Tools for Regional Economic Development: Regional I/O Models & Cluster Identification

Transcription

1 Tools for Regional Economic Development: Regional I/O Models & Cluster Identification Brian Richard, PhD Center for Governmental Studies Northern Illinois University

2 Outline Comparison of available I/O models Methods for identifying regional clusters Selecting important sectors Value chain Pitfalls

3 Modeling Software

4 Modeling Software BEA RIMS II multipliers Regional Input Output Modeling System Multipliers are purchased from BEA (not a software package) Multipliers for all industries in a given region, $275 State level multipliers for a single industry, $75 BEA collects the data for the input output tables upon which other modeling software packages are based. Source:

5 Modeling Software IMPLAN IMpact analysis for PLANning Helps address questions like How does the local economy function? What would the economic consequences of this project be? What would the effect of this company/base closure be? Source:

6 Modeling Software IMPLAN Multipliers Output multipliers based on inter industry transactions Income, employment and value added multipliers are based on output multipliers Source:

7 Modeling Software Source:

8 Modeling Software IMPLAN data Data must be purchased to perform impact analysis Single county, $390 State package (all counties in state) Illinois $3,850 Wisconsin $3,280 Source:

9 Modeling Software The REMI model incorporates aspects of four major modeling approaches: Input Output General Equilibrium Econometric Economic Geography Source:

10 Modeling Software PI+ (Policy Insight) generates realistic year by year estimates of the total regional effects of any specific policy initiative. A wide range of policy variables allows the user to represent the policy to be evaluated, while the explicit structure in the model helps the user to interpret the predicted economic and demographic effects. Source:

11 Modeling Software Source:

12 Modeling Software Source:

13 Modeling Software REMI pricing Illinois (all counties) Initial Annual maintenance Illinois (10 regions) Source:

14

15 Cluster Analysis Analytical tools explored Location Quotient Shift Share Analysis Input Output Models These tools can be used together to identify important clusters in a region

16 Cluster Analysis Clusters geographic concentrations of interconnected companies, specialized supplies, service providers, firms in related industries, and associated institutions (Porter, 2001, p.7). Firms in an industry cluster may interact through purchase sale relationships; interfirm collaboration in product development, marketing, or research; or a shared reliance on specialized services and labor markets (Barkley & Henry, 2005, p. 3).

17 Cluster Analysis Advantage of targeting industry clusters Clustering strengthens localization economies Specialized input suppliers, workers, infrastructure Interfirm technology transfer Clustering facilities industrial reorganization Adoption of new technologies easier Proximity of specialized suppliers and markets Pool of skilled labor Clustering encourages networking among firms Source: Barkley & Henry, 2005

18 Cluster Analysis Advantage of targeting industry clusters Clustering results in larger local economic impacts Higher multiplier effects Clustering facilitates entrepreneurial activity Clusters & entrepreneurial activity reinforce one another Especially important in small clusters or in declining industries Source: Barkley & Henry, 2005

19 Cluster Analysis Disadvantages of targeting industry clusters Difficulty in picking winners Industry targeting is not an exact science Source: Barkley & Henry, 2005

20 Cluster Analysis Approaches to identifying industry clusters using benchmarks Comprehensive benchmarks Applies industry groupings for a relevant reference area (i.e. nation) to regional data to identify potential clusters Focused benchmarks Applies industry groupings for a relevant reference area (i.e. nation) to selected industries within a region to identify potential clusters Source: Feser, Renski, & Koo

21 Cluster Analysis Approaches to identifying industry clusters Regional Cluster Analysis with Interindustry Benchmarks (Feser, Renski, & Koo) Comprehensive benchmarks Targeting Industry Clusters for Regional Economic Development (Barkley & Henry) Focused benchmarks

22 Cluster Analysis Regional Cluster Analysis with Interindustry Benchmarks Interindustry benchmarks Classifications of interrelated industries that have been developed from analyses of interindustry relationships undertaken for a region (or set of regions) other than the one under study (p. 3). Use national data as the basis for local analysis Source: Feser, Renski, & Koo

23 Cluster Analysis Regional Cluster Analysis with Interindustry Benchmarks National clusters serve as templates for regional analysis (comprehensive approach) By grouping those firms that are most likely to interact with each other, both directly and indirectly [using national input output data], the templates reveal relative specializations in the regional economy by exposing otherwise opaque extended product chains (p. 4). Source: Feser, Renski, & Koo

