Industry Cluster Analysis and IMPLAN SoftwareA Conceptual Overview

April 18, 2023

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 OrganizationsHelp identify careers in related industriesHelp guide local schools and colleges in providing appropriate trainingHelp 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 WorkPolicymakers

Policy Goals

ClusterDefinition

Value-addedI-O

EmploymentSkills

Growth Rates

Basic Data Composition

National Data Analysis

State Data Analysis

Sub-state Data Analysis

ReportGeneration

Benchmark I-O Accounts of U.S.Transactions Accounts

NC & KY StudiesIMPLAN

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 ModelDeveloped from macroeconomic modeling and classic economic theoryUsed to analyze policies or projects involving price responsesAssumes the existence of profit-maximizing producers and utility-maximizing consumersBased on Walras’ Law – for all goods with value > 0, Qs = Qd