IMPLAN METHODOLOGY The model uses national production functions for over 536 industries to determine how an industry spends its operating receipts to produce its commodities. These production functions are derived from U.S. Census Bureau data. IMPLAN couples the national production functions with a variety of county-level economic data to determine the impacts at a state and congressional-district level. IMPLAN collects data from a variety of economic data sources to generate average output, employment, and productivity for each industry in a given county. IMPLAN combines this data to generate a series of economic multipliers for the study area. The multiplier measures the amount of total economic activity generated by a specific industry’s spending an additional dollar in the study area. Based on these multipliers, IMPLAN generates a series of tables to show the economic event’s direct, indirect, and induced impacts to gross receipts, or output, within each of the model’s more than 536 industries. The model calculates three types of effects: direct, indirect, and induced. The economic impact of NSU is the sum of these three effects. CONSIDERATIONS CONCERNING IMPLAN There are three important points about the use of IMPLAN (or any other input-output model): It is a fixed-price model. The model assumes that changes in consumption are not limited by capacity and do not affect prices. This assumption does not cause a problem for the analysis presented here because we are taking a snapshot of South Dakota in a specific year. As in many studies using this type of model, the direct impacts are not calculated by the model; they are a reflection of actual spending levels and patterns created by South Dakota. Changing the level of direct spending allows us to calculate the magnitude of the indirect and induced effects associated with the initial level of spending. Because the model continues to calculate additional spending until all of the money leaves the region (i.e., “leakage”), the larger and more economically diverse the region, the longer it will take for spending to leave the region and the larger the impact is likely to be. For example, employees of South Dakota may spend some amount of their income on buying a car. If there are no car manufacturers in their state or county, this spending will leave the region and the multiplier effect will stop. At the national level, some portion of that same spending by that same individual may go to a national auto producer. That spending would lead to more spending at the national level than would be captured by a more regional model. The national impact will be larger than the sum in the individual states, and the individual state impact will be larger than the sum of the impacts in its congressional districts. 19
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