URP Slides for Multiplier Tables 12 April Lectures Economic Impact - - PDF document

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URP Slides for Multiplier Tables

12 April Lectures

Economic Impact of Maytag Closing

Financial Amount in Millions

Direct Indirect Induced Total Inputs Multiplier (Type I) Total Multiplier Total Output 892.61 82.24 74.894 1049.74 1.09 1.18 Value Added 237.51 41.41 47.06 325.98 1.17 1.37 Labor Income 174.78 26.31 22.26 223.35 1.15 1.28 Economic Impact of Maytag Closing Jobs 1970 745.5 1011.3 3726.9 1.38 1.89

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Using Multipliers

There are two kinds that are generated by our d l model:

Type I (or Type Inputs) Type Total

Type 1 = (direct + indirect) / direct Type Total = (total effects) / direct Type Total = (total effects) / direct Refer to previous table

Using the Multipliers

Say we had a new plastics manufacturer wanting t l t i I I it li ti f 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, and have gross sales (output) of $8.68 million. We could build a table that lets us apply our multipliers from a table of multipliers

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Table of Multipliers for Misc. Plastics

Direct Indirect Induced Type I Type Total Output Multiplier 1.0 0.2516 0.2182 1.2516 1.4699

Direct Indirect Induced Total Type I Type Total 0.2261 0.0714 0.0662 0.3636 1.3158 1.6085 Labor Income Per $1,000,000 of Output Jobs Direct Indirect Induced Total Type I Type Total 5.1805 1.6207 2.2627 9.0639 1.3129 1.7496 Jobs Per $1,000,000 of Output

So, we could calculate impacts

Direct Values X Multiplier = Impact Output = $8.68 M X 1.4699 = $12.76 M Labor income = $1.96 M X 1.6085 = $ 3.15 M Jobs = 45 X 1.7496 = 78.7

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New scenario

Now suppose that a new cookie factory was i t b t th l thi th t it ld 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? Begin, again with a table of multipliers for the cookie industry Table of Multipliers for Cookie Manufacture

Di I di I d d T I T T l Output Multiplier Direct Indirect Induced Type I Type Total 1.0 0.3724 0.1690 1.3724 1.5414

Direct Indirect Induced Total Type I Type Total 0.1222 0.1078 0.0512 0.2812 1.8822 2.3017 Labor Income Per $1,000,000 of Output Direct Indirect Induced Total Type I Type Total 2.6131 2.5238 1.7525 6.8894 1.9658 2.6365 Jobs Per $1,000,000 of Output

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Interpolating the impacts

Steps: 1 The table tells us that there are 2 631 jobs

• 1. The table tells us that there are 2.631 jobs

per $1 million in direct output. So,

100 jobs / 2.631 = $38.01 million in expected direct

• utput.
• 2. The table tells us that we would expect, per

$1 illi i di $ 1222 i di $1 million in direct output, $.1222 in direct labor income. So.

38.01 in output X .1222 = $4.645 M in labor income

Impacts continued

Now we can do the direct values times the lti li j t lik b f multipliers now just like before: Output = $38.01 M X 1.5414 = $58.6 M Labor Inc. = $4.645 M X 2.3017 = $10.69 M Jobs = 100 X 2.635 = 263.5

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Comparisons

The cookie multipliers are higher than th l ti lti li the plastic multipliers. Why is that? What is going on in the Iowa accounts that would make cookies worth more to an economy than plastics? than plastics? Why do we need to be careful when we are declaring our economic impacts?

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Furniture Store Sales Economic Impact Demonstration Per Dollar of Sales

0 09 0.4 0.6

• 0.56
• 0.14
• 0.06

0.10 0.16 0.09

• 0.4
• 0.2

0.2 Indirect taxes Other value added

• 0.08
• 0.8
• 0.6

Initial Round Inputs Round Household Round Labor income Local inputs Other imports Cost of goods sold

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A bill of goods approach

First, read the REGIONAL MULTIPLIERS:A User

Handbook for the Regional Input‐Output Modeling Handbook for the Regional Input‐Output Modeling System (RIMS II) ‐‐ Read the introduction through page 9 plus the case examples. Pay particular attention to Case Studies 3 and 4 as that is all that we will cover in this class. We have already used a multipliers approach to an economic impact. Now we are going to shift away from the multipliers to another approach.

