Assumptions

OVERVIEW

This document is designed to help you explain to key stakeholders what assumptions are inherent in IMPLAN. These assumptions are key to understanding your results and reporting them accurately and fairly. Feel free to copy and paste all or some of this material directly into your reports or presentations!

ASSUMPTIONS

Studies, results, and reports that rely on IMPLAN data or applications are limited by the researcher’s assumptions concerning the subject or event being modeled. 

IMPLAN provides the estimated Indirect and Induced Effects that stem from the given economic activity as defined by the user’s inputs. Some Direct Effects may be estimated by IMPLAN when such information is not specified by the user. While IMPLAN is an excellent tool for its designed purposes, it is the responsibility of analysts using IMPLAN to be sure inputs are defined appropriately and to be aware of the following assumptions within any I-O Model.

Constant Returns to Scale

The same quantity of inputs is needed per unit of Output, regardless of the level of production. In other words, if Output increases by 10%, input requirements will also increase by 10%.

No Supply Constraints

I-O assumes there are no restrictions to raw materials and employment and assumes there is enough to produce an unlimited amount of product. It is up to the user to decide whether this is a reasonable assumption for their study area and analysis, especially when dealing with large-scale impacts.

Fixed Input Structure

I-O assumes there are no restrictions to raw materials and employment and assumes there is enough to produce an unlimited amount of product. It is up to the user to decide whether this is a reasonable assumption for their study area and analysis, especially when dealing with large-scale impacts.

Industry Technology 

By this assumption, each Industry's production requires a unique set of inputs, no matter which product it is producing. This assumption provides the basis for the mechanical calculation of the total requirements tables in the I-O accounts.

Commodity Technology 

By this assumption, the production of each Commodity requires a unique set of inputs no matter which Industry produces it. This assumption provides the basis for the redefinition of secondary products in the I-O accounts, whereby the secondary product and its associated inputs are redefined from the Industry that produced it to the Industry in which it is the primary product.

Constant Make Matrix

As a requirement of the Industry technology assumption, Industry byproduct coefficients are constant. An Industry will always produce the same mix of Commodities regardless of the level of production. In other words, an Industry will not increase the Output of one product without proportionately increasing the Output of all its other products.

The Model is Static

No price changes are built in. The underlying data and relationships are not affected by impact runs. The relationships for a given year do not change unless another IMPLAN Data Year is purchased.

Written March 13, 2020

Updated May 18, 2020