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Economic Analysis with IMPLAN presented in WF ED 543, Evaluation of Investments in Workforce Education & Development, at Penn State

Economic Analysis with IMPLAN presented in WF ED 543, Evaluation of Investments in Workforce Education & Development, at Penn State

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    Wfed543 Implan Wfed543 Implan Presentation Transcript

    • Economic Impact Analysis with IMPLAN WF ED 543
    • Our process today
      • We have a lot of information. But, we don’t need to dump it all on you.
      • No time pressure to do it all.
      • Bring your knowledge and experiences to the table.
      • Ask questions! Talk! Challenge!
      • A copy of all slides is provided on ANGEL. We will not overwhelm you with handouts.
      • Sources of information are available on a web site.
      • Breaks and lunch will occur!
    • For information after today http://PSU-IMPLAN-Refs.notlong.com
    • Input-Output Analysis A systematic view of production and consumption in an economy
    • Sex life of a regional economy < the birds & bees of job creation >
    • The economy is like a ball of string < complex > < intertwined > < large > < unexpected >
    • Way to organize data < input-output tables > Summarize production & consumption.
    • Input-output table ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output
    • How is economic activity classified?
      • An industry is a group of establishments with similar production processes or products.
      • An establishment is a single physical location where business is conducted.
        • Industrial operations conducted or services provided.
        • Not to be confused with an enterprise.
      • A commodity is a group of similar products.
      • Industries make and use commodities.
        • Some commodities are primary products or services.
        • Some some commodities are secondary to primary business.
    • NAICS classifies industries
      • N orth A merican I ndustrial C lassification S ystem.
      • Six-digit code read from left to right (general to more detailed industries).
        • First two digits = sector (manufacturing).
        • Third digit = sub-sector (food manufacturing).
        • Fourth digit = industry group (dairy product manufacturing).
        • Fifth digit = NAICS industry (ice cream & frozen dessert manufacturing).
        • Sixth digit is country–specific.
      An example
    • Primary & secondary commodities
      • Establishments are in industries that define their primary commodities.
      • Most establishments produce commodities in addition to primary.
        • Newspapers are primary product of newspaper industry; advertising is secondary product.
        • Lodging is the primary product of hotels; meal services are secondary products.
        • Other examples?
      • Secondary commodities are redefined to other industries.
    • Simple input-output table ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output
    • Industries produce goods & services ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output producers
    • Industries purchase goods & services ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output purchasers
    • Production sector of the economy ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output
    • Production sector of the economy ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output interindustry transactions
    • Production sector of the economy ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output direct requirements
    • A closer look at interindustry transactions ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand purchases of ind 2 from ind 1
    • A closer look at interindustry transactions ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand purchases of ind 3 from ind 2; or, ind 2 produces for ind 3
    • A closer look at interindustry transactions ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand purchases of ind 1 from itself; some industries use the products they make
    • Industry production function -- the direct supply chain ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand All purchases of ind 1; aka industry production function
    • Producing & purchasing continues until goods or services created ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand < make/use… make/use… make/use… the production cycle goes round & round >
    • Consumption ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output
    • Final demand… Gross domestic product… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand ind 1 ind 2 ind 3 ind 4 < personal consumption > < government purchases > < investment > < export >
    • Total economic output… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output production + consumption = total output
    • An Example of an Input-Output Table
    • Here is the sex part…. < where jobs come from >
    • Jobs are created because…
      • Total output is created by a mix of productive resources.
      • Labor is a productive resource, along with land and capital.
      • Human capital is required to produce goods and services.
      • People, with other resources, create output.
    • Jobs are tied to total output… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output ind 1 ind 2 ind 3 ind 4 < in each industry, it takes a certain number of people to create a dollar’s worth of total economic output >
    • Jobs are tied to total output… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output ind 1 ind 2 ind 3 ind 4 < if It takes .001 workers to create $1 of economic output, then,                               
    • Jobs are tied to total output… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output ind 1 Ind 2 ind 3 ind 4 < if It takes .001 workers to create $1 of economic output, then, with $1 billion of total industrial output, 1 million workers are required >
    • Jobs are tied to total output… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output ind 1 ind 2 ind 3 ind 4 < changes in labor intensity or in total economic output create changes in numbers and kinds of jobs >
    • Occupational employment is tied to total industrial output… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output ind 1 ind 2 ind 3 ind 4 < industries use different occupations > < industries use different labor intensities > < occupational employment differs by industry >
    • Occupational employment is created.. … when people use their unique human capital to create goods & services
    • Results of input-output analysis
    • Input-output tables are used for…
      • Economic accounting
      • Forecasting
      • “ What if” simulation
    • Local uses of input-output analysis < producer & purchaser data > < multipliers >
    • Multiplier A product of input-output analysis
    • producer/purchaser data… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total output producers purchasers
    • Multipliers
      • Economic impact of change in final demand.
      • Calculated for output, income, employment, taxes, and other factors.
      • Show total effects of change on economy.
      • Expressed as a positive number.
    • Producing & purchasing multiplies… ind 1 ind 2 ind 3 ind 4 ind 1 ind 2 ind 3 ind 4 final demand total demand
    • Multipliers display three components of change
      • Direct.
      • Indirect.
      • Induced.
    • Direct effects
      • Changes in production as a result of immediate effects of a change in final demand.
      • E.g., increase in demand for autos increases production of autos.
    • Indirect effects
      • Changes in production in industries supplying industry delivering the final product.
      • E.g., increase in auto production increases production in supplying industries (like glass, steel, plastics).
    • Induced effects
      • Changes in direct and indirect production increase income and, therefore, consumption (and, maybe saving).
      • E.g., workers in auto industry and supplying industries spend and save their income, creating additional economic activity.
    • Two types of multipliers type 1 = type 2 = direct + indirect direct direct + indirect + induced direct
    • Some employment multipliers
      • Input-output model, extended to social accounting.
      • Type 1 and type 2 multipliers for output, value added, employment, taxes, and others.
      • Full access to input-output table.
      • Available for nation, state, county, and sub-county.
      http://www.implan.com
    • Marketing waste industries
      • Waste hauling and landfills are part of our highways and landscape.
      • No one wants waste hauled near their homes.
      • Landfills are not desirable neighbors.
      • The Pennsylvania Waste Industries Association wanted information about economic impact of waste hauling/landfills in Pennsylvania.
      IMPLAN analysis of multipliers for waste/recycling activity: Employment Personal Income Total Income Value Added Total Output
    • Waste/recycling multipliers for Pennsylvania
    • Loss of opportunity Penn State research on: Community Costs of Technical Skills Deficits
    • Quick response, regional impact Penn State research: Economic & Workforce Brief series http://PSUBrief.notlong.com
    • Economic Impact Analysis with IMPLAN WF ED 543