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The Economic Impact of Equipment Dealers In Georgia
Prepared by the Center for Agribusiness and Economic Development
The University of Georgia
John C. McKissick, Phd, Professor and Coordinator
and David Waters, Research Assistant
Special Report # CR-03-02
February, 2003
The University of Georgia’s Center for Agribusiness and Economic Development was
requested by the Southeastern Equipment Dealers Association to study the local and state
economic impact of equipment dealers. These types of businesses impact the local and
state economy on two levels. Through the business, itself, employment and taxes are
generated directly by each business, and indirectly, by the business conducted through
other companies suppling products or services to the equipment dealer. An impact
analysis through an economic tool called an input/output model can capture both the
direct and indirect effects of such businesses.
An input/output model is simply a model of all the businesses and households in an
economy and how they interact with other businesses and households in the economy.
The input-output model, IMPLAN (IMpact analysis for PLANning) was utilized for this
project. IMPLAN has been validated and tested throughout the U.S. and represents the
most widely used input/output model available. IMPLAN is a complete model of a local
economy down to the county level, and thus IMPLAN can be used to predict the effects
of a new or existing venture on output (sales), employment and tax revenue for a state,
region or county. Input-output models work by separating the economy into various
sectors, such as agriculture, construction, manufacturing and so on. The model can
capture how a change in one industry (for example, equipment dealers) will change
output and employment in other industries. The changes in the initial industry are
labeled direct effects, and the changes in the other industries are called indirect effects.
2
Ideally, an impact analysis would be completed for each equipment dealer in the state in
order to show total impact of the dealers in the counties where they operate. Since this
was not practical, data was collected from three actual dealers in the state representing
three sizes of operations and operating in South, Middle and North Georgia. A detailed
impact analysis was completed for each dealer. First, the relevant impacts were
estimated for the county in which the dealer operated. This was accomplished by
considering only the dealer in the county and how the dealer interacted with other
businesses within the county boundary. Secondly, an impact analysis was completed for
the impact on the state as a whole. Obviously, a larger set of businesses are impacted
when considering the state rather than only the county. The overall objective of the
analysis was to calculate the direct and indirect economic impacts of three specific size
dealers operating in different locations of the state so that general conclusions can be
made about the impacts of other equipment dealers located in the state.
Table 1 indicates the economic impact results of each size operation on the county in
which they operate. The exact county of operation is not named so that the dealer’s
individual operating data may not be identified. The equipment dealer sales from the
past year represent the direct economic community impact of goods and services
produced. Direct employment is the number of full-time employees each dealer has on
the payroll. The direct production of goods and services in the county causes other
businesses to benefit as the dealer buys some goods and services from local companies.
These businesses then buy other goods and services, and thus employ some labor because
of the equipment dealer’s business. This is the so-called ripple or spinoff effect of the
dollars passing through the local economy, resulting in indirect economic benefit to the
community. Such indirect effects can only be identified where the specific businesses
and business relationships have been modeled and are unique to any one economy. Since
the area of analysis here is the county, the results are unique to the set of businesses
located in the home county from which the local dealer buys goods and services.
Table 1. Total Yearly Home County Economic Impacts of Equipment Dealers
Sales of Goods and Services
Location
Direct
Indirect
Employment
Direct
Indirect
Tax Revenue Generated
Local/State
Federal
Middle GA
$4,700,000
$1,774,713
12
22
$158,216
$468,596
North GA
$7,600,000
$2,450,248
17
28
$154,533
$261,728
South GA
$32,000,000
$8,688,940
30
117
$863,939
$1,593,004
In order to explain the impact results, refer to the small sales dealer located in Middle
Georgia in Table 1. The results reveal that the small dealer had sales totaling $4.7
million last year. Of these sales, the equipment itself represented the greatest cost the
dealer paid to other businesses. In most cases, the equipment sold is not manufactured in
the dealer’s home county. So these dollars are “exported” to wherever the equipment
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sold is manufactured, thus stimulating the economy at that location. However, Table 1
does indicate that the total indirect impact of the goods and services the small dealer
buys locally produces a total of another $1.7 million in the home county. Such services
as legal, accounting, trucking, printing, advertising, utilities and maintenance /cleaning
may be examples of the kinds of goods and services purchased locally by the dealer.
Because these goods and services are purchased, the business from which the purchases
are made hires people and buys other goods/services locally. The employees of these
businesses also buy goods and services locally because of the initial purchases of the
dealer.
In summary, if the local small scale dealer is removed from its Middle Georgia county
home, the county will not only have an immediate drop of $4.7 million in economic
output, but will eventually loose another $1.7 million as the dealer no longer makes
purchases from the county’s other businesses to run the dealership. The county’s
employment not only would drop by the 12 individuals employed by the dealership, but
eventually by another 22 from the businesses dependent on the local dealer for purchases.
The loss of jobs and sales results in a loss of local and state tax revenue from all sources
of about $252 thousand per year. Our model is unable to distinguish between which
taxes are collected locally and those collected at the state level. So these two are lumped
together as state and local tax revenues.
Table 2 summarizes the impacts of each dealer per million dollars of sales. The average
row of Table 2 can be used to generalize the county analysis to other dealers located in
other counties. For instance, the average of the actual impacts of the three size dealers
located in three different parts of the state indicates that each 1 million dollars of sales
results in a direct impact of 1 million dollars (of course) and an additional $324 thousand
of goods and services per year in the dealer’s home county. The sampled dealers employ
2 people for each million dollars of sales, and the associated and impacted business in the
county employ another 4 people for each million dollars of yearly sales. State and local
tax revenues are found to be about $27 thousand per each million dollars of dealer sales.
Table 2. Average Yearly Home County Impacts of Three Sample Georgia\
Equipment Dealers
Goods and Services Sales
Generated Per Million
Dollars of Dealer Sales
Direct
Average of All
Sampled Dealers
$1,000,00
0
Employment
Generated Per Million
Dollars of Dealer Sales
Indirect
$323,843
Direct
2
Indirect
4
Tax Revenue Generated
Per Million Dollars of
Dealer Sales
Local/State
$26,988
Federal
$184,731
4
Tables 3 and 4 repeat the impact analysis, but the results are calculated for the entire
Georgia economy. The direct results do not change as this represents the dealer’s actual
sales and employment in each case. However, the indirect results do change as the
analysis is no longer limited to the interaction of businesses and households within the
dealer’s county alone. In some cases for instance, equipment sold by the sample dealer
will be manufactured somewhere in the state. If this is the case, the dealer’s sale is
assumed to stimulate the manufacturing plant as long as it is located within the state’s
borders. In a like manner, any other type of business that the equipment dealer may
purchase from is included in the state economy analysis. As in the preceding analysis,
the ripple effects of the stimulated business are also included. For example, the Georgia
equipment manufacturer that has purchases from the sampled dealer hires workers and
buys manufacturing inputs from other Georgia firms as a result of the equipment dealer’s
sales. This further stimulates the state’s economy.
Table 3. Total Yearly State Economic Impacts of Equipment Dealers
Sales of Goods and Services
Location
Direct
Indirect
Employment
Direct
Tax Revenue Generated
Indirect
Local/State
Federal
Middle GA
$4,700,000
$3,353,769
12
31
$443,546
$541,467
North GA
$7,600,000
$8,336,103
17
78
$267,337
$831,703
South GA
$32,000,000
$35,312,252
30
330
$1,125,925
$3,413,450
Table 4 indicates the average impact on Geogia’s economy from the sample firms. Each
million dollars of sales from the three firms was found to be indirectly responsible for
producing another $971 thousand dollars of goods and services and 9 other jobs
somewhere in Georgia. The state and local tax revenues were found to change by about
$55 thousand for each million dollars of equipment sales.
Table 4. Average Yearly State Impacts of Three Sample Georgia Equipment
Dealers
Goods and Services Sales
Generated Per Million
Dollars of Dealer Sales
Direct
Average of All
Sampled Dealers
$1,000,000
Employment
Generated Per Million
Dollars of Dealer Sales
Indirect
$971,310
Direct
2
Indirect
9
Tax Revenue Generated
Per Million Dollars of
Dealer Sales
Local/State
$54,911
Federal
$119,295
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Summary
This report assesses the impact of three differing size equipment dealers located in
different sections of the state. Actual dealer yearly sales and employment data was
obtained. The input/output model IMPLAN was employed to measure the indirect
economic effects of the three dealers on their county’s economy as well as on the state’s
economy. The actual impacts were calculated for each dealer in the sample and averages
of the sample impacts are shown so that readers may generalize to equipment dealers not
contained in the sample.
The results show equipment dealers to be an important segment of the local and state
economy. The analysis assumes that all dealer sales are strictly tied to the dealer. This
represents a much more restrictive assumption for the state analysis than the county
analysis as the closing of a dealer in one area of the state may represent lost business to
the county, but not necessarily to the state. The lost dealer’s sales in one part of the state
may represent gains to another part of the state or even outside the state. Dealers outside
the state may still represent markets for equipment input suppliers within the state.
Thus, the state analysis must be interpreted with these facts in mind.