Comparing multipliers over the years

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    IMPLAN Support
    Hello Christine. There are several factors which may influence the size of an economic multiplier such as: size of the local economy or study area, substantial imports into the region, significant, leakage of spending by households, strength of backward linkages, and strength of household spending. Multipliers change every year due to changes in economic conditions as well as changes in the underlying data. For instance, decreased U.S. manufacturing and growth in foreign imports will affect the multipliers. In general, productivity goes up over time, so the direct employment (and payroll) per dollar of output goes down. Lower payroll means lower induced effects. The US economy also gets more global as we progress forward in time - the more imports, the smaller the multipliers. When the sectoring scheme changes (509 to 440 sectors), we may gain or lose sectors, meaning that sectors may contain a greater mix of sector activity types than before which could affect the multipliers as well. Also, Version 2 used the econometric RPC method, while the default RPC method in Version 3 is the trade flows model. To make the analyses more comparable, you may want to use the econometric method in Version 3 - you can do this by going to File > User Preferences > Social Accounts and selecting Econometric RPC. We hope this addresses your question.
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    ccooper
    Thank you, that is a very helpful summary.
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    ccooper
    So running an industry change of some amount (say $10 million) in each of the different year models yields pretty predictable results, but the state and local tax impact between 2011 and 2012 is significantly different. It looks like this is due to a decline in property tax revenues and sales tax revenues of about 50% each from 2011 to 2012. This is pretty difficult to explain to our macro people, who easily produce data showing both of these revenue streams have increased in the state. Is the data series that you use subject to these types of swings?
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    IMPLAN Support
    Hello Christine, Could you let us know what region or regions you are working with in which you are seeing this variance. Any information you can provide, will help us to be able to see if we can duplicate what you are seeing in house. Thanks!
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    ccooper
    Yes, sorry! We are looking at the state of California as a whole.
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    ccooper
    Also, the industry is 346.
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    IMPLAN Support
    Hi Christine. I ran 2011 and 2012 models for California, using the Econometric RPC method. The variance between the multipliers for sector 346 are within the margin of reason given the factors that can affect the size of multipliers and when dealing time series estimates. Do these values resemble those that you derived using Sector 346 and a $10 million industry change for this sector? Please let us know if they are different because if they are, then we need to check a few other issues to determine why you are receiving the values you are getting. I have attached an Excel Spreadsheet with Sector 346 multipliers' for employment, labor income, and output for both 2011 and 2012. Please let us know if we can be of further help.
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    ccooper
    We always use the trade flows method, so the multipliers are not the same (they are a bit higher than those you have sent). Can you try again using trade flows? Or is econometric modeling preferred?
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    IMPLAN Support
    Hi Christine. We generally run the model using the trade flow method. We will run both 2011 and 2012 using the trade flow method and share the multipliers with you.
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    IMPLAN Support
    Hi Christine. Attached is an Excel Spreadsheet which contains employment, labor income, and output multipliers using both the Econometric RPC approach and the Trade flow Model approach. We hope this helps. Let us know if we be of further help.
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    ccooper
    Yes, thank you so much, this does match what we have. But we are still wondering about the different tax impact between the two years. We discovered this by making an industry change in 346 of $10m in each model and running the scenario. The state and local tax impact is substantially lower in 2012, and I was hoping for some justification for that. Thank you so much for your assistance. Hi Christine. The difference you are seeing is virtually all occurring in the direct Tax impacts (indirect and induced tax impacts looked similar). The difference in the two years is that 2011 for industry 346 pays far more into Taxes on Production (IBT). In 2011 we made a stronger effort to tie industry payments to IBT to BEA GSP estimates (lagged one year). The payment by 346 to IBT in the current 2012 data is $334,540,985 but looking at past underlying data it should be closer to $1,261,705,172. I will review the programming, but for now I would edit the sector and rebuild the multipliers: 1) If Customize does not show in the left hand Menus go to File > User Preferences > Analysis and click the "Advanced modeling box and them the "Enable Model Customization Box" 2) Go to Customize > Study Area Data and select industry 346 from the industry list. 3) Click the "Edit Totals then update per worker values" radio button (under "Edit Options" 4) Type $1,261,705,172 over the $334,540,985 "Tax on Production and Imports" value 5) Click the Update button 6) Click the Save button 7) Go to Options > Construct and click on "Multipliers" to create new multipliers using the edited data. Note the tax impacts in the Taxes on production (ibt) column will still be lower but it will be a lot closer. Sorry for the hassle and thanks for pointing out the difference.
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    ccooper
    Thank you so much! But now I have a couple of other questions: 1. Would an adjustment have to be made at the county level as well? It may not be important in some counties, but it might be in larger ones (especially LA County). 2. Do you think this might apply to other industries as well? I really appreciate your support and advice. Thanks again.
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    IMPLAN Support
    Hi Christine. At the moment, we believe that no further adjustments are needed unless you are seeing similar variations of Sector 346 at the county level. If you are, please let us know about the variations in 2011 and 2012 data. As far as adjustments in other industries, again, we believe that no further adjustments are required unless you are seeing something that we are missing. We hope this helps and again, we apologize for the data error.
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