So, you’re a business professional, consultant, researcher, or local government or agency hoping to gain insight and quantify the impact of an industry, a new or existing business, expected growth or changes, or a specific event to the economy of a particular region.
You're going to want to choose a widely used database and software package that uses input-output analysis based on interdependencies of economic sectors.
IMPLAN, whose beginnings date to the late 1970s when the base model was first developed under the direction of the federal government, is used to create Social Accounting Matrices and Multiplier Models of economies. Our system provides software tools, region-specific data, and technical support to allow its users to deeply examine potential and existing economic impacts.
It’s like one gigantic checkbook for the local economy. This checkbook shows all purchases within a local economy, who made those purchases, and when.
IMPLAN creates an in-depth snapshot of that economy by using regional data to estimate the indirect and induced effects of those transactions.
Consider the indirect impact as the chain effect of those transactions—the business-to-business purchases that result from the change—and the induced impact as the continuing chain effect—how workers’ wages would affect the local economy.
TAKING THE FIRST STEPS
The initial steps of undergoing an economic analysis are vital. These include framing the study, which means identifying which industry is involved, where the impacts are taking place, what regions are affected by the change, and the year it takes place.
Regional identity is key to an effective and accurate impact analysis, so its geography is an important consideration.
The data is integrally tied to the industry makeup and mix of household demographics that are present in each individual region. Additionally, size matters. While the impact of Katrina was significant, and devastating, to Orleans Parish, economically it had little impact on the state of Louisiana.
Just as the mix of industries in the economic picture changes from region to region, it also changes over time, which is why having data that is most current is typically recommended.
GOOD, BETTER, BEST
Here, we will take a look what the user brings to the study, and the most fitting way for each IMPLAN user to approach the task.
After identifying the “what, when and where” of the study, the next step for users is determining how to approach the analysis. We use a “Good, Better, Best” model to identify best practices and explain the differences of each approach in order to help users determine what will work best for their specific study.
It’s important to remember each approach will garner a complete and detailed examination of economic impact. It’s all about which approach will work best for you: Imagine that you are Goldilocks, only you’re much more interested in the just-right economic analysis than the perfectly heated bowl of porridge.
GOOD: A “good” study starts with one data point. A user examining the economic impact of a yet-to-be-built restaurant, for example, would start with the cost of construction of the establishment. From there, IMPLAN’s extensive database would provide estimates for all other relevant figures.
Ninety percent of studies are done this way, as data points can be difficult to obtain. It’s a perfectly valid study that will provide the user with a helpful snapshot of what effect the new construction could have on the local economy.
BETTER: A “Better” study model would begin with more data points. The contractor would not only provide construction costs, but also employee compensation and a breakdown of payroll distribution. They might include cost of equipment and furnishing, as well.
Results from this framework would provide more exact figures related more specifically to this restaurant’s construction.
BEST: Some academics or researchers may have access to even more figures. They may have not only construction costs, but also a more detailed breakdown of labor costs, cost figures for equipment and how each piece is purchased. They would be able to include fees and other “soft costs,” and factor in how they vary from the regular spending pattern.
Information needed for this approach can be difficult to come by, as oftentimes certain data is proprietary to some businesses or firms. Other factors can be laborious to bridge to the system and may not carry the level of detail needed.
If you have the time and ability to take this approach, then, absolutely, do it. You’ll get the best results. But it takes significantly more time and resources, and it is not a required approach.
A LITTLE GOES A LONG WAY
The more tailored the study input, the more industry-specific and exact the output. But one of the advantages of using IMPLAN is the extensive database that provides estimates for you.
Moving from “Best” to the “Better” closes a much smaller gap than moving from “Good” to “Better”.
Users are encouraged to carefully consider a study and to cull readily accessible facts and figures for its model. Then, sit back and let IMPLAN do all the rest.