0591 SS 072312 Part A rev2

SUPPORTING STATEMENT

ANNUAL ECONOMIC SURVEY OF FEDERAL GULF AND SOUTH ATLANTIC SHRIMP PERMIT HOLDERS

OMB CONTROL NO. 0648-0591

INTRODUCTION

We are requesting the extension of a currently approved data collection.

Economic data is collected from shrimp vessel owners who operate in federal waters of the Gulf of Mexico and South Atlantic. These fishermen are required to have one or more federal permits for the commercial catch of shrimp depending on species (penaeid or rock) and water body fished.

The Annual Economic Survey of Federal Gulf and Atlantic Shrimp Permit Holders is conducted by the Social Science Research Group of the Southeast Region Fishery Science Center (SEFSC) of the National Marine Fisheries Service (NMFS). The survey collects data about operating expenses and the costs of owning and maintaining shrimp vessels. Each spring, surveys are sent by mail to a random sample of about a third of all vessels with federal permits for the harvest of Gulf of Mexico penaeid shrimp or South Atlantic penaeid or rock shrimp. The survey has been very successful, with high response rates (84% in 2009). Reports summarizing the results for each of the data years 2006 through 2009 are available on the following website:

http://www.sefsc.noaa.gov/socialscience/shrimp.htm

The 2010 data is still to be analyzed; the Deepwater Horizon oil spill created some complexities.

A collection of economic information from fishermen affected by the management of federal commercial fisheries is needed to ensure that national goals, objectives, and requirements of the Magnuson-Stevens Fishery Conservation and Management Act (MFCMA) and other laws are met. This information is vital in assessing the economic and social effects of management decisions and regulations on individual fishing enterprises, fishing communities, and the nation as a whole. Since the survey is repeated annually, the data are also used to assess trends in the financial and economic state of the fisheries.

A. JUSTIFICATION

1. Explain the circumstances that make the collection of information necessary.

A collection of economic information from fishermen and fishing businesses affected by the management of federal commercial fisheries in the southeast region is needed to ensure that national goals, objectives, and requirements of the MFCMA, National Environmental Policy Act (NEPA), Regulatory Flexibility Act (RFA) and Executive Order 12866 (EO 12866) are met. This information is vital in assessing the economic and social effects of fishery management decisions and regulations on individual fishing enterprises, fishing communities, and the nation as a whole. Due to the persistent fluctuations in the price of fuel and the price of shrimp and other changes in the southeast shrimp fisheries, analyses and models require up-to-date data to remain valid.

The central goal of this project is to collect up-to-date cost data for the Gulf and South Atlantic commercial shrimp fisheries in federal waters. National Standard Guidelines for social and economic information needs are mandated in 50 CFR 600. In the past, legal decisions have gone against Department of Commerce (DOC), National Oceanic and Atmospheric Administration (NOAA), and NMFS based on the lack of social and economic information or the inadequate analysis of existing data. Thus, it is imperative that these data be collected to accurately assess the economic and social impacts on individual shrimp fishing entities as imposed by shrimp fishery management plans and regulations.

The data collection effort is an ongoing annual survey effort. Regular surveying is necessary to capture critical cost data that fluctuate from year to year. Fluctuations are generally due to annual fluctuations in shrimp abundance caused by environmental factors, input and output price variability and adaptations to these.

Economic information on commercial fishing enterprises is also vital to the optimum yield (OY) management of marine fishery resources as mandated under the MFCMA (16 U.S.C. 1802 MS Act § 3). The term “optimum” is defined under section 104-297 (28) of the Act, as: (A) will provide the greatest overall benefit to the Nation, particularly with respect to food production and recreational opportunities, and taking into account the protection of marine ecosystems; (B) is prescribed as such on the basis of the maximum sustainable yield from the fishery, as reduced by any relevant economic, social, or ecological factors; and (C) in the case of an over-fished fishery, provides for the rebuilding to a level consistent with producing the maximum sustainable yield in such a fishery.

2. Explain how, by whom, how frequently, and for what purpose the information will be used. If the information collected will be disseminated to the public or used to support information that will be disseminated to the public, then explain how the collection complies with all applicable Information Quality Guidelines.

Combined with data from existing collections, the information is used by NMFS economists and social scientists to create, develop, and update economic and social models and descriptive reports of these important fisheries. The results support the management of the shrimp fisheries by the South Atlantic and Gulf Fisheries Management Councils and NMFS Southeast Regional Office. Foremost, the data are used to evaluate the economic health of the sector and the potential economic impact of proposed regulations. The data is also used by the academic community studying SE shrimp fisheries.

The results of this survey (summary statistics) are disseminated to the public through annual economic reports available on the SEFSC’s website. An example annual report for the Gulf shrimp fishery, based on the survey, is attached at the end as Table 2. Data may be reported for various groups of fishermen (by vessel size, state, etc.). This will allow vessel owners to compare and evaluate their operations relative to others in the same group in terms of ability to generate revenues, cost efficiency, and profitability.

Statistical models that predict or forecast various characteristics, such as fleet size, fishing activity or effort, cost versus benefits of fishing, market activity, and efficiencies of proposed fishing regulations are further uses of these data. Gross revenues and costs can vary across time and geographic areas as a result of changes in a number of different factors, including fishery management regulations (e.g. gear modifications, time/area closures, etc.), fluctuations in abundance (due to changes in various environmental factors), market conditions (such as fuel or seafood prices), and behavioral responses by fishermen.

The following is a detailed description of justifications for the collection of these data. In general, the survey instrument asks questions pertaining to the annual total of variable costs, fixed costs, and other financial and production factors. These data are necessary to generate cost, profit, input demand, and production functions. Such functions and the results generated from their estimation are typically used in financial analyses (used to determine a business’ cost efficiency and profitability), economic impact analyses (used to determine the economic value of a particular activity to a particular locale, community, or region), bio-economic models (used to predict how the biological and economic components of a fishery will respond to exogenous shocks, such as policy changes), cost-benefit analyses (used, in part, to determine the net economic benefits of a particular action), and behavioral models (such as those that explain or predict exit or entry decisions and decisions regarding spatial or temporal allocation of effort). These data can also be used to determine the relative efficiency of the various participating vessels in a fishery and thus whether the aggregate harvesting costs are in fact being minimized. Such models and analyses are critical to guiding fisheries management decisions whose general purpose is to maximize net national benefits and optimally distribute those benefits.

The survey is divided into three parts. It starts on page 1 with a pre-filled header section that serves to identify the respondent. The second section, also on page 1, collects information on annual financial expenditures (“cash costs”). These should correspond to receipts and invoices and the associated payments and should be readily available from regular business accounting. Page 1 is set up to add up to the total financial expenditures of one calendar year. This should reduce the cognitive load and enhance internal consistency.

Expenditures do not fully reflect the economic concepts of costs (and hence profit); therefore, in order to facilitate economic analysis, further information is necessary, and this is collected on page 2. For example, loan principal payments are real financial transfers but do not constitute a cost in the economic sense. Depreciation charges are an example of the reverse, where real economic costs produce no corresponding financial transaction. Please see the attached survey instrument and its instructions for an in-depth explanation of the intent of each question.

Header: Vessel information

This pre-filled section lists and verifies the identity of the respondent, including owner name, permit number, vessel name, and vessel registration number. Respondents are requested to make any changes if there is an error. This information will allow NOAA Fisheries to link this vessel’s responses with other pertinent data, such as permit, revenue, vessel and gear, and catch information, located in other datasets.

Total YEAR Expenses (Page 1)

The first 11 questions elicit total annual expenditures associated with the vessel. They are arranged into three blocