Modeling capital expenditures with limited info.
I am conducting an economic impact analysis of the mining industry. A survey of participating mines was administered which asked about their projected capital expenditures over the next five years (2020-2024). Of the 5 surveyed mines, all provided dollar amounts but only two provided a description of the purchase. I have two questions:
- For those mines that provided a description (e.g. structural steel replacement) and a dollar amount, how would you suggest I model the specific purchase? I would assume some portion of the spending would go to the manufacturing sector associated with the purchase while some would go to retail? Wholesale? Engineering? Is there a standard way to estimate the proportions? Any guidance would be appreciated.
- For those mines that provided a dollar amount but no specific description, is there a way to model “generic” capital spending, or do we need to get more information from the companies? Could we, for example, impact the wholesale trade sector?
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Official comment
Hello!
1. For the mines that you know specific purchases, I recommend using a Bill of Goods approach and modeling each of the purchases as Commodity Output Events. This article should help walk you through it.
https://implanhelp.zendesk.com/hc/en-us/articles/360026040433-ABP-Analysis-by-Parts-Bill-of-Goods-Using-Commodity-or-Industry-Events-with-Labor-Income-Events2. For this, you will have to make an assumption. Often large capital purchase items are not produced in your study region, and are therefore leakage.This may even include the wholesale portion. You could make the assumption that they used a local wholesaler, which could be modeled through one of the wholesale IMPLAN Industries (392-401).
Please let me know if you have more questions!
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Thanks for getting back to me Candi,
I have located the margins and have applied them. I am curious as to why there are no margin values for sectors 3262 and 3215.
Also, I am trying to model the capital purchases in the manner that you described. For the purchases where we had specific information I applied the spending reported by the companies to the corresponding sectors. I then applied margins from IMPLAN’s “common margins” file to distribute the industry spending accordingly. I modeled the margined sectors as an industry spending pattern using the spending amount as the level. However, I am unsure of which sector to apply the direct effects. Alternately, would it be acceptable to model the margined dollar amounts as industry change activities?
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Hello!
For your first question, there are no margins for those two Commodities because IMPLAN assumes they are not available via wholesale or retail.
On your second question, I would recommend that you model them as Industry Changes. That way, you would get the Direct Effects.
Candi
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