Frequently Asked Questions
The reasons for the use of IMPLAN lies in its ease of operation as well as the data it provides to create a complete picture of the economy. As input-output analysis requires a substantial amount of data as it tracks the flow of transactions between local industries, sales by industries to households, as well as to other “final users” of goods or services. One of IMPLAN’s great values is that it embeds much of that data, and even if sectors of key interest are customized, having the rest of the economic sectors for your area already developed will save a great amount of time. It should be noted that, in 2008, the federal government stopped producing many of the commonly used data sets to create input output models, which reduced the options available for conducting input-output analysis.
That being said, there are other options out there for conducting input output analysis such as RIMS II and REMI. Individuals can also create a computable general equilibrium model to evaluate the economic impacts but the creation of these models requires significant economic knowledge as well as a significant time commitment.
If you decide to hire a consultant to conduct your economic impact assessment the toolkit can be a helpful resource in this process and perhaps save some time and “billable hours” since it lays out a process that is already recommended by key funders, such as the USDA. The toolkit can be presented to the consultant as a guide to the best practices that you want them to follow as they conduct the analysis.
Regardless of whether or not you utilize a team member to support the analysis or hire someone externally, make sure that your team understands the assumptions in the model, and data/modeling decisions. A report should include enough methodological detail such that someone could replicate the study. One of the challenges with most local food economic impact assessments to date has been the ‘black box’ methodological approach.
These approximations are not perfect and often do not reflect the characteristics of your community, and have to be modified to reflect these characteristics. Another problem with the location quotient lies in the concept of margining (for more information on margining please refer to module 6), because the retailer often times does not actually produce the product and instead provides value-added this can complicate the interpretation of approximations of leakage.