New Industry Constrained by Foreign Export Value

Comments

6 comments

  • Avatar
    BAEdavisassociate
    One method that we've tried unsuccessfully to apply is the use of supply/demand pooling to calculate the RPCs. The literature we've been able to find on this topic indicates that supply/demand pooling prioritizes the use of local supply to satisfy local demand before allocating production to exports. When we select supply/demand pooling under user preferences, then reconstruct the model using multipliers, the net commodity supply for commodity 3005 Tree Nuts remains at $0, resulting in a maximum RPC of 0.0%. Is there any way to modify to proportion of local supply allocated to foreign exports, or is this endogenously imposed on the model based on the national trade flows data? Is there any combination of RPC calculation method and model construction method that could help us resolve this issue? Similarly, how are so many people using this method of re-using IMPLAN sectors with zero output to represent new industry sectors, when the model continues to impose default data for the original sector when calculating things like foreign exports and institutional demand?
    0
    Comment actions Permalink
  • Avatar
    IMPLAN Support
    Hello Aaron, Thank you for your post. We have a couple of questions on your Model setup and some thoughts. Unfortunately there is no way to change the Trade Flow data in the Model, thus our recommended thought on building this would be use the econometric Regional Purchasing Coefficient methodology when you are making these kinds of changes. It looks to us like the problem may be that all the steps in the split weren't not completed or not completed properly due to the drastic differences in your numbers between Industry Output and commodity production. Please make sure that all of the following steps are in place: 1. In the Study Area Data that both totals and per worker values are appropriate for the modified Tree Nut farming Sector and the Walnut Sector. If you don't have all the Total values (such as Total Other Property Income and Taxes on Production & Imports) then change your totals first and then edit your per worker values for the OPI and TOPI factors to match your known, or the values that currently exist for tree nut farming. You don't want to allow the underlying ratios for tobacco farming to be used to make your estimations for walnuts. 2. In the Industry Production screen that you change/modify the production function to match your known walnut farming production function of to use the tree nut production function. 3. In the Commodity Production that you edit the commodity sheet to producing the commodity of Tree Nuts, since that is the commodity that walnuts would fall into. You would not want to leave it as the tobacco commodity. You could set it to represent all tree nuts, or use the commodity split of the traditional tree nut Sector, depending on your assumption. -There is a two-fold reason for this: --Firstly, this way your Commodity Trade and Summary sheets will reflect the same values they did before but you will have different Industry Sectors contributing to that total commodity production. In this case this is desirable since we are parsing an Industry Sector into subcomponents, not adding a novel Industry. --Secondly, in your region, even though there is no tobacco farming, there is still a small amount of tobacco production coming from Institutions. If you leave your walnut Sector producing tobacco then you are mixing the Institutional tobacco production with your tree nut farming activity. Regards, IMPLAN Staff
    0
    Comment actions Permalink
  • Avatar
    BAEdavisassociate
    Thank you for your prompt reply. I think your response essentially tells me what I need to know, which is there is no way of updating the trade flows model to produce a more representative foreign exports value for a custom industry sector. Is this correct? Also, thank you for outlining the steps necessary for creating a custom industry sector. We have actually already gone through each of the steps you identified, though I failed to acknowledge that in my prior post.
    0
    Comment actions Permalink
  • Avatar
    IMPLAN Support
    Hello Aaron, You are correct; that value does not update. We do recommend that you state your choice of the tobacco sector and the assumptions related to said selection in your report. Regards, IMPLAN Staff
    0
    Comment actions Permalink
  • Avatar
    akerna