Using industry inputs

Sometimes we do not know much about an i d t th i d t i t ll d ib d industry or the industry is not well described in our modeling system. To compensate, we can look at the balance sheet of an industry to identify its major inputs into production, and the estimated p p , percent of those inputs that are purchased locally, along with its payments to labor.

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Bill of Goods Analysis

• This gives us a “Bill of Goods” or “Analysis of

I t ” th d f ti ti i t Inputs” method for estimating impacts

• It is a little more complicated but it is very

useful, especially when there is limited information about an industry or the industry is a new type that does not resemble old yp industries.

Needs

• We need a multiplier table – I will

h f th t t f I have one for the state of Iowa available for use

• We also need to translate household

spending (the earnings of workers)

• properly. That too will be made

p p y available for use.

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Multiplier Table

Oilseed farming Grain farming Vegetable and melon farming Direct 1.0 1.0 1.0 Indirect 0.2828 0.3014 0.1851 Indirect 0.2828 0.3014 0.1851 Induced 0.2669 0.2511 0.3931 Type I 1.2828 1.3014 1.1851 Type Total 1.5497 1.5525 1.5782 Direct 0.2718 0.2432 0.4490 Indirect 0.0677 0.0781 0.0560 Induced 0.0809 0.0761 0.1192 Total 0.4203 0.3975 0.6241 Type I 1.2490 1.3212 1.1247 Output Multiplier Labor Income Per $1.0 Million of Output Type Total 1.5467 1.6342 1.3901 Direct 5.7378 8.9062 3.3600 Indirect 1.9780 2.4502 1.8734 Induced 2.7666 2.6036 4.0755 Total 10.4824 13.9600 9.3088 Type I 1.3447 1.2751 1.5575 Type Total 1.8269 1.5674 2.7705 Jobs Per $1.0 Million of Output

Example

Furniture Economic Impact Per $1,000,000 in Output Total Impacts Inputs (Sector) Percent of Inputs Input Amounts Output Labor Income Jobs Sawmill (112) 20% 351,360 60,520 1.96 Wholesale (390) 10% 155,000 55,730 1.25 Plastic parts (177) 5% 73,495 18,180 0.45 Trucking (394) 8% 132,368 44,400 1.14 Labor 30% 297,912 88,731 3.03 Imports 27% * * *

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First we calculate the input values

Furniture Economic Impact Per $1,000,000 in Output Total Impacts Inputs (Sector) Percent of Inputs Input Amounts Output Labor Income Jobs Sawmill (112) 20% 200,000 351,360 60,520 1.96 Wholesale (390) 10% 100,000 155,000 55,730 1.25 Plastic parts (177) 5% 50,000 73,495 18,180 0.45 Trucking (394) 8% 80,000 132,368 44,400 1.14 b % Labor 30% 300,000 297,912 88,731 3.03 Imports 27% 270,000 * * *

Next input amounts are translated into total impacts for those sectors using multipliers

Output Multiplier Direct Indirect Induced Type I Type Total 112 Sawmills 1.0 0.5736 0.1831 1.5736 1.7568 390 Wholesale trade 1.0 0.2140 0.3360 1.2140 1.5500 Plastics plumbing fixtures Output Multiplier 177 and all other plas 1.0 0.2516 0.2182 1.2516 1.4699 394 Truck transportation 1.0 0.3185 0.3361 1.3185 1.6546

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For the total output impacts

