Indirect Effects of Gas Extraction

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    IMPLAN Support
    Hi Nicholas, The first check is to be sure that you have matched up the Activity Level and the spending pattern correctly. If the Sum of Event Values is [b]less [/b]than 1.00 you will want to ensure that you use the full Output value for the Activity Level ($144MM). If you have normalized the spending pattern so that Sum of Event Values [b]does [/b]equal 1.00 you will want to set Activity Level to your 71.4MM. If this is not the problem, can you provide us some additional information so that we can try to duplicate what you are seeing here? For instance can you tell us which counties, and what year of data you are working with? Did you build all three counties into a single model or set them up as an MRIO? Thanks!
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    ndennis
    I verified that the coeficients add to 1 and that the activity level for the imported Industry 20 spending pattern is $71.4 MM. Here are my model settings: single model encompassing Sublette, Sweetwater, and Lincoln Counties, WY 2011 data 2013 event year Here are my activity settings 1. an industry spending activity selecting industry #20 with level set to $71.4 MM and normalized coefficients 2. a labor income change activity selecting employee comp with labor income value = $15.41 MM 3. a labor income change activity selecting PI with labor income value = $1.87 MM Direct effects as required for analysis-by-parts are as shown in the summary results table I sent previously. What else do you need?
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    ndennis
    Also: LPPs for all intermediate purchases at IMPLAN levels.
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    IMPLAN Support
    Hi Nick, Your results look fine and as expected, let me explain what we’ve done and how we are looking at it, and thanks for helping us to be able to view it too. You stated in the original post: As shown in the detail results for this scenario, the total indirect effect is $25.8 million and, of this, the value-added component is $15.4 million. This tells me that the intermediate purchase component of the indirect output effect is $10.4 million ($25.8 - $15.4). As stated above, I think the intermediate purchase component of the indirect effect should be at least $21 million. You are correct and the first-round of the Indirect is about $20.7 MM. You can calculate/verify this by hand by basically doing the same thing that the software does, Export the Activity to excel, and multiply the Activity Level times the coefficient and the LPP value and then sum the values. This leaves approximately $5.1 MM dollars being generated in the remaining rounds of Indirect effect ($25.8MM-$20.7MM) which seems very reasonable to us based on the typical sharp reduction of Indirect effects that remain local with each round and the RPC’s for this region. There is unfortunately no way to view the first round at this time, nor calculate it from the results. The value of 10.4MM that you calculated above, rather than representing the first round of Indirect impacts, represents the Intermediate Expenditures for all rounds of the Indirect Effect. Please let us know if you have any additional questions
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    ndennis
    I agree that the first-round indirect effect is $20.7 million and that subsequent rounds add another $5.1 MM. My question concerns whether the indirect effect only includes intermediate purchases, or also purchases resulting from value added? Value added appears to contribute $15.4 to the total output indirect effect, which would leave only $5.3 MM attributable to intermediate purchases. Please correct me if I'm wrong about that. That seems too small because, as you confirmed, first-round intermediate purchases made locally are $20.7 MM.
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    IMPLAN Support
    Hi Nick, The 20.7 million includes a value added component; that is, 20.7 million dollars of total production (or Output) from each of the 115 Sectors that are affected (although not all of these are local). The $5.3MM does not represent the first round of indirect impacts. Rather, it represents the portion of all rounds of indirect that goes to Intermediate Expenditures. Output = Intermediate Expenditures + Value Added, whether that Output is generated directly, indirectly, or via household spending (induced), and whether it is the first round or a later round. So the 20.7 million dollars of first round impacts includes all the Value Added expenditures. The fact that ~60% of the Indirect impact is Value Added simply indicates that the indirectly-affected industries purchase only about 40% of their total Output as goods and services and use about 60% of their total Output for Labor payments, profits and taxes. This doesn't seem particularly unusual, or out of place. Each item in the Industry Spending Pattern represents the amount of Output required by each of the industries listed in the spending pattern. That Output includes Value-Added. Take the expenditure for sector 20 as an example. You are demanding 0.075* $71,399,936 = $5,354,995 from sector 20. 15.4% of this is purchased locally for a final figure of $825,609 of demand for local sector 20's output. This $825,609 represents the Output you are demanding from local sector 20 - that Output includes Intermediate Expenditures AND Value-Added. In other words, the Intermediate Expenditures that sector 20 will need to buy to generate this $825,609 worth of output is just a fraction of that $825,609.
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