Unlocking the Economic Potential of Emerging Industries

IMPLAN is built on many years of economic data – but how can it help when you’re curious about the economic impacts of an industry without a documented history to examine?

Emerging industries, such as legalized cannabis, are reshaping local economies and generating ripple effects that influence job creation, tax revenues, and broader economic landscapes. For policymakers, business leaders, and researchers, understanding these impacts is essential for making informed decisions. IMPLAN, a robust economic impact analysis tool, is particularly suited for analyzing emerging industries due to its flexibility, data granularity, and customization capabilities.

Let’s take a look at how IMPLAN can be employed to measure the economic impacts of new industries.

Why Study the Economic Impact of Emerging Industries?

Emerging industries often bring unique challenges and opportunities. Their economic footprints are not always well understood due to factors such as limited historical data, evolving regulatory frameworks, and varying regional adoption rates. Legal cannabis, for instance, has transformed from an underground market to a regulated industry generating billions in economic activity and tax revenue.

Economic impact studies in this space can:

• Quantify contributions to GDP and employment.
• Highlight industry-specific supply chain effects.
• Inform policy decisions, including taxation and regulation.
• Help stakeholders, including local governments and investors, identify growth opportunities.

IMPLAN provides the tools necessary to conduct these studies with precision, even for industries with unique characteristics like legal cannabis.

How IMPLAN Supports Emerging Industry Analysis

1. Granular Data Availability
   IMPLAN’s extensive economic database allows users to analyze economic impacts at national, state, and sub-state levels. Emerging industries, often concentrated in specific regions, benefit from this granularity, enabling localized insights.
2. Customizable Industry Modeling
   The legal cannabis industry doesn’t fit neatly into existing economic categories. IMPLAN allows users to create custom spending patterns, tailoring analyses to reflect unique industry dynamics, such as spending on cultivation equipment, compliance costs, or specialized labor.
3. Tracking Direct, Indirect, and Induced Effects
   IMPLAN captures the full range of economic impacts:
   • Direct Effects: Revenue and jobs generated by cannabis retailers, growers, and processors.
   • Indirect Effects: Supply chain activities, such as the production of agricultural inputs or packaging materials.
   • Induced Effects: Increased consumer spending by employees in the industry and its supply chain.

Custom Spending Patterns: A Key to Accurate Analyses

Standard economic models may fail to capture the nuances of emerging industries like legal cannabis. For instance, a cannabis dispensary’s spending pattern differs significantly from that of a traditional retailer. IMPLAN users can create custom spending patterns to more accurately reflect industry-specific expenditures.

Steps to Build Custom Spending Patterns

1. Data Collection: Gather detailed information about the industry, including operational expenses, labor costs, and supply chain relationships. Sources might include industry reports, surveys, or interviews with stakeholders.
2. Input Development: Use IMPLAN’s customization tools to enter spending data into the model. For example, allocate a higher proportion of expenditures to agricultural equipment or security services if these are significant cost drivers.
3. Validation: Compare your custom spending pattern against known benchmarks or consult industry experts to ensure accuracy.

By tailoring the model to reflect the reality of the legal cannabis market and other emerging industries, analysts can avoid the pitfalls of applying generic assumptions.

Tips for Conducting Accurate Studies

1. Define the Study Scope Clearly
   Determine whether your analysis focuses on the entire industry (in the case of cannabis, cultivation, manufacturing, retail) or specific segments. Also, clarify geographic boundaries, such as state-level impacts versus local county effects.
2. Account for Informal Market Transitions
   The shift from illicit to legal markets is a hallmark of the cannabis industry. Include assumptions about how much of the informal market transitions into the formal economy, as this affects revenue and tax impact estimates.
3. Use Robust Data Sources
   Enhance your analysis by integrating high-quality data, such as:
   • Government reports on cannabis taxation and licensing.
   • Industry publications with detailed spending breakdowns.
   • Surveys capturing consumer behavior and market trends.
4. Incorporate Regulatory Impacts
   Regulatory requirements, such as licensing fees, testing costs, or environmental compliance, can significantly influence economic outcomes. Include these factors to provide a realistic picture of industry performance.
5. Leverage Sensitivity Analyses
   Emerging industries often face uncertainty, such as price volatility or changing regulations. Use IMPLAN’s tools to test different scenarios and assess how sensitive your results are to key assumptions.

Broader Implications for Emerging Industry Analysis

IMPLAN’s versatility makes it applicable to other emerging sectors beyond just the legal cannabis industry – there is potential for analysis of new renewable energy sources, electric vehicles, esports, and so much more. The key lies in leveraging IMPLAN’s customization features and combining them with rigorous data collection and thoughtful modeling practices.

Emerging industries like legal cannabis hold enormous economic potential, but understanding their impacts requires tools capable of handling complexity and nuance. IMPLAN’s ability to provide granular insights, combined with customizable spending patterns, empowers analysts to deliver accurate and actionable findings.

By following best practices—such as defining study scopes, accounting for unique industry dynamics, and validating data—researchers can unlock a deeper understanding of these industries' roles in local and national economies. Whether you’re assessing the ripple effects of legal cannabis or exploring the next big thing, IMPLAN offers the resources to make your analysis a success.

Ready to dive into economic impact analysis for emerging industries? Explore IMPLAN’s capabilities today and see how we can help you uncover new opportunities.