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An Economic Analysis of the U.S. Wooden Pallet and Container Industry A‐3 A.2 Methodology for the National Economic Impact Analysis The primary tool used for the national economic impact analysis is the IMPLAN 1 system. IMPLAN is comprised of detailed databases, multipliers, and economic models. IMPLAN covers over 500 unique industries and contains data on output, employment, value added, labor compensation, and other economic indicators. IMPLAN is often used by business professionals, researchers, and elected officials to assess potential local economic impacts of various projects. IMPLAN is based on the 2007 Benchmark Input-Output table produced by the Bureau of Economic Analysis (BEA). 2 From the benchmark make and use tables, an industry by industry domestic (not including imports) direct requirements matrix is derived at the national level. The economic impact analysis consists of several parts: 1. Upstream analysis – This traces the impact of a given producing industry on supplier industries, including the suppliers to those suppliers. For each industry, calculations are made on output, jobs, earnings, and value added impacts. 2. Downstream analysis – This traces the impact of purchases of products through wholesale and retail trade distribution channels. The input-output table is used to estimate the distribution and total level of wholesale and retail trade activity generated through the distribution of a given product. The Inforum Iliad model and its associated databases were utilized to calculate retail and wholesale margins of focus industries. These margins serve as the 'direct output' of downstream analyses. 3. Induced analysis – This additional level of impact comes about through the earnings generated in the upstream or downstream industries. It represents the impact of consumer spending from the capital and labor earnings in these industries. The analysis is done for 2016, and all results are in 2016 dollars. The impact analysis begins with the national output of each industry segment. In the first iteration, all supplier industries' output is calculated, using the input-output coefficients from the column of the matrix. Note that not all of the output of the focus industry goes to domestic suppliers. Some is supplied by imports, which are calculated in each iteration according to the average import share of that industry. Some of the output is paid out in value added. Both imports and value added can be thought of as leakages that reduce the total output required from domestic suppliers. In each subsequent iteration, the suppliers to the previous round of suppliers are calculated. Because of the leakages just described, the amount necessary to supply each further round becomes smaller and smaller. At some point, the additional supplier output is very small, and the process converges. Associated with each round of direct and supplier (indirect) output are the employment, earnings and value added necessary to supply that output. When the solution has completed, the model shows the total direct, indirect, and induced effects, as well as detailed impacts by industry. 1 See www.implan.com for more detailed descriptions of IMPLAN databases and models. 2 See https://www.bea.gov/newsreleases/industry/io/ionewsrelease.htm, and accompanying materials on the BEA website.

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