Negative value added

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    maria_lucas

    Hello,

    Instead of modifying the industry data, I'd recommend replacing Proprietor Income (PI) in the Event setup with $0 after entering the $1MM of Industry Sales. Entering $1MM of Industry Sales will trigger the estimated negative PI to populate in the Event (make sure under Event Options > Show > Labor Income is selected). I did a quick test, and customizing the Event by zeroing out Proprietor Income produced all positive results. This is recommended over modifying the model itself.

    Thank you,
    Maria 

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    Mflyr

    Thanks! That did work for sector 500. However, I came across another sector in the model with negative results: sector 135, Wood preservation. In this sector, the problem seems to be with OPTI, not with PI. OPTI can't be adjusted in the event set up. Do you have a recommendation for how to deal with a sector like this?

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    maria_lucas

    Hello, 

    Great question. The negative OPTI in the industry does not have the same cascading implications that showed up in the case of the negative PI. Negative Labor Income (EC or PI) is essentially treated as a loss in Household spending, so this lead to the negative induced and total Labor Income and Value Added impacts. 

    On the other hand, OPTI does not generate any indirect or indirect effects, as long as changes have not been made to internalize Capital and Enterprise (corporations) in the Multiplier Specification. Therefore, by default the negative estimated OPTI will only affect the Direct effects. Customizing the region is an option here if the negative OPTI does not appropriately reflect the activity you are analyzing. With OPTI being a component of Value Added (which is equivalent to the effect on GDP), its important to accurately represent for this value to account for the true affect on GDP.

    If a customization seems appropriate this can be done via Customize > Study Area Data. In Industry 135, OPTI can be zeroed out in either the per worker value or in the total. Hit tab/enter, then click "Update", and save the change. The model will then need to be rebuilt via Options > Construct. I suggest reconstructing each of the three options to update the entire model. Notice, when you update OPTI from the negative value to zero, this causes Intermediate Expenditures to go down. This is subsequently decreases Indirect effects. Testing this with a Hawaii 2017 model, I do see a significantly larger total Value Added overall in my results after making the edit. 


    Thank you,
    Maria 


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