ABP: Using an Industry Spending Pattern

Introduction:

Analysis-by-Parts is a technique by which you can analyzed the impact of an Industry's production/spending in separate components using multiple Events instead of using a single Industry Event. The purpose of this article is to explain how to analyze the Intermediate Expenditure portion of an Analysis-by-Parts (ABP) using an Industry Spending Pattern. Alternatively, the Intermediate Expenditure portion of an ABP could be analyzed using the Bill of Goods approach. 

Detailed Information:

Step 1: Intermediate Expenditures - Industry Spending Pattern

To analyze the Intermediate Expenditure portion of 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 or organization being modeled.

 

        

• 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:

Click the Other Options icon  on the Event and choose Advanced.

Intermediate Expenditures vs. Total Output:

This 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 Total Gross Absorption for the selected Industry is multiplied by the Value before it is analyzed as spending on the commodities included in the Industry Spending Pattern.

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 Percentages:

Change values in the Percentage column for 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. 

Modifying the LPPs: 

LPP in an Industry or Institutional Spending Pattern tells the software what portion of the line item Commodity was purchased locally and therefore affects the local Region.  The Industry Spending Patterns by default sets the "LPP" (Local Purchase Percentage) values to "SAM" (Social Accounting Matrix) value  for all commodities, but the option to set one or all LPPs to 100% or to some other value is available. When LPP is set to "SAM", LPP will be set to the Regional Purchasing Coefficient (RPC) for the given Commodity and Region. This is the proportion of local demand for the commodity that is met (according to the Data Year) by local production in whichever Region the Event is analyzed within. 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%.

Deleting Commodities:

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.

Adding Commodities:

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. 

Step 2: Labor Income (Direct Income Spending Induced Effects)

• 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. 

Step 3: Run the Analysis

Drag and drop all Events created in Steps 1 and 2 into a Group. Be sure your Group has a title and the appropriate Dollar Year, Data Year and Region have been selected. Then, hit run! 

Step 4: Interpreting, Editing and Reporting Results

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.

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 analyze the Indirect and Induced Effects.

More information about categorizing effects can be found here.

Updated February 21, 2020