INPUT-OUTPUT MODEL FOR ECONOMIC ANALYSIS

Instructional Manual

By

Carlos E. Restrepo, Ph.D.

Charles Lamphear, Ph.D.

Clare A. Gunn, Ph.D.

Linda S. Restrepo, MBA.

Robert B. Ditton, Ph.D.

John P. Nichols, Ph.D.

Research & Development International

P.O. Box 12066

El Paso, Texas 79912

Prepared for the Bureau of Land Management

The methodology of indirect impact measurement utilized in the IXTOC I and the BURMAH AGATE oil spill studies involved the use of economic relationships developed in an input-output analysis of the coastal economies of Texas.

Regional input-out models were constructed because they permit a detailed examination of the economic relationships between the endogenous (internal) sectors of an economy and between these endogenous sectors and the sector(s) or event(s) considered external to the regional economy. For instance, an oil spill is an external event that impacts on the internal sectors of a region's economy.

The basic tabloid of an input-output model is the transaction table, which is a summary account of the many sales and purchase transactions that take place between all the sectors of the economy under study for some specified time period. Other important tables are derived from the transactions table that provide the sector impact multipliers for economic impact assessment purposes.

Eighteen regional input-output models, each containing 65 economic sectors, were constructed for the oil impact study. The construction of the eighteen input-output models reflects 1) the delineation of six impact study areas, comprising the total nineteen-county study region and five subregional divisions within the total study region, and 2) the establishment of a 3-year study period.

The construction of input-output models requires an enormous compilation of economic information, such as information on imports/exports, interindusty transactions, sector gross sales, and personal income by sector. Such information, especially at the regional level, either does not exist or is in a form not useful for the construction of regional input-output models. Therefore, the modeler must decide between a massive survey approach for model construction purposes or the use of secondary estimating techniques to derive a regional input-output model from a larger-scaled geographic model, such as a national input-output model. Oftentimes, budget constraints preclude the survey approach, especially for small regional studies. Useful and satisfactory estimating techniques have been developed to derive regional input-output models from the larger-scaled geographic models.

The eighteen regional input-output models used in the oil impact study to measure the indirect economic impacts associated with the oil spills were derived from the Texas Input-output Model. The Texas model was modified to reflect the Texas coastal economies for the study period. The report, Input-Output Model for Economic Analysis, explains 1) methods for deriving regional input-output models from larger-scaled geographic models and 2) how regional input-output models can be used to assess the indirect economic effects associated with some external event, such as an oil spill.

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