October 3, 2012

The Bureau of Economic Analysis (BEA) updated its Regional Input-Output Modeling System (RIMS II), a tool used by investors, regional planners, and government officials to gauge the impact of a change in economic activity on a local community or a particular region of the country. The update incorporates new information from both BEA’s industry and regional economic accounts.

The premise of RIMS II is that an initial change in economic activity leads to additional changes in economic activity in other industries or sectors of an economy—for example, an increase in furniture manufacturing leads to more production of wood and textile products. The increased production of wood and textile products, in turn, leads to more logging. Workers benefiting from these increases may also spend more, which adds to economic activity.

To account for the relationships between industries and households, RIMS II uses information from BEA’s industry accounts. These accounts include the “recipes” of goods and services used by industries to produce their own products—for example, they show how much manufacturers spend on wood and textile products to produce furniture. These accounts also show how much households spend on particular goods and services.

RIMS II uses the relationships from BEA’s industry accounts data, but adjusts them using regional economic data to account for the fact that many of the goods and services purchased by local industries and households are “imported” from outside a given region—for example, a local furniture manufacturing industry may need to purchase lumber that’s imported from another region. These imports result in money “leaking” out of the economy because they don’t aid local economic activity.

The adjusted relationships are then used to calculate “multipliers,” which can be used to estimate the total effect that an initial change in economic activity has on a region. This total effect can be measured in terms of output (sales), value added (gross domestic product), earning, or jobs (full and part time).

The RIMS II update replaces the 2008 data from BEA’s industry and regional economic accounts previously used in the model with data for 2010. This means that the updated multipliers will reflect more recent recipes used by industries. The updated multipliers will also reflect more recent changes in local supply conditions, including changes for economies that may have grown and now import less to satisfy their own production and consumption needs.

The RIMS II model is customized for each customer’s needs, and its output is available from BEA for a small processing fee. More information is available on the RIMS II Web site.