24 Cluster Analysis Regional Cluster Analysis with Interindustry Benchmarks Applies a clustering algorithm to national inputoutput data to identify groups of related industries Identifies potential location of clusters using employment location quotients and growth within each cluster Also employs a diversity index to determine similarity between regional and national clusters Source: Feser, Renski, & Koo

25 Cluster Analysis Regional Cluster Analysis with Interindustry Benchmarks May identify clusters that weren t obvious Professional services, administrative support, wholesale May misidentify clusters Largest component of arts & media cluster are durable & non durable goods wholesalers and professional, scientific, and technical services These sectors appear in many other clusters The core industries in this cluster are much smaller Source: Feser, Renski, & Koo

26 Cluster Analysis Targeting Industry Clusters for Regional Economic Development Identify industry concentrations with recent regional employment growth Construct value chains for the industries selected Rank selected industry clusters by expected economic impacts on the local economy Source: Barkley & Henry, 2005

27 Cluster Analysis Targeting Industry Clusters for Regional Economic Development Industry concentration screening criteria (manufacturing) Minimum number of establishments Minimum employment Employment growth LQ > 1 or LQ growth Positive industry competitiveness measure Regional Shift portion of shift share analysis Source: Barkley & Henry, 2005

28 Cluster Analysis Targeting Industry Clusters for Regional Economic Development Cluster value chains National IMPLAN (input output) data used to identify top 5 input suppliers and top 5 product markets for each industry cluster Manufacturing industries with 5 or more linkages to the industry clusters were identified as industries that might find the region attractive Source: Barkley & Henry, 2005

29 Cluster Analysis Targeting Industry Clusters for Regional Economic Development Cluster rankings National employment growth Average establishment size Average wages Fixed assets per employee Industry multipliers Import substitution Source: Barkley & Henry, 2005

30 Cluster Analysis These techniques provide guidance on where to look for regional clusters Provide no direct evidence of local interindustry ties Valuable as a tool for understanding a region s economic niches within a larger national economy A starting point for more in depth analysis of local linkages Source: Feser, Renski, & Koo

31 Cluster Analysis Based on these analysis, local officials might investigate why their region has developed some industries in a cluster and not others Sometimes this is related to policies Human capital Other time it is not Nearby natural resources Source: Feser, Renski, & Koo

32 Cluster Analysis Cluster analysis exercise: identifying clusters in the SOI region Data: Quarterly Census of Employment and Wages (QCEW)

33 Cluster Analysis Cluster analysis exercise: identifying clusters in the SOI region 4 digit NIACS sector screening criteria Manufacturing sector 2012 employment > 500 LQ > 1 Positive RS portion of shift share Exceptions Employment > 2000 LQ > 2

34 SOI Industry Clusters NAICS IMPLAN Industry SOI Employment 2012 Total 317, Machine shops 6, Fluid power process machinery 5, Cutting tool and machine tool accessory manufacturing 3, Other plastics product manufacturing 2, Motor vehicle parts manufacturing 2, Other fabricated metal manufacturing 1, Coating, engraving, heat treating and allied activities 1, Snack food manufacturing 1, Other major household appliance manufacturing 1, Other commercial and service industry machinery manufacturing 1, Other engine equipment manufacturing 1, Plate work and fabricated structural product manufacturing 1, Printing 1, Automatic environmental control manufacturing 1, Crown and closure manufacturing and metal stamping 1, Surgical appliance and supplies manufacturing Ferrous metal foundries Other rubber product manufacturing 618 Italics: Industries with negative RS shift share components

35 SOI Industry Clusters NAICS IMPLAN Industry US Growth 2012 National Annual Average Pay Income Multiplier SOI LQ 2012 Total Snack food manufacturing 14.6% $ 53, Printing 31.7% $ 44, Other plastics product manufacturing 19.2% $ 46, Other rubber product manufacturing 26.8% $ 51, Ferrous metal foundries 22.2% $ 50, Crown and closure manufacturing and metal stamping 9.0% $ 55, Plate work and fabricated structural product manufacturing 10.0% $ 48, Machine shops 16.7% $ 49, Coating, engraving, heat treating and allied activities 4.7% $ 44, Other fabricated metal manufacturing 4.6% $ 57, Other commercial and service industry machinery manufacturing 24.4% $ 66, Cutting tool and machine tool accessory manufacturing 12.8% $ 55, Other engine equipment manufacturing 8.3% $ 74, Fluid power process machinery 4.5% $ 62, Automatic environmental control manufacturing 7.1% $ 90, Other major household appliance manufacturing 38.8% $ 55, Motor vehicle parts manufacturing 30.9% $ 55, Surgical appliance and supplies manufacturing 1.6% $ 64, Italics: Industries with negative RS shift share components

