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APPENDIX V
IMPLAN MODELING FOR
SOCIOECONOMIC IMPACTS OF ALTERNATIVES

The purpose of this section is to estimate the economic impacts that the implementation of the alternatives will have upon the eight-county area of the Quincy Library Group legislation. The IMPLAN (IMpact analysis for PLANning) system is a Leontief economic input-output model, a type of model that is frequently used for economic impact analysis.

Economic INPUT-OUTPUT Models

In today's national economy there is a large amount of economic interdependence. Two hundred years ago, the links between economic sectors were not as strong as they are today. A farmer might go to town every two or three weeks to buy supplies, and then at the end of the summer, sell some agricultural products to pay for them. But most of the year, the farm family led an isolated life. Today, there are economic transactions that almost everyone makes every day during the year. Even just staying home and consuming electricity counts as an economic transaction. Because of these interconnected transactions, additional purchases and sales of any sector in the economy effects the other sectors in the economy. Economists call the sum of these induced changes "multiplier effects." These are usually the total of the economic changes in an economy over a fixed time period produced by some initial economic change or changes. The change is usually a change in sales in a particular economic sector. This change could be real or imaginary. For instance, one might be interested in the potenial impacts on Southern California or Orange County, if Disneyland were wiped out.

An economic multiplier is just this economic impact information in the form of a number. The number is the total change in a particular regional economy resulting from some initial economic change of a given economic sector.

Economic multipliers come in many varieties. There are sales or output multipliers, which estimate the effects on total private sector sales in the economy resulting from an initial change in sales. There are also employment multipliers and income multipliers, which estimate the effects on jobs and income in an area. There can also be value-added multipliers, water multipliers, air pollution multipliers, and others. All of these multipliers give an estimate of all the impacts in an economy of a change in output (or jobs or income) in one or more of its sectors.

One of the ways to estimate these multipliers is by using economic (Leontief) input-output models. Regional and national input-output models are well regarded and used around the world, to describe different region's and country's economies, and for estimating the economic effects of policy changes and different resource uses.

The basic input-output dollar flow or transactions table describes for a specific geographic area, and for a fixed time period, all the dollar flows (buying and selling) between the different economic sectors. With some mathematical manipulations, this dollar flow table can be changed into a table of multipliers for the region.

Multipliers

Economists have long been interested in estimating the total economic impact on an economy from an initial change. The initial change can come from a variety of reasons. It can be from normal private sector expansion or contraction of business activity (e.g.; a new factory), or, as in this case, it can be a result of a change in government policy. The initial change produces additional changes, caused by people or businesses getting more (or less) money or more (or less) sales. These, in turn, cause additional changes in sales and income received as each change is incorporated into each sector's spending. Eventually these changes converge, and the economy will reach a new equilibrium point. The sum of all these changes from an initial change are called multiplier effects. The main contribution of economic input-output analysis is the estimation of these multiplier effects.

The greater the interdependence in the economy, the greater the multiplier effects. The more that people and institutions buy and sell within their economy, the greater the multiplier effects. On the other hand, the sooner the transactions escape (leak) from an area, the smaller the multiplier effects. The amount of leakage is a critical factor in determining whether or not an economy has high or low multipliers. For the same reason, the greater the geographic area covered by an input-output model, the higher the multipliers. This is because as the geographic area covered becomes larger, the more likely the economic activity is within the area and as leakage goes down, multipliers go up.

The USDA Forest Service's IMPLAN System

The IMPLAN (IMpact analysis for PLANning) system, was designed by the USDA Forest Service, to be able to estimate economic input-output models for any county, or group of counties, in the United States. It was then taken over by the University of Minnesota and then privatized. The system is now operated by the Minnesota Implan Group in Stillwater, Minnesota. The IMPLAN system contains a huge data base, along with software and algorithms to estimate regional input-output models from this secondary published data. It has comprehensive and detailed data on every area of the United States and the ability to turn this data into dollar flow or transaction tables.

An input-output dollar flow table describes, for a specific geographic area and a fixed time period, all the dollar flows (buying and selling) between the economic sectors of that area. With some mathematical manipulations, this dollar flow table can be changed into a table of multipliers for the region. The IMPLAN system has the data and software to allow one to do this for any county or group of counties in the United States at minimal cost.

With the multipliers from the IMPLAN system, it is possible to estimate the total economic effects of any kind of economic change in a regional economy. We will estimate estimated changes in the regional eight-county economy that would be brought about by differences in the five alternative implementation plans. If some activity is constant over the five alternatives, the estimated economic impacts will be zero.

The five tables show the direct expenditures under each alternative, the corresponding multipliers for that expenditure from the eight-county IMPLAN input-output model, and the economic impacts on output, income, value-added, and jobs in the eight-county area.

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