Sometimes a new firm is coming to your study area that is in an industry that doesn’t currently exist. Maybe this is the first solar energy company (Sector 44 - Electric power generation - Solar) or the first brewery (Sector 108 - Breweries). This is great news! But how can I model that in IMPLAN if that industry doesn’t exist yet? Well, here’s how.
Let’s say we want to model the economic impact of a new barbecue sauce company coming to Mecklenburg County, NC. First, we determine this would be Sector 103 - Mayonnaise, dressing, and sauce manufacturing. We can see on the Regions Overview screen that this industry does not currently exist in the county. We notice that the greater Charlotte area is lacking in tortilla manufacturing; roasted nuts and peanut butter manufacturing; as well as mayonnaise, dressing, and sauce manufacturing as all of the Employment, Labor Income, and Output fields are zero for these indicating there is not yet a firm engaged in these businesses in the county.
By clicking on the advanced menu icon on the Regions Overview screen, Customize Region pops up. This is where we can create our new industry.
Select the Industry to customize by scrolling to the IMPLAN Sector; in this case Sector 103 - Mayonnaise, dressing, and sauce manufacturing. Now we see the details, which in this case are zero, for the Industry.
An Employment value must be provided in the Employment field under the Sector Selection. For each value in the table below the Employment field (Output, Employee Compensation (EC), Proprietor Income (PI), Other Property Income (OPI), and Taxes on Production & Imports (TOPI)) either the total values can be entered where the zeroes are located on the left-hand side of the table or the per worker values (per worker being denoted as /w) can be entered where the blanks are on the right-hand side of the table (to the left of the labels). If the values on the left are provided IMPLAN will then calculate the ratios on the right. Alternatively, if you enter the ratios on the right IMPLAN will then calculate the values on the left.
However, we might know very few details about the barbecue sauce company. Given this, we can borrow the information about the Industry from another Region. If we know that the new barbecue sauce company will be very similar to one located in another county nearby or might follow national averages, we can pick that region from which to borrow. A good check for determining if a Regions makes for a good “proxy Region” is to compare the similarity of an Industry that exists in your Region and the Region you are considering borrowing information from, ideally an Industry similar to the one being introduced to your Region.
In this example, let’s borrow the national model for our estimates. Open up IMPLAN on a second tab and navigate to Customize Region as done earlier for Mecklenburg County, NC. Select Sector 103 - Mayonnaise, dressing, and sauce manufacturing and we see the information from the national level.
If only employment is known about the new Industry
On the Mecklenburg County, NC screen, start by entering an employment number for the new company. Next, copy the ratios directly from the US Total model into the Mecklenburg County model. Highlight each ratio individually, right click to copy, and paste each into the appropriate space on the county model. Make sure that all the boxes on both sides of the table are filled in so that your screen looks like this. The borrowed ratios from the national model show as edited while the totals on the left show as calculated.
If only Output or some component of Output is known
Start by entering the known value about the new Industry on the left side in the appropriate field. These values should be entered in terms of the Data Year you are working with, so apply the appropriate deflation if necessary. Using the proxy Region, the nation in our example, divide the total value that you’ve just entered by the proxy Region per worker value on the right to calculate Employment. In the box below we show an entered value of $10 million for output. From our national model we see output/worker to be $563,479.98, so we will divide $10,000,000/$563,479.98 and get 17.75 employees. Enter this figure in the Employment field. Continue by entering the remaining per worker fields using the proxy Region. Ensure that all of the fields are filled in before clicking Complete Customization.
The new region will base the Intermediate Expenditures value off of Output - Value Added (or EC + PI +OPI + TOPI). Dollars modeled going to the new Industry’s Intermediate Expenditures will be modeled through the National Spending Pattern for that Sector. Supply chain and backward linkages will be assumed from the national model, regardless of where you borrow the inputs and ratios.
When you are finished entering the information about the new Industry, click Complete Customization in the bottom right of your screen. You will be prompted to give your new Customized Region a name. Remember to make it something you will remember.
Now click on Add to Impacts and give your Project a name. Enter the information we know about the new barbecue sauce company. In this example we know they will employ 100 people, so we create an Industry Employment Event for 100. Click save and add your Event to the group on the right. Ensure that your new Customized Region name, in this case, Mecklenburg BBQ, shows up as the selected region under the Dollar Year and Data Year fields. Now you can run your analysis.
If we had not created Sector 103 in Mecklenburg County, NC, our results would show zero impacts across the table because the sector didn’t exist before and therefore had no effect on the local economy. When you view your results after adding the sector, you will see that, in our example, we have a Direct Impact of 100 jobs in Sector 103 - Mayonnaise, dressing, and sauce manufacturing, just as we entered. We also see the associated Indirect and Induced effects of our input as well as the effects on Labor Income, Value Added, and Output.
How is it that a southern metropolitan city doesn’t have one company making barbecue sauce? Now we can fix this problem and see what the ripple effects of adding a much needed business to the economy would look like.
Written June 27, 2019