is travel is viewed from a single dimension, i.e. dollars flowing into the state. In reality, travel includes dollars both coming into the state and leaving the state. This calculation would provide a true estimate of travel impact and thus travel related employment within a specific geography.