36 Cluster Analysis Value Chains for SOI clusters For each of the 18 cluster industries, IMPLAN data are used to identify The top five input supplier industries The top five product markets Source: Barkley & Henry, 2005

37 SOI Industry Clusters Suppliers of inputs IMPLAN Commodity Industry count 319 Wholesale trade distribution services Iron and steel and ferroalloy products Management of companies and enterprises Securities, commodity contracts, investments, and related services Plastics materials and resins Motor vehicle parts Semiconductor and related devices Steel products from purchased steel Plates and fabricated structural products Machined products 2

38 SOI Industry Clusters Purchasers of production Code Industry Industry count 283 Motor vehicle parts manufacturing Construction of other new nonresidential structures 7 38 Construction of other new residential structures Construction machinery manufacturing 5 34 Construction of new nonresidential commercial and health care structures Automobile manufacturing Mining and oil and gas field machinery manufacturing Other engine equipment manufacturing Semiconductor and related device manufacturing Wholesale trade businesses Private hospitals 3

39 SOI Industry Clusters Linked Industries IMPLAN Commodity Inputs Markets 319 Wholesale trade businesses Motor vehicle parts manufacturing Iron and steel and ferroalloy products Management of companies and enterprises Securities, commodity contracts, investments, and related services 8 36 Construction of other new nonresidential structures 7 38 Construction of other new residential structures Plastics materials and resins Construction machinery manufacturing Semiconductor and related device manufacturing Construction of new nonresidential commercial and health care structures Machine shops Automobile manufacturing Mining and oil and gas field machinery manufacturing Other engine equipment manufacturing Private hospitals 3 37 Construction of new residential permanent site single and multi family structures Steel products from purchased steel Plates and fabricated structural products Valve and fittings other than plumbing manufacturing Farm machinery and equipment manufacturing Heavy duty truck manufacturing Food services and drinking places 2

40 Methodology Pitfalls Measures are potentially too broad Market for 250 Automatic Environmental Controls Industry Description Inputs 0 Total Industry Demand 38 Construction of other new residential structures 22.7% 36 Construction of other new nonresidential structures 13.8% 34 Construction of new nonresidential commercial and health care 9.0% 283 Motor vehicle parts manufacturing 6.4% 265 Other major household appliance manufacturing 6.3% 58.2%

41 Methodology Pitfalls Measures are potentially too broad IMPLAN sector 319 = NAICS 42 NAICS Industry SOI LQ Motor vehicle and parts merchant wholesalers Furniture and furnishing merchant wholesalers Lumber and const. supply merchant wholesalers Commercial equip. merchant wholesalers Metal and mineral merchant wholesalers Appliance and electric goods merchant whls Hardware and plumbing merchant wholesalers Machinery and supply merchant wholesalers Misc. durable goods merchant wholesalers Paper and paper product merchant wholesalers Druggists' goods merchant wholesalers Apparel and piece goods merchant wholesalers Grocery and related product wholesalers Farm product raw material merch. whls Chemical merchant wholesalers Petroleum merchant wholesalers Alcoholic beverage merchant wholesalers Misc. nondurable goods merchant wholesalers Wholesalers 1.00

42 Methodology Pitfalls Measures are potentially too broad Impacts vary across the region NAICS Industry Winnebago Walworth Rock Racine Kenosha Boone SOI 42 Wholesalers

43 Methodology Pitfalls Measures are potentially too broad NAICS Industry Winnebago Walworth Rock Racine Kenosha Boone SOI 4231 Motor vehicle and parts merchant wholesalers Furniture and furnishing merchant wholesalers Lumber and const. supply merchant wholesalers Commercial equip. merchant wholesalers Metal and mineral merchant wholesalers Appliance and electric goods merchant whls Hardware and plumbing merchant wholesalers Machinery and supply merchant wholesalers Misc. durable goods merchant wholesalers Paper and paper product merchant wholesalers Druggists' goods merchant wholesalers Apparel and piece goods merchant wholesalers Grocery and related product wholesalers Farm product raw material merch. whls Chemical merchant wholesalers Petroleum merchant wholesalers Alcoholic beverage merchant wholesalers Misc. nondurable goods merchant wholesalers Wholesalers

44 Tools for Regional Economic Development: Regional I/O Models & Cluster Identification Brian Richard, PhD Center for Governmental Studies Northern Illinois University