Analysis-by-Parts is a technique by which you can split the "stemming ripple effects" of an Industry Event into its individual impact components - budgetary spending pattern and income. Intermediate Expenditures and income spending are the core impact factors of an Industry Event, initiating Indirect Effects and Induced Effects, respectively. Separating them into two Events gives you, as the user, more flexibility and customization capabilities in your analysis.
To perform an Analysis-by-Parts, ideally you will want to know Direct Employment, Direct Labor Income, and either the total budgetary (goods and services) value or Direct Output. However, all of these elements can be estimated from the IMPLAN Model as long as you have, at minimum, a budgetary or Output value with which to initiate your Scenario.
Analysis-by-Parts is the process of splitting or parsing an impact analysis issue into more specific parts.
ABP allows you to:
- Specify the amount of commodity inputs
- Specify the proportion of local labor income
- Specify the proportion of local purchases
- Use IMPLAN's special spending patterns
ABP is accomplished using combinations of Events Types. The total impact is the sum of the impacts of all of the following parts:
Part 1 – Direct Effects
- No analysis required
- If not all the Direct factors are known, estimates of these factors can be made from the underlying Study Area Data using the information found:
- in Regions Details > Social Accounts > Balance Sheet > Industry Balance Sheet you will find Output value ratios in the Commodity Demand and Value Added tabs. If the industry does exist in the region, the Proxy region information must be used.
- Employment can be estimated using the Output per Worker ratios that are provided in the Model.
- Record your Direct Effect because you will not be using an Industry Event to model the Indirect and Induced Effects.
Part 2 – Indirect and Induced Effects as a result of Intermediate Expenditures
- Use an Industry Spending Pattern Event in the Impacts screen.
- Choose the Sector that best matches the spending of the Industry/Organization being model.
- By default the Value should be the total dollars spent on Intermediate Expenditures.
- Using the Advanced menu, you have the option to indicate that the Value should be Total Output, as well as make edits to the Commodities included in the Industry Spending Pattern.
Part 3 – Induced Effects as a result of Labor Income
- Use Labor Income Events in the Impacts screen.
- Specification Employee Compensation should be paired with a Value of total income for Wage and Salary workers, and Proprietor Income should be paired with a Value of total income for self-employed workers. If the impact involves both types of labor, create 1 Event for each.
Unless you need to change the underlying Multiplier matrix, Analysis-by-Parts is the suggested technique for modeling an Industry that is a subset of a current IMPLAN Sector or for introducing a new Sector or new Sector definition to the Model.
Analysis-by-Parts is also the appropriate technique for modeling an Industry that doesn't exist in the Study Area and for modeling non-profit and public Impacts.
Industry Spending Pattern
To perform an Analysis-by-Parts, begin by adding an Industry Spending Pattern Event and selecting the Sector as the Specification that best matches the spending of the Industry/Organization being model.
- By default the Value entered in this Event should be total Intermediate Expenditures, meaning 100% of the entered Value will be spent on the commodities included in the Industry Spending Pattern.
- Secondly, by default all the commodities in the Industry Spending Pattern will be modeled as 100% local purchases.
Industry Spending Pattern Advanced Options
- Opening the Advanced Menu by clicking the Other Options icon will display the default selection of Intermediate Expenditures, indicating the Value entered in the Event should be the value of Intermediate Expenditures. This can be changed so that Value entered should be Total Output, in which case the regional proportion of Intermediate Expenditures out of Total Industry Output for the selected Industry is multiplied by the Value before it is modeled as spending on the commodities included in the Industry Spending Pattern. The proportion can be found as the Total Gross Absorption percentage found in Region Details > Social Accounts > Balance Sheets > Industry Balance Sheet > Commodity Demand. Whether Intermediate Expenditures or Total Output is selected, the Sum of Percentages will stay at 100% unless you modify the Percentage on an individual commodity.
- Modifying the Percentage on an individual commodity will adjust how much of the total spending on these commodities will go towards the individual commodity.
- Once the Percentage on an individual commodity is modified, the change will be locked. You can redistribute the other Percentages so that the Sum of Percentages is back at 100% by clicking Normalize in the Other Options within the Industry Spending Pattern Advanced Menu.
- If you don't want to keep the changes you've made to these Percentages, you can Reset in the Other Options within the Industry Spending Pattern Advanced Menu as well.
- The Industry Spending Patterns by default set the "LPP" (Local Purchase Percentage) values to 100% for all commodities, but the option to set one or all LPPs to "SAM" or the Social Accounting Matrix value is available. This option will set the LPP to the Regional Purchasing Coefficient (RPC), or the proportion of local demand for the commodity that is currently met by local production. If the LPP is known for a given commodity, your own value can be entered as a coefficient.
- The Reset option in the Other Options within the Industry Spending Pattern Advanced Menu will also set all the LPPs back to 100%.
- In the final column of the Industry Spending Pattern Advance Menu you will find a Trash icon in every commodity row which will delete the given commodity.
- In the top left corner of the Industry Spending Pattern Advance Menu below the word "Commodities", you'll find a "+" sign labeled "Add New". This option allows for additional commodities to be added.
- Whether a commodity is being added or removed, the Sum of Percentages here again can be balanced back to 100% by choosing the Normalize option in the Other Options.
You will also need to setup a Labor Income Change to capture the effects associated to the Direct labor payments on the economy.
Specification then defines the type of Labor Income that should be entered as the Value.
- If you have only a total Labor Income value, you can:
- Enter all of the value as Employee Compensation in one Labor Income Event.
- Or, find the % of Output going to Employee Compensation and Proprietor Income based on regional information found in Region Details > Social Accounts > Balance Sheets > Industry Balance Sheet > Value Added.
- If you have a split of Employee Compensation and Proprietor Income create the Event(s) accordingly.
- The Industry Spending Pattern Event and the Labor Income Event(s) should be dropped into a Group in which the Dollar Year, Data Year and Region have been defined appropriately. Then, click Run.
What to expect in your results
Since Direct results are not analyzed with this methodology, they are also not reported. Final results require adding the Direct Effects into the table and re-summing the totals.
Industry Spending Patterns are by definition the first-round of the Indirect Effects, so the results tables will show Indirect Effects and Induced Effects. The Labor Income Event(s) will only generate Induced Effects.