National Heavy Duty Truck Transportation Efficiency Macroeconomic Impact Analysis

Methodology for Deriving National Macro Economic Impacts

To derive the economic and employment impacts from the UCS Blueprint Heavy Duty Truck Transportation scenario we began with the actual investments in vehicle efficiency and the changes in motor fuel expenditures brought about by these investments. Once the gains and losses were sorted out in each industry sector, we then evaluated the net benefits or impacts to the nation's overall economy. This includes: 1) the net contribution to the employment base (jobs); 2) the net gain in wage and salary compensation, measured in millions of year 2006 dollars; and 3) the net contribution to Gross Domestic Product (GDP), also measured in millions of year 2006 dollars. These three impacts were evaluated using data derived from the IMPLAN V3.0 software. IMPLAN is an input-output (I-O) model that identifies interactions between all sectors of the economy. The model incorporates interactions among 440 industrial sectors to trace supply linkages and evaluate how changes in spending affect employment, wages, and gross domestic product (GDP). For each of the benchmark years (2020 and 2030), each change in an industry's spending pattern is matched to an appropriate industry multiplier. Input-output models were initially developed to trace supply linkages in the economy. Thus, the impacts generated from the UCS Blueprint Heavy Duty Truck Transportation Scenario depend on the structure of the economy. For example, I-O models can show how increasing purchases of more efficient trucks not only directly benefit the truck manufacturers, but also benefit those industries that provide inputs (i.e., goods and services) to these manufacturers. I-O models can also be used to show the benefits from indirect economic activity that occurs as a result of these transactions (e.g., banking and accounting services, among others) and the spending of fuel savings throughout the economy. Therefore, spending on more fuel efficient trucks has an effect on total employment, income (i.e., wage and salary compensation), and GDP.For each industry sector within the economy we utilized multipliers that identify the employment and economic activity generated from a given level of spending in each sector. Changes in expenditures are matched with appropriate multipliers. For instance, employment multipliers show the number of jobs that are directly and indirectly supported for each one million dollars of expenditure in a specific sector. For this analysis, a job is defined as sufficient wages to employ one person full-time for one year in a given sector. The analysis in this study includes several assumptions and adjustments to the methodology of matching expenditures and multipliers. First, it was assumed that fuel efficiency improvements are a part of all new truck purchases. Second, we made an adjustment in the employment impacts to account for future changes in labor productivity in specific sectors. Utilizing data from the Bureau of Labor Statistics Economic and Employment Projections 1998, 2008 and 2018 , we developed productivity trends for our analysis. These trends suggest that productivity rates are expected to vary widely among sectors. Annual productivity gains are forecast to range from little if any change in the education sectors to over 4.0 percent annual productivity gain in the medium and heavy-duty truck manufacturing sectors. Third, we assumed that 80 percent of the investments in new more fuel-efficient vehicles will be financed by bank loans carrying an average 6 percent interest rate over a five year period.1 No parameters were established to account for changes in interest rates or in labor participation rates. While a demand for labor may tend to increase the overall level of wages (and potentially lessen economic activity), the employment benefits from the scenario are relatively small compared with the national level of unemployment or underemployment download