Indirect Spending back into own industry
I am working on a county level impact analysis for a client who is the only employer in a their industry in the County (as confirmed by IMPLAN's employment numbers in the sector). We have a large amount of data and are able to categorize most indirect spending with a high level of certainty. When we run the IMPLAN impacts of the industry overall to cross check with the analysis we run based on our data, I am seeing indirect spending back into the same industry category as our client. I understand from other forum topics that this represents spending into their own company for operations. We have a complete budget and a variety of expenditure information form our client and I want to compare this indirect spending estimate to the information that we have been provided.
It looks to me like the impact of indirect spending into the industry might correspond to the spending to purchase their own labor for operations. What categories of spending and output would be included in this indirect component? If we calculate the impacts of wages and salaries to the facility, would that appropriately capture the indirect spending back into their own company? I understand that employee compensation is typically considered to produce induced effects, but it seems like that might be what is being captured here as an indirect effect as well.
Thank You
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Hello Edward, While it is certainly the case that a firm may purchase from itself, what you typically see when a firm purchases from its own sector code is purchases from other firms that happen to share the same sector. Without knowledge of your firm (and its corresponding IMPLAN sector), we cannot say for sure that the industry's production function does not make a purchase from its own sector; however, it's more likely that the indirect spending back into your sector is representative of other industries purchasing from your firm's sector during the subsequent waves of indirect impacts. Impacting your industry will result in a total output larger than your firm's reported operation (due to the indirectly impacted sectors purchasing from your firm's sector). As your firm represents the entire industry in the region, we suggest that you utilize the Contribution Analysis methodology. Estimating the Contribution of an Entire Industry: IMPLAN Online http://support.implan.com/index.php?option=com_content&view=article&id=351 Estimating the Contribution of an Entire Industry: IMPLAN Pro http://support.implan.com/index.php?option=com_content&view=article&id=211 Regards, IMPLAN Staff
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