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Input-Output Models for Impact Analysis:. Suggestions for Practitioners Using RIMS II Multipliers. Rebecca Bess. 65 th Annual AUBER Fall Conference Indianapolis, IN October 8-11, 2011. Outline of Today’s Talk. Input-output models Key assumptions Information required from users

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input output models for impact analysis

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

outline of today s talk
Outline of Today’s Talk
  • Input-output models
  • Key assumptions
  • Information required from users
  • Multiplier selection
  • Common mistakes
i o multipliers
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
literature review
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)
national use table
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


key assumptions
Key Assumptions
  • Backward linkages
  • Fixed production patterns
  • Industry homogeneity
  • Fixed prices and no supply constraints
  • Local supply conditions
  • No regional feedback effects
information required from users
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


common mistakes
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


further suggestions
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
thank you
Thank You

Rebecca Bess

RIMS II Section, Regional Product Division

U.S. Bureau of Economic Analysis

Phone: 202-606-5343