Both Margins and Deflators are included in the IMPLAN database. Margins allow for consumer expenditures to be traced though retail, wholesale, and transportation sectors back to the industries who manufactured the product. This allows Final Demand values to be appropriately allocated to the producing Sectors. Built-in Deflators allow for adjustments of the initial impact input dollar event entry and/or of your impact results to the dollar year in which your demand/result is occurring.
Most Input-Output models, including IMPLAN, record expenditures in producer prices. This allocates expenditures to the Industries that produce the goods or services. Any expenditures/sales the user wishes to apply to multipliers that are in purchaser prices (prices paid by final consumers) need to be converted to producer prices or allocated to the producing Industries. Margins enable the move from producer to purchaser prices or vice-versa.
Below is an example to show how a purchase is allocated with Margins. Assume that a consumer spends $1.00 at a retail store. A portion of that dollar, 20 cents in this case, is retained by the retailer. A portion, 10 cents, of the dollar is paid to the wholesaler and so forth until the dollar is fully allocated. Industry Margins are derived from the Bureau of Economic Analysis Input-Output tables.
Margins are particularly important for Personal Consumption Expenditures (PCE) values as nearly all household purchases of goods are through a retail sector. The Margins used to form the PCE data elements are compiled from the BEA Detailed Benchmark tables. This data provides the Margins associated with each of the different Personal Consumption categories. These PCE categories are modified to fit IMPLAN Sector definitions.
Deflators are used to adjust for relative price changes over time.
Output deflators are sector specific and are used to adjust sector output. GDP deflators are not sector specific and are used to adjust Final Demand and Value Added. Output and GDP deflators from the BEA are used for all past years, while BLS output deflators are used for future years.
The BEA Output deflators are provided with the BEA Gross Output data. The BEA GDP deflators come from NIPA Table 1.1.9 - Implicit Price Deflators for Gross Domestic Product. The BLS produces time-series of output estimates for its Employment Growth Model. The outputs are projected in real and constant dollars. This gives implicit price index projections which are the basis for projections of the IMPLAN deflators.
Both the BEA and BLS deflator data have fewer sectors than the IMPLAN sectoring scheme; therefore, all IMPLAN sectors within a single BEA or BLS sector will have the same deflator.
What are deflators and when are they used in IMPLAN?
The purchasing power of a dollar changes over time (typically decreasing) due to inflation, a cyclical phenomenon by which prices of goods and services increase, which spurs workers to demand higher wages, which in turn increases demand for goods and services, thereby spurring additional price increases, and so on. Due to inflation, a dollar in 2017 cannot purchase as much as did a dollar in 2001, for example; as such, a 2017 dollar is not the same thing as a 2001 dollar. IMPLAN's deflators are indexes of inflation, with the deflator for the model data year set at 1.00.
The deflators are not used to create the social accounts or multipliers but are necessary for impact analysis whenever the dollar year of the event differs from the year of the model data. The same model year multipliers are used regardless of the dollar year of the event; it is the value applied to those multipliers that changes when the dollar year of the event differs from the year of the model data. Indeed, if one were to run an un-customized event using an event year that differs from the model year but views the results in the same year as the model, the multipliers calculated from these results will match the multipliers displayed in the multipliers tables of the model.
Why is this adjustment needed?
All the relationships in the multipliers are based on model year prices, so the direct effects applied to those multipliers need to also be in model year dollars - this is accomplished via the deflators. The value applied to the multipliers is the user-entered value divided by the deflator. The deflators also allow impact results to be viewed in years other than the model year, regardless of whether or not the dollar year of the event differs from the year of the model data.
While the event values and/or result values can be inflated or deflated, depending on whether the index value being applied is less than 1.00 or greater than 1.00 (i.e., depending on the industry/commodity and whether one is adjusting to a future or past value), we use a single term – deflators – to refer to all of these index values.
The output deflators are specific to the industry/commodity and are applied to the output value, while the same GDP deflators are the same for every industry/commodity and are applied to all of the value-added components.
The Bureau of Economic Analysis (BEA) provides historical output deflators which we use for past to current years. For projections into the future, we use the annual rate of change from the Bureau of Labor Statistics’ (BLS) employment growth model. The BEA also has historical GDP deflators which we use for past to current years. For projections into the future, we use the annual rate of change from the BLS employment growth model for "All Industries".
Event Year vs. Dollar Year for View
Changing the Dollar Year for View in the Scenario Results screen is not equivalent to changing the Event Year in the Analyze Scenarios screen. By default, impacts will be reported in data year dollars; however, because IMPLAN data are typically lagged a year (i.e., 2013 data were released in 2014), it is handy to be able to report the results in current year dollars. This can be achieved by changing the Dollar Year for View in the Scenario Results screen. This is just an option, and is not the same thing as changing the Event Year in the Analyze Scenarios screen. The Event Year must match the year that the dollars represent - this ensures that the correct value is applied to the multipliers. Note that you need to set the Event Year before entering a value to ensure correct deflation/inflation.
When Event Year should NOT be set to the Year of your Event
Suppose you are going to model the impact of the 500,000 visitors that came to your tourist attraction in 2014. Suppose that you didn’t conduct your own visitor expenditures survey and are thus borrowing a survey that was conducted on a similar tourist attraction in a similar region but way back in 2005. That survey gives you the per-tourist expenditures on things like lodging, food, transportation, and entertainment. For example, each tourist spent $200 on lodging during their 3-night trip to that attraction. If you were to set Event Year to 2014 and put in $200 you would be understating your impact because 3 nights at a similar hotel would cost more than $200 in 2014 due to inflation! So you’d want to set the Event Year to 2005, since that is the year that those $200 represent. IMPLAN will inflate accordingly and apply the value to the multipliers.
 Not all goods and services are inflationary every year. For example, the prices of consumer electronics often decrease over time. As another example, the prices of agricultural commodities rise and fall in response to many factors, including weather.