Sectors internalized in the model


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    Hi Jacklyn,

    The decision of what to internalize is a question of whether or not that institution's level of spending is responsive/reactive/directly tied to the income/revenue it receives as a result of the impact and if so, whether that institution will spend it in the study area.  It is more straightforward to argue/prove that households generally spend more as they earn more, but government spending is not as flexible/reactive - government budgets are set far in advance and must be approved by congress, etc.  It also depends on study area and level of government in question and the source of the tax revenues.  For example, even if I know that the increased tax revenue that Colorado is receiving from marijuana sales is going to lead to increase State/Local Gov spending, it is mandated by law that those funds be spent on very specific things like drug abuse prevention programs, so I'd not want to internalize State/Local Government since that would spend the money using the average government spending pattern when really I need it to be spent on these specific programs, so I'd be better off leaving government externalized and run a separate impact on those specific expenditure items.  So, in summary, it is the industry standard to internalize households only, but that under some specific cases it may be justified to internalize State/Local Government.  This article explains the topic in more detail and provides examples of when it might and might not be appropriate to internalize various institutions:

    If you decide you would like to edit the default internalization settings, then yes, you would simply apply those changes by selecting the appropriate check boxes in the User Preferences > Multiplier Specification screen and click "Apply". 

    Thank you,

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