Proven foundations. Better inputs. A model that keeps improving.

Lumecon analyses are built on input-output modeling, the same analytical foundation used across the economic impact field for decades. An input-output model maps how industries in a region buy from and sell to each other, so a change in one place (a new program, an expansion, a budget) can be followed through the purchases, wages and household spending it sets off.

The mathematics is compact. Each industry’s production recipe is summarized by a technical coefficient, the amount it purchases from every other industry per dollar of its own output. Collecting those coefficients into a matrix, a single inversion carries every round of purchasing at once: the direct requirement, the suppliers’ requirements, the suppliers’ suppliers and so on. That inverse is the Leontief system, and it is the arithmetic at the center of every impact estimate.

We keep that proven core and supplement it with higher-frequency public indicators and newer estimation methods, so an analysis can better reflect current economic conditions rather than relying exclusively on the vintage of the underlying benchmark tables.

The industry-to-industry relationships in the national accounts describe how the U.S. economy as a whole buys and sells. To analyze a county, a state or a reservation, those relationships are adjusted to the region: local industry mix, employment and wages come from the regional data listed below, and regional purchase behavior estimates how much of each purchase is met by suppliers inside the region rather than imported from outside it. Regional self-sufficiency is estimated sector by sector with location quotients in the Flegg family, and the adjusted table is then rebalanced with biproportional (RAS) scaling so the accounting identities still hold. Smaller and more specialized regional economies keep less of each dollar, and the model reflects that.

Suppressed and small-area data

Federal disclosure rules withhold some county-sector figures so individual employers cannot be identified. Where a suppressed sector clearly exists in the region, its employment is estimated from wider employment-per-establishment patterns, and wages fall back through a stated hierarchy of sources. Every figure carries a source tag (reported, apportioned or estimated) so a reviewer can see exactly which numbers came straight from the data and which were estimated.

Every result separates the three layers of activity. Direct effects are the project’s own spending, wages and jobs. Indirect effects happen at the suppliers the project buys from. Induced effects come from workers spending their earnings locally. The layers are always shown separately, so a reviewer can see how the total is composed rather than taking one number on faith.

Induced effects come from a social accounting matrix formulation. The input-output table is extended with a household account that receives labor income and spends it back into the region, and a government account that collects taxes and returns them as procurement and transfers. Household income includes transfer income, which matters in regions where transfers are a large share of income, including many reservation economies. Local spending propensities govern how much of each household dollar recirculates in the region rather than leaking out, so induced effects stay tied to the region’s real spending patterns.