Furniture Economic Impact Per $1,000,000 in Output

Inputs (Sector) Percent of Inputs Input Amounts Output Labor Income Jobs Sawmill (112) 20% 200,000 351,360 60,520 1.96 Wholesale (390) 10% 100,000 155,000 55,730 1.25 Plastic parts (177) 5% 50,000 73,495 18,180 0.45 Trucking (394) 8% 80,000 132,368 44,400 1.14

p $ , , p

Total Impacts Labor 30% 300,000 297,912 88,731 3.03 Imports 27% 270,000 * * *

For the labor income impacts: Multiplier Table

Direct Indirect Induced Total Type I Type Total 112 Sawmills 0.1440 0.1031 0.0555 0.3026 1.7158 2.1013 390 Wholesale trade 0.3781 0.0773 0.1019 0.5573 1.2045 1.4738 Plastics plumbing fixtures Labor Income Per $1.0 Million of Output 177 and all other plas 0.2261 0.0714 0.0662 0.3636 1.3158 1.6085 394 Truck transportation 0.3396 0.1135 0.1019 0.5550 1.3344 1.6344

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We multiply the input value times the “Total” labor income multiplier per $1 million

F rnit re Economic Impact Per $1 000 000 in O tp t

Inputs (Sector) Percent of Inputs Input Amounts Output Labor Income Jobs Sawmill (112) 20% 200,000 351,360 60,520 1.96 Wholesale (390) 10% 100,000 155,000 55,730 1.25 Plastic parts (177) 5% 50,000 73,495 18,180 0.45 Trucking (394) 8% 80,000 132,368 44,400 1.14

Furniture Economic Impact Per $1,000,000 in Output

Total Impacts g ( ) , , , Labor 30% 300,000 297,912 88,731 3.03 Imports 27% 270,000 * * *

Last we do the same thing for the jobs multipliers

Direct Indirect Induced Total Type I Type Total 112 Sawmills 3.9471 3.9635 1.8986 9.8092 2.0042 2.4852 390 Wholesale trade 6.7986 2.1935 3.4834 12.4756 1.3226 1.8350 Per $1.0 Million of Output Jobs 177 Plastics plumbing fixtures and all other plas 5.1805 1.6207 2.2627 9.0639 1.3129 1.7496 394 Truck transportation 8.1225 2.6591 3.4847 14.2663 1.3274 1.7564

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We multiply the input value times the “Total” jobs coefficient

Furniture Economic Impact Per $1 000 000 in Output

Inputs (Sector) Percent of Inputs Input Amounts Output Labor Income Jobs Sawmill (112) 20% 200,000 351,360 60,520 1.96 Wholesale (390) 10% 100,000 155,000 55,730 1.25 Plastic parts (177) 5% 50,000 73,495 18,180 0.45 Trucking (394) 8% 80,000 132,368 44,400 1.14

Furniture Economic Impact Per $1,000,000 in Output

Total Impacts Labor 30% 300,000 297,912 88,731 3.03 Imports 27% 270,000 * * *

Now the impact multipliers for the furniture workers’ spending

Direct Indirect Induced Total Type I Type Total Output 641,359 171,836 179,854 993,049 1.268 1.548 Labor Income 190 362 52 958 54 525 297 845 1 278 1 565

Median Houshold Statewide Multipliers Per $1,000,000 of HH Income

Labor Income 190,362 52,958 54,525 297,845 1.278 1.565 Jobs 6.8 1.5 1.9 10.2 1.221 1.500

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Multiplying the furniture labor income times the Total HH spending multiplier:

Furniture Economic Impact Per $1,000,000 in Output Inputs (Sector) Percent of Inputs Input Amounts Output Labor Income Jobs Sawmill (112) 20% 200,000 351,360 60,520 1.96 Wholesale (390) 10% 100,000 155,000 55,730 1.25 Plastic parts (177) 5% 50,000 73,495 18,180 0.45 Trucking (394) 8% 80,000 132,368 44,400 1.14 Total Impacts Labor 30% 300,000 297,912 88,731 3.03 Imports 27% 270,000 * * *

Now we build the rest of the impact table