Input-Output Models for Impact Analysis: Suggestions for
Download
Report
Transcript Input-Output Models for Impact Analysis: Suggestions for
Input-Output Models for
Impact Analysis:
Suggestions for Practitioners Using RIMS II
Multipliers
Rebecca Bess
65th Annual AUBER Fall Conference
Indianapolis, IN
October 8-11, 2011
www.bea.gov
Outline of Today’s Talk
▪
▪
▪
▪
▪
Input-output models
Key assumptions
Information required from users
Multiplier selection
Common mistakes
www.bea.gov
2
I-O Multipliers
▪ Similarities to macroeconomic multipliers
Initial change leads to additional spending
Leakages (imports, saving, taxes)
▪ Differences from macroeconomic multipliers
Measured inter-industry relationships
No supply constraints
▪ Similar results between models more likely when
resources are “slack”
▪ Advantages of industry-level detail
www.bea.gov
3
Literature Review
▪ Macroeconomic multipliers
Kahn (1931); Hall (2005)
▪ I-O multipliers
Leontief (1938); Isard (1951); Richardson (1985);
Beemiller (1990)
▪ Uses and misuses of multipliers
Coughlin and Mandelbaum (1991); Mills (1993);
Hughes (2003); Grady and Mullen (1988); Harris
(1997); Siegfried, Sanderson, and McHenry (2006)
www.bea.gov
4
National Use Table
•
•
•
•
Intermediate inputs are commodities purchased by industries
Value added is the income earned in production, including labor earnings
Total gross output = Intermediate Inputs + Value Added
GDP = Σ Value added = Σ Final use; GDP ≠ Total gross output
www.bea.gov
5
Key Assumptions
▪
▪
▪
▪
▪
▪
Backward linkages
Fixed production patterns
Industry homogeneity
Fixed prices and no supply constraints
Local supply conditions
No regional feedback effects
www.bea.gov
6
Information Required from Users
▪ Final-demand change
Expressed in terms of output, earnings, or employment
Changes in demand from final users
Personal consumption expenditures (C) ; Investment in new
construction, equipment, software (I); Government (G); Exports (X)
▪ Final-demand industry
Detailed or aggregate
Consider project phases
▪ Final-demand region
Purpose of the study
Area of interrelated economic activity
Location of industries supplying direct inputs
Where most new employees will reside
www.bea.gov
7
Multiplier Selection
www.bea.gov
8
Common Mistakes
▪ Not taking offsets into consideration
▪ Confusing gross output with regional GDP
▪ Confusing changes in investment with
intermediate purchases
▪ Using final-demand changes in purchaser prices
▪ Using a Type II multiplier when a Type I
multipliers is more appropriate
▪ Averaging or summing multipliers
▪ Using multipliers to measure industry
contributions
www.bea.gov
9
Further Suggestions
▪ Avoid using multipliers to estimate the
impacts of:
single events taking place over a short period of
time
an industry’s contribution to the economy,
especially one of the economy’s largest industries
changes large enough to affect the structure of the
economy
www.bea.gov
10
Thank You
Rebecca Bess
RIMS II Section, Regional Product Division
U.S. Bureau of Economic Analysis
Phone: 202-606-5343
E-mail: [email protected]
www.bea.gov
11