    Dear IMPLAN, We are conducting an analysis similar to the one discussed in this thread, a multi-industry contribution analysis using new customized industries. We realize that there is no way to change the Trade Flow data in the model (and we haven't tried to use the Econometric Regional Purchasing Coefficient methodology yet), but we were wondering if our solution is an acceptable alternative. We are thinking of parsing out a number of industries from existing IMPLAN industries. One example is parsing out Refrigerated Warehousing from all Warehousing. We have customized the study area according to the steps listed earlier in this thread, but instead of putting our new, parsed out refrigerated warehousing into a non-existent industry for our study area, we were thinking of keeping the parsed out refrigerated warehousing in the existing warehousing industry to preserve the underlying trade flows. We would then move the remainder of warehousing into a non-existent industry. Is this an acceptable method to avoid the trade flow issue mentioned above? And are there any caveats to this method? Second, since RPCs are assigned to commodities and both the parsed out refrigerated warehousing and remainder of warehousing (in the non-existent industry) are both producing the same commodity (3416), will zeroing out the RPC (step in multi-industry contribution analysis) affect not just refrigerated warehousing (our industry of interest) but also the remainder of warehousing? Thank you for your time! Ashley
    0
    Comment actions Permalink
  • Avatar
    IMPLAN Support
    Hello Ashley, To get the “correct” multipliers from a custom model, you need to ensure several things: 1) Any new or taken-over industries must have the proper Industry Production coefficients – this is the stuff they buy. If you take over an industry (regardless of whether the new industry is refrigerated warehousing or non-refrigerated warehousing), the initial Industry production coefficients will be from the industry you take over. This will be the case regardless of whether you adjust either industry’s commodity production (a.k.a., “byproducts”). So, make sure any new industry you create, or existing industry you alter (e.g., when you reduce an industry’s values after subtracting away part of that industry) has the correct values in Customize>Industry Production. You can also see these data in Explore>Social Accounts>Balance Sheets>choose an industry>Commodity Demand. These coefficients reflect only how “Total Absorption”, a.k.a. intermediate spending, is spent. You may need to customize intermediate spending’s share of output (and, correspondingly, the value added share of output) in the Customize>Study Area Data screen. 2) Any new or taken-over industries must have the proper Commodity Production coefficients – this is the stuff they make. When you take over an industry, the initial byproducts will be based on the byproducts of the taken-over industry. You can adjust these in Customize>Commodity Production. Note that the model will use pre-existing RPCs for those commodities. You also can see them in the report in Explore>Social Accounts>Balance Sheets>choose and industry>Commodity Production. 3) The commodity-level RPCs need to be correct. You can edit these in Customize>Trade Flows, either at the commodity level in the “Trade Model” page, or at the industry and institution level (in the “Industry/Institution RPC” page). Note that scaling the RSC from 0% to 100% affects only local purchases of local production after deduction of estimated foreign exports, which is not customize-able. Similarly, scaling the RPC in the Industry/Institution RPC page limits you to increase the RPC up to the point that total local demand equals Net Commodity Supply (Gross Supply less Foreign Exports). 4) Custom levels of output, value added components (EC, PI, TOPI, and OPI), and employment need to be correct. Whether a solution is acceptable depends on your tolerance for error in each of the above issues. You are correct that if you change RSCs or RPCs for a commodity, it will affect each industry that produces that commodity. One thing you could do to overcome the problem that both your new refrigerated warehousing and non-refrigerated warehousing industries produce the same commodity is to “take over” a commodity that is otherwise unavailable in your region. Ideally, this would be a commodity like non-comparable imports that is neither produced by industry nor sold by institutions. You would “take over” it by assigning it as the sole byproduct of one of your custom industries (assign it to an industry whose contribution you are measuring, i.e., an industry whose RSC you will zero-out). This way, you could zero-out RPCs just for the commodity byproducts of refrigerated warehousing, and not for the commodity byproducts of non-refrigerated warehousing. You need to make sure that commodity production of any industries whose RSCs have not been zeroed-out are reasonable. So, if you still have regular warehousing in your model and are not measuring its contribution, and leave its byproducts with non-zero RSCs, it needs to produce warehousing services, not something like oilseeds. Regards, IMPLAN Staff
    0
    Comment actions Permalink

Please sign in to leave a comment.