U.S. Department of Commerce Bureau of Economic Analysis Regional Input‐Output Modeling System (RIMS II)
Calculation of the total economic impact of direct expenditures must take into account specific inter‐industry relationships within a region. These relationships largely determine how the regional economy responds to expenditures and changes in expenditures. Inter‐industry relationships are factored into the calculation of total economic impact by using regional input and output multipliers provided by the Regional Input‐Output Modeling System (RIMS II) of the U.S. Department of Commerce.
RIMS II is widely used by public and private sectors throughout the country. For example, the Department of Defense uses RIMS II to estimate the regional impacts of changes in defense expenditures, and the Florida Department of Transportation uses RIMS II to estimate the regional impacts of constructing and operating transportation facilities.
Following is an overview of how these multipliers are derived. Additional information is available from the U.S. Department of Commerce, Bureau of Economic Analysis, BE‐61, Washington, DC 20230, 202‐606‐5343. The Bureau’s website is located at www.bea.gov.
- The Bureau of Economic Analysis [BEA] categorizes all national production into 471 detailed industries and summarizes these details into 60 aggregate industries.
- National surveys are conducted to determine how much of the output (i.e., product) of each industry is used in the production of each industry. For example, a survey of industry X would ask “How much (in $) of the output of industries A, B, C, D, etc. is used to produce a dollar’s worth of the product of industry X? ’’ These input amounts are the direct requirements for the production of $1 of output by industry X. The data from these surveys are compiled on national input‐output tables maintained by the BEA.
- The BEA determines how much the demand for each product is caused by the earnings paid to workers in each industry. The Total Requirements Coefficients for the production of $1 of product X include estimates of the increase in demand for product X which is caused by earnings paid to employees of industry X as well as each of its supplying industries. Because these coefficients are dollar multiples of the initial dollar spent to produce a product, they are referred to as Output Multipliers.
- The BEA also compiles wage and salary data for every county in the nation including the ratio of jobs to earnings in each region. This database is used to adjust the BEA’s national input‐output table to reflect each region’s industrial structure and trading patterns. It is also used to determine Employment Multipliers.
- Employment Multipliers estimate the number of jobs required in each industry which contributes to the production of $1 million of each product. For example, for the production of $1 million of product X, how many jobs are required in industry X as well as in each of its supplier industries?