We are modeling the impacts of the construction of a large organic chemical manufacturing facility (a three-year project). The construction is a bit unique in that the largest portion of their spending is going directly to equipment purchases, with a smaller portion being spent on the actual construction and site preparation. The firm estimates that the entire project will cost $200 million, with approximately 55% of the costs going to equipment, 23% spent on wages, 13% on site prep and construction, and the remaining 9% on engineering and architecture. The company provided a fairly detailed list of their equipment purchases, with a total (aggregate) LPP for equipment purchases of about 50%. They indicated that a few items that they thought, in particular, would be purchased locally. They also indicated that about 30% of the engineering / architecture costs would be spent locally, and about 90% of the workforce would be local. Our team ran the impacts as follows: • One Industry Spending pattern for all of the known equipment purchases, with some slight adjustments to LPPs so that the total purchased locally was around 50% and those items that the company indicated would be purchased locally were represented. • One labor income change activity, adjusted to account for the non-local workforce using the commuting rate equation on your website • One Industry Spending pattern in sector 53 to account for site prep and construction as well as engineering and architecture costs, with all of the “known” equipment sectors (previously mentioned) removed. The coefficient for the architecture / engineering commodity was adjusted so that it reflected the total amount spent on that item, and the LPP was changed to 30%. My question is this… our results provided no direct effects, since all of our activities were run as industry spending pattern activities and/or labor income change activities. My initial thought was that the direct effects would be equal to the inputs provided by the company (250 employees, slightly less than $45 million in labor income adjusted to account for non-local workforce, and $200 million in output). Value added was calculated by doing an industry change activity using these inputs in sector 53. However, now I’m second guessing our strategy here. Should I be reducing the direct effects to account for the % spent in the study area? The non-local spending is already being accounted for in the indirect and induced effects, but should they also be reduced in the direct effects? This would make the direct effects much smaller – total output would be somewhere around $128 million instead of $200 million. Thank you for your help!
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