Regionalizing Cotton Cost Functions in Implan

IMPLAN, one of the most popular tools for estimated economic contributions, assumes that all regions of the U.S. have the same cost function for cotton production. In reality, there are multiple production methods (e.g., dryland and irrigated production) with very different cost functions within even a single region. This study uses Extension crop budgets to modify the default IMPLAN cotton sector to represent irrigated and dryland production functions in two Texas regions—the High Plains and the Coastal Bend.  Crop budgets typically allocate expenditures across fewer industry sectors than does IMPLAN so budget data were entered into the IMPLAN cotton sector, which was then rebalanced to redistribute expenditures across all industries in the national production function. Cotton output multipliers varied by up to 15 percent from the default multiplier for the state of Texas. Texas Value Added multipliers varied by up to 35 percent, Labor Income by up to 33 percent, and Employment by up to 19 percent. Economists in other cotton-producing regions can readily adopt this methodology to modify regional cost functions.