Economic Impact Summaries
Dave Swenson
Economics
Iowa State University
March 2008
Introduction
This is a technical report looking at the potential regional economic effects of several types and
sizes of food producers and sellers in the region comprise of Benton, Black Hawk, Bremer,
Buchanan, Butler, Fayette, Grundy and Tama County in Iowa. Data from several farm and food
service operations were forwarded for coding and inclusion into an economic impact model for
the region. There was a special emphasis in this research in identifying the extent to which the
producers were utilizing locally supplied inputs in their operations.
When a region increases its dependence on locally supplied inputs, it reduces its need for
imports. Imports result in payments leaving a region, while import substitutes result in
payments staying within an economic region. For any economy, the degree to which it can
minimize its imports and maximize its exports enhances the overall area balance of trade. It is
generally considered desirable to have a positive balance where money coming into a region
exceeds the amount leaving.
This analysis was conducted using an input output model of the regional economy. The model
is constructed to align with the eight county region, and it contains a high amount of detail on
expected interindustrial transactions. The data that were provided on this project, in contrast
to many studies, contained a high amount of detail on the kinds and amounts of production
inputs these operations required. As a result, we were able to compile a much more complete
picture of the relationship of the study firms with the regional economy than is normally the
case with just basic industry-level data.
Basic Procedures
Economic effects (or impacts in the case of an expanding or contracting economy) accumulate
to a region based on three levels of activity. First we have the operations of the firm that we
are scrutinizing. These are called the direct values. Next, all firms require production inputs of
commodities, goods, and services. These are called the indirect values. Last, workers in the
direct industry and in the supplying industries convert their pay into household spending in the
study region. These are called the induced or the household effects. We sum the direct,
indirect, and the induced effects to arrive at the total economic value of an activity or an
industry.
The modeling structure contains default estimates of the amounts of inputs that are required
for particular industries, but in the case of this study, the high amount of production cost detail
allowed us to over-ride the default analysis and conduct a more targeted assessment of
production relationships. In all instances, there were two types of assessments. First, the value
of all inputs was run through the modeling structure to understand the magnitude of the
indirect effects. Next, all payments to labor and to proprietors were entered into the model to
account for their household consumption.
There are three sets of values that are displayed. The first is the industrial output. Industrial
output is a measure, primarily, of gross sales and other receipts. Next is labor income. Labor
income accrues to workers through wages and salaries and to proprietors as returns to their
management and labor. In this analysis, I have put all net income into the proprietor category
without any assessment of what would constitute a normal return versus a return to
investment, which is normally accounted in a different category. Accordingly, the labor income
values have been inflated slightly. Last is an estimate of the number of jobs that were
associated with the activities. A job should not be confused with a full time equivalent worker.
Many people have more than one job, and farmers’ labor is often allocated more than one
industrial category. A farmer with both grain and animal production will count as two jobs, for
example.
The data are presented in basic tables that identify the direct, indirect, induced, and the total
economic output, labor income, and jobs. In addition, the tables will present two types of
multipliers. The first is called the local inputs multiplier. It reflects the amount of locally
supplied inputs that are required per dollar of direct output. It is a ratio representing the value
of that local linkage. The next is called the total multiplier. It is a ratio that represents the total
regional economic value to the direct value in each category. An output multiplier, for
example, of 1.50 means that for every dollar’s worth of direct output, there is $.50 in additional
output in the region as a result of all linkages. A labor income total multiplier of 1.50 means
that for every dollar’s worth of direct labor income, $.50 of labor income is supported in the
rest of the economy. Finally, a jobs total multiplier of 1.50 means that for every job in the
direct industry, there is 50/100th of a job supported in the remaining economy.
The values for each of the enterprises studied are contained in the accompanying tables.
Farm 101F
Summaries
Industrial Output
Labor Income
Jobs
Direct
Indirect
Induced
Total
Local
Inputs
Multiplier
Type
Total
Multiplier
143,641
46,451
58,173
248,265
1.32
1.73
73,920
20,050
18,801
112,771
1.27
1.53
2.0
0.9
0.8
3.7
1.45
1.85
Type
Total
Multiplier
Farm 102F
Direct
Indirect
Induced
Total
Local
Inputs
Multiplier
Industrial Output
216,136
55,941
76,598
348,675
1.26
1.61
Labor Income
105,341
19,467
25,138
149,946
1.18
1.42
7.0
0.8
1.0
8.8
1.11
1.26
Type
Total
Multiplier
Summaries
Jobs
Restaurant
Direct
Indirect
Induced
Total
Local
Inputs
Multiplier
Industrial Output
670,611
448,946
183,919
1,303,476
1.67
1.94
Labor Income
289,838
107,198
82,373
479,409
1.37
1.65
12.0
3.2
3.3
18.5
1.27
1.54
Summaries
Jobs
Farm 103F
Direct
Indirect
Induced
Total
Local
Inputs
Multiplier
Industrial Output
61,000
26,296
25,525
112,821
1.43
1.85
Labor Income
28,440
11,325
7,739
47,504
1.40
1.67
4.0
0.3
0.3
4.6
1.08
1.15
Type
Total
Multiplier
Summaries
Jobs
Type
Total
Multiplier
Farm 106F
Direct
Indirect
Induced
Total
Local
Inputs
Multiplier
Industrial Output
937,500
647,860
314,362
1,899,722
1.69
2.03
Labor Income
270,400
213,525
95,811
579,736
1.79
2.14
5.0
7.3
3.6
15.9
2.46
3.18
Type
Total
Multiplier
Summaries:
Jobs
Farm 104F
Direct
Indirect
Induced
Total
Local
Inputs
Multiplier
Industrial Output
894,790
474,019
396,897
1,765,706
1.53
1.97
Labor Income
412,461
166,836
122,199
701,496
1.40
1.70
9.3
5.0
4.5
18.8
1.54
2.02
Type
Total
Multiplier
Summaries
Jobs
Farm 104P
Summaries
Industrial Output
Labor Income
Jobs
Direct
Indirect
Induced
Total
Local
Inputs
Multiplier
1,147,606
898,109
271,059
2,316,774
1.78
2.02
238,176
161,200
83,495
482,871
1.68
2.03
7.0
5.3
3.1
15.4
1.76
2.20
Type
Total
Multiplier
Farm 104R
Summaries
Industrial Output
Labor Income
Jobs
Direct
Indirect
Induced
Total
Local
Inputs
Multiplier
168,413
88,834
78,455
335,702
1.53
1.99
80,913
25,327
24,680
130,920
1.31
1.62
4.0
0.7
0.9
5.6
1.18
1.40
Pertinence of the Results
The results of this assessment by definition will imply higher overall multipliers than would be
the norm for the average comparable industry in the region: these farms and businesses have
strong supply chain linkages with the regional economy. To illustrate, the following two
graphics display first the comparison of the study farms with the average regional grain farm,
and then next the average regional restaurant versus the study restaurant.
Notes to the findings.
By way of comparison, I have included prototypical multiplier tables (see below) for grain
farming in the region and for restaurant services. These are the values that the modeling
system assumes given the distribution of inputs available in the region.
Prototypical Grain
Summaries
Industrial Output
Labor Income
Jobs
Direct
Indirect
Induced
Total
Local
Inputs
Multiplier
Type
Total
Multiplier
1,000,000
152,733
201,430
1,354,163
1.15
1.35
257,466
51,862
60,929
370,258
1.20
1.44
7.0
1.6
2.3
10.9
1.23
1.56
Type
Total
Multiplier
Prototypical Restaurant
Summaries
Industrial Output
Labor Income
Jobs
Direct
Indirect
Induced
Total
Local
Inputs
Multiplier
1,000,000
317,676
215,171
1,532,847
1.32
1.53
272,040
81,762
65,109
418,911
1.30
1.54
24.7
2.5
2.4
29.6
1.10
1.20