November 2010 Archives

Income and Economic Impacts with IMPLAN

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Hopefully, everyone is aware that IMPLAN calculates economic impacts based on labor income. Impacts associated with spending by labor are called "indirect" effects in IMPLAN. You can, in theory, create an IMPLAN report by entering a change in labor income.

For example, if the hospital increases wages by $2 million, what is the economic impact in the community? This is all driven off labor income, not jobs or output. Those do not change in this scenario.

The question is, what is the direct effect in IMPLAN? How does IMPLAN treat a labor income change? For example, what about in-commuters? They drive in to work and take their salary home. Do I have to adjust the labor income change for them? Or what about taxes? Does IMPLAN account for a percent that goes to taxes or do I have to adjust labor income for those too?

Here's what I learned:

"Leakages from labor income include payments to social insurance (social security, medicare, unemployment contributions paid by both the employee and the employer) and incommuters, the remainder go to local households. Leakages from household spending include income taxes, savings and imported goods and services. The remainder is purchase of local goods and services and is significantly smaller than the original labor income value.
Also, this first round of local spending is "output", the labor income required to produce this new demand is even smaller.

Remember that retail industry purchases are margined, so only the gross margin is guaranteed to be local, the producer value may or may not be from a local manufacturer." - Posted to IMPLAN user's forum by Doug Olson

My interpretation: IMPLAN accounts for leakages to non-local suppliers and to in-commuters.

It raised a second question for me - how do they calculate the percent going to in-commuters. I found this on the forum (also from Doug):

"Currently commuting flows are based on the REIS residence adjustment, adjusted by national "alien" workforce ratios. These values are net values. The current MRIO only internalizes the interregional industry purchases. We are working to introduce the commuting to the Multi-region model"

I thought I knew something, until...

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I thought I knew at least a little something about research methodology, that was, until I read this blog post from the Social Science Statistics Blog and the accompanying article by Phil Schrodt on the seven deadly sins of contemporary qualitative analysis.

I read Schrodt's article, but I can really only say I understood about 25% of it, and that might be an over estimation. It was good to read none the less because it highlighted some of the empty assumptions that I've had about data analysis. I like to keep my skeptical whits about me and this article really was helpful. I also appreciate his suggestions for keeping it simple and avoiding fancy methods unless you know they're the most appropriate.

I'm also more interested than ever in learning about Beynesian Analysis. I don't know enough about it to understand when and where it's the right way to go. Let me know if you have any cool insights about it.

Anyway, leave a comment on this post if you read the essay. I'd like to hear your favorite peices.

Budget Simulation

I just saw this come across from the Fiscal Issues and Geeky stuff blog. I think it's really interesting and useful when difficult things like the federal budget deficit are condensed into a game/ infographic. It would be great to develop a tool like this for local budget situations. An even bigger dream would be to have an interactive tool that helps think about public value.

News from AAEA

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With the dollars allocated to me for membership in professional organizations, I have maintained a membership in the Agriculture and Applied Economics Association (AAEA). Within the organization, I am in the Community Economics Network (CENET) and the Committee on Women in Agricultural Economics (CWAE). As a result, I receive email updates regarding community economics at other universities. There are a couple of things I have been hearing lately, professional chatter, if you wish, that I would like to share.

First, agricultural and applied economics' departments across the United States are under tremendous pressure. In Nevada last spring, the Provost of the University of Nevada proposed closing the entire College of Agriculture and laying off all faculty in the Department of Resource Economics. Now just a few weeks ago, the Dean of the College of Agriculture at Clemson proposed disbanding the Agriculture Economics Department and sending the faculty to the economics and/or math departments depending on their qualifications.

In the string of emails discussing this, one person suggested that agriculture and/or applied economics is actually a subset of economics, and therefore, that perhaps all these programs should be covered within the economics department.

Agricultural economics departments have traditionally been part of the College of Agriculture, given their strong ties to agriculture. However, over time, agricultural economics has evolved into applied economics, covering a wide range of topics that are not necessarily related to agriculture. Thus, the question of the placement of the departments can start to feel legitimate.

I share this with my colleagues, so you can be aware of trends at the national level.

Second, you may or may not know, but Rob King with University of Minnesota's Department of Applied Economics, is the President-Elect of the AAEA.

Finally, in the spirit of our conversation last week about working with communities to help mitigate "shocks" to the community (could be construction, flood, etc), a potential session topic for the 2011 AAEA meeting is : Fiscal responses of rural/small communities to disasters and other emergencies. I will keep you posted if I hear of any research in that area. I thought it might dovetail nicely with some of our programs.

What's blowing, roilling, and burning out there?

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I was out in Denver last week (Oct. 25) at a Department of Energy (DOE) and National Renewable Energy Lab (NREL) pow wow. ( Well, it was literally billed as a 'program review', yet the camaraderie and ambiance was somewhat like a pow wow).

There were over two dozen federally recognized Indian tribes offering glimpses of their DOE/NREL funded projects in wind, hydro, solar and biomass energy projects. They were at different levels of completion, and it was interesting to listen to the varying experiences of raising capital, getting through feasability studies, navigating environmental assessments and getting decent Power Purchase Agreements.

Highlighting an interesting point for each type of energy source, I was impressed that with:

-Wind power. A tribe has been able to produce "behind the meter" (energy produced and used locally) with smart technology that allows individual homes to 'talk' with the turbine and local diesel generator to maximize power distribution.

-Hydro power. A tribe is building a large dam with turbines, and there is the future possiblity for coastal tribes to capture energy off tides from long turbine 'snakes' that float on the surface. The latter are not being implemented by tribes (nor are effiecient due to equipment deterioration and high cost of such capital); but some tribes are looking at existing dams and the possibility of retrofitting 'spinners' (my term) onto them.

-Solar power. A tribe is currently working on a huge field of solar panels in a farm-like fashion, and has gotten offers of capital from overseas companies. (No longer are tribes having to scrape up their own monies to buy equipment...the world is coming to them).

-Biomass power. Tribes (especially northern ones) are now investing in ways to harvest fuel on the ground as well as tree stand fuel into pellets that can be burned in individual home stoves or in mass fashion for a municipal boiler.

One of the main messages overall was that tribes may need to smartly go through internal change to reorganize their tribal politics from environmental investments so as to secure outside (non-Indian) investors, to meet requirements for the various phases of a project (as well as distribute dividend payments, I believe). One of the major advances of pursuing such projects is not only the savings in energy costs for tribal members, but also the building up of infrastructure, creating jobs as well as leveraging housing dollars.

Truly, many of the tribes saw pursuing alternative energy projects as exercising their national sovereignty and taking care of the earth- but also as economic development!

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