Regional input-output models such as IMPLAN provide tremendous detail on the impacts. However, this detail carries with it a number of major assumptions. If these assumptions do not hold, the study can be limited in its usefulness. The assumptions include: 1) the supply of labor and other intermediate resources is not limited so growth will not increase wages or other prices, 2) the percent of supplies that are purchased outside the region will stay the same as growth occurs, 3) household consumption of each item increases in direct proportion to income, 4) there is no underemployment, 5) there are no economies of scale, and 6) there will be no substitution between inputs due to price changes.²³

If the first three assumptions are not correct, the impacts are likely to be overestimated when there is economic growth. In this study, the first assumption is not likely to be a problem. The size of the dairy industry, while an important part of Minnesota's economy, is not large enough to cause wages or other prices to increase. The second assumption is not a problem since existing linkages are being examined. If the model was used to examine increases in the industry, this aspect would need careful examination. The third assumption would definitely be a problem in this study if the full income was used for estimating the induced employee spending impacts. To correct for this, only one-half of the income stemming from the industry was used for household consumption spending. If this project was examining an expansion in the dairy industry, assumptions four and five would be problematic. However, for a structural linkage study as was done here, these assumptions do not present problems. Assumption six is unlikely to be a problem since prices are not likely to be changed.²⁴

Overall, input-output appears to be a reasonable approach for looking at the linkages between the dairy industry and the rest of the Minnesota economy.²⁵