Industry Cluster Analysis and IMPLAN Software A Conceptual Overview May 19, 2015

Industry Cluster Analysis What are Industry Clusters? Three critical conceptual dimensions Linkage Interdependence between businesses/industries/sectors Stage of development Clusters may be existing, emerging, or potential Geography

Linkage The heart of cluster analysis May be formal or informal Sources common value (e.g. production, market) chains similar labor skill requirements shared or similar technologies or knowledge and/or innovation exchange Choice of study linkage determined, at least in part, from policy goals.

Stage of Development Offers different cluster types for study focus, depending on goals Existing stage Existing clusters are those that have reached a critical mass in size and/or diversity of operation Existing clusters may be expanding or contracting at any given point in time Emerging Emerging clusters are likely to achieve critical mass, given current trends Potential Potential clusters are those with potential, but uncertain growth environment and possibly have only a few related industries

Geography Clusters must be identified by more than locality Regional concentration versus global dispersion Cross boundary linkages Study order: Linkage/economic logic Geographic concentrations

Cluster Organizations Help identify careers in related industries Help guide local schools and colleges in providing appropriate training Help policy makers understand the connections between industry requirements and the training needed for successful welfare reform and implementation of the Workforce Investment Act

Required Resources and Tools Resources Benchmark Input-Output Accounts of the U.S. Staffing Patterns Matrix Industry X Industry Transactions Matrix Analytical Tools IMPLAN – IMpact Analysis for PLANing Programmable statistical software (e.g. SAS or SPSS) Excel

General Flow of Work Policymakers Policy Goals Cluster Definition Value-added I-O Employment Skills Growth Rates Basic Data Composition National Data Analysis State Data Analysis Sub-state Data Analysis Report Generation Benchmark I-O Accounts of U.S. Transactions Accounts NC & KY Studies IMPLAN Mathematical Methods NC & KY Reports

IMPLAN Description Regional modeling system Comprises two components Software Databases Impact Analysis - Facilitates evaluation of various economic scenarios Traces out linkages in regional economy

Components Software Allows reporting on the local economic structure Creates a predictive model of the economy Databases Includes data at national, state, and county levels Uses 528 industrial sectors, from 3 and 4-digit SIC codes Input-Output Employment Income (value – added) Business Taxes Business-to-business transactions

IMPLAN Uses Aid in Industry Cluster Analysis What & Where I-O, Value-added -(employees compensation, proprietor income, other property income and indirect business taxes), Employment, etc. Geographic Impact Analysis Event – Natural, Disaster Firm – Boeing, Intel Industry – Health Care, Tourism, Technology Resource – Land Use, Resource Development Development – Rural, community, watershed Policy – Strategic planning, Immigration, Taxes, Education Scenario – to evaluate alternate economic paths

IMPLAN Uses (cont.) Commodity Analysis Economic Evolution In conjunction with Computable General Equilibrium modeling Forecasting

Computable General Equilibrium Model Developed from macroeconomic modeling and classic economic theory Used to analyze policies or projects involving price responses Assumes the existence of profit-maximizing producers and utility-maximizing consumers Based on Walras’ Law – for all goods with value > 0, Qs = Qd