10/3/2017 Learning to Use RIMS II Multipliers The RIMS II Data and System of Analysis Dave Swenson 1 RIMS II • Regional Impact Modeling System • This has been developed as a for‐a‐fee data service by the U.S. Bureau of Economic Analysis – BEA • BEA is the primary agency of the federal government that compiles economic information. • For our purposes, they also produce what are called the Benchmark Input‐Output accounts of the U.S. Economy. • We depend on those data to build our input‐output models • And students will recognize the structure of the national I‐O table as identical to their own work Dave Swenson 2 1
10/3/2017 Total Requirements Table From the BEA Dave Swenson 3 When you buy RIMS II data from the BEA, here’s what you get …. • A regionally or state specific set of total final demand multipliers for – Total industrial output – Value added – Earnings (labor income = wages and salaries, proprietors’ income, plus employer contributions to insurance, pensions, and social insurance) – Jobs • Rather than generating our own multipliers, we simply apply theirs Dave Swenson 4 2
10/3/2017 Example of Total Multipliers from RIMS II State of Iowa Total Change Per Million $ of Output Change Final- Final-demand Industry Final-demand demand Final-demand Employment Industry Output /1/ Earnings /2/ Value-added /4/ /3/ (number of Code (dollars) (dollars) (dollars) jobs) 1111C0 Oilseed and grain farming 2.2912 0.5115 0.8164 11.7168 111200 Vegetable and melon farming 1.658 0.4625 1.0362 12.1034 111300 Fruit and tree nut farming 1.7646 0.5603 1.1035 15.8131 111400 Greenhouse, nursery, and floriculture production 1.8601 0.6512 1.0677 14.6713 111900 Other crop farming 1.8274 0.5141 0.9785 11.2727 1121A0 Beef cattle ranching and farming, including feedlots and dual-purpose ranching and farmin 2.3601 0.4762 0.9277 10.0601 112120 Dairy cattle and milk production 2.2588 0.5108 0.9481 11.229 112A00 Animal production, except cattle and poultry and eggs 1.7215 0.392 1.0553 7.9912 112300 Poultry and egg production 2.8222 0.5981 0.9759 12.3488 113000 Forestry and logging 1.7651 0.6041 0.9889 21.9356 This, too, contains the same type of information I’ve already showed you: Looking at Forestry and Logging (113300), for example, if the Iowa economy had $1 change in that sector’s final demand …. – $1.7651 in total output change, – $.6041 in earnings change, – $.9889 in value added change, and – Each $million change in forestry & logging final demand required 21.94 total Iowa jobs Dave Swenson 5 Table of Multipliers from 326190 Other plastics product manufacturing State of Iowa Total Change Per Million $ of Output Change Final- Final-demand Final-demand demand Final-demand Employment Industry Industry Output /1/ Earnings /2/ Value-added /4/ /3/ (number of Code (dollars) (dollars) (dollars) jobs) 326160 Plastics bottle manufacturing 1.9851 0.3655 0.7341 8.4095 326190 Other plastics product manufacturing 2.044 0.3986 0.7491 9.7769 State of Iowa Direct Change Per $Million of Output Change Industry Industry Code Output Earnings Jobs 326160 Plastics bottle manufacturing 1.0 0.143182 3.37 326190 Other plastics product manufacturing 1.0 0.150200 3.84 Type II State of Iowa Earnings Type II Jobs Multiplier Multiplier Direct-effect Direct-effect Employment /6/ Industry Industry Earnings /5/ (number of Code (dollars) jobs) 326160 Plastics bottle manufacturing 2.5527 2.4991 326190 Other plastics product manufacturing 2.6538 2.5436 Dave Swenson 6 3
10/3/2017 You also get • Aggregated industrial contributions to the total final demand multipliers for – Total industrial output – Value added – Earnings (labor income) – Jobs In the next table, the values are to be read left to right, but they are the same aggregated industry multipliers that were in your Total Requirements Table for your assignment Dave Swenson 7 Dave Swenson 8 4
10/3/2017 Using the Multipliers Say we had a new plastics manufacturer wanting to locate in Iowa. In its application for economic development assistance it told the state that it would employ 45 workers, pay out a total of $1.96 million in labor incomes (Earnings), and have total output of $8.68 million, all producing for final demand (i.e., export sales). We could easily build a table that lets us apply our multipliers from a table of RIMS II multipliers and arrives at the expected impacts Dave Swenson 9 Refer to the Iowa multipliers handout Dave Swenson 10 5
10/3/2017 Table of Multipliers from 326190 Other plastics product manufacturing State of Iowa Total Change Per Million $ of Output Change Final- Final-demand Final-demand demand Final-demand Employment Industry Industry Output /1/ Earnings /2/ Value-added /4/ /3/ (number of Code (dollars) (dollars) (dollars) jobs) 326160 Plastics bottle manufacturing 1.9851 0.3655 0.7341 8.4095 326190 Other plastics product manufacturing 2.044 0.3986 0.7491 9.7769 State of Iowa Direct Change Per $Million of Output Change Industry Industry Code Output Earnings Jobs 326160 Plastics bottle manufacturing 1.0 0.143182 3.37 326190 Other plastics product manufacturing 1.0 0.150200 3.84 Type II State of Iowa Earnings Type II Jobs Multiplier Multiplier Direct-effect Industry Direct-effect Employment /6/ Industry Earnings /5/ (number of Code (dollars) jobs) 326160 Plastics bottle manufacturing 2.5527 2.4991 326190 Other plastics product manufacturing 2.6538 2.5436 Dave Swenson 11 So, we could calculate the impacts as … Direct Values X Multiplier = Impact Output = $8.68 M X 2.044 = $17.74 M Earnings = $1.96 M X 2.6538 = $ 5.20 M Jobs = 45 X 2.5436 = 114.462 jobs Dave Swenson 12 6
10/3/2017 If all they had told us was that their expected annual output was $8.68 million we could have done it this way …. Total output of $8.68 million X Total output multiplier of 2.044 = $17.74 million Total earnings multiplier of .3986 = $3.46 million And Total jobs multiplier of 9.7769 (per $million of output = 8.68 X 9.7769 = 84.8 jobs The earnings and jobs values are different from the previous estimate, so the more information you get, the better your impact estimate as the industry in the first example indicated that it was somewhat different than the state average for that kind of manufacturing Dave Swenson 13 New scenario Now suppose that a new cookie factory was going to open but the only thing that it would tell you was that it would employ 100 workers. What kinds of impacts could you calculate? We begin, again with a table of multipliers for the cookie industry Dave Swenson 14 7
10/3/2017 Table of Multipliers from 311820 Cookie, cracker, and pasta manufacturing State of Iowa Total Change Per Million $ of Output Change Final- Final-demand Final-demand demand Final-demand Employment Industry Industry Output /1/ Earnings /2/ Value-added /4/ /3/ (number of Code (dollars) (dollars) (dollars) jobs) 311810 Bread and bakery product manufacturing 2.1092 0.474 0.8634 14.1601 3118A0 Cookie, cracker, pasta, and tortilla manufacturing 2.1699 0.4236 0.8496 10.3696 State of Iowa Direct Change Per $Million of Output Change Industry Industry Code Output Earnings Jobs 311810 Bread and bakery product manufacturing 1.0 0.195981 7.27 3118A0 Cookie, cracker, pasta, and tortilla manufacturing 1.0 0.143161 3.64 Type II State of Iowa Earnings Type II Jobs Multiplier Multiplier Direct-effect Industry Direct-effect Employment /6/ Industry Earnings /5/ (number of Code (dollars) jobs) 311810 Bread and bakery product manufacturing 2.4186 1.9484 3118A0 Cookie, cracker, pasta, and tortilla manufacturing 2.9589 2.8487 Dave Swenson 15 Interpolating the impacts: finding the direct values Steps: 1. The table tells us that there are 3.64 jobs per $1 million in direct cookie industry output. So, 100 jobs / 3.64 = $27.47 million in expected direct output. 2. The table tells us that we would expect, per $1 million in direct output, $.143161 million in direct labor income (earnings). $27.47 in output X .143161 = $3.93 million in direct labor income (or earnings) 3. And there are 100 direct jobs, so … Dave Swenson 16 8
10/3/2017 Impacts continued Now we can do the direct values times the multipliers now just like the first example using the numbers we knew and the numbers we discovered Output = $27.47 M X 2.1699 = $59.61 M Labor Inc. = $3.93 M X 2.9589 = $11.63 M Jobs = 100 X 2.8487 = 284.9 jobs Dave Swenson 17 I could have just used the change in output times just the final demand multipliers • Output = $27.47 M X 2.1699 = $59.61 M • Earnings = $27.47 M X .4236 = $11.64 M • Jobs =$27.47 M X 10.3696 = 284.9 jobs I chose to “back‐out” the direct values first so that we could evaluate the initial worth of the jobs. Dave Swenson 18 9
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