Industry Cluster Analysis and IMPLAN Software A Conceptual Overview

1. Industry Cluster Analysis and IMPLAN SoftwareA Conceptual Overview March 12, 2014

2. 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

3. 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.

4. 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

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

6. 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

7. 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

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

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

10. 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

11. 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

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

13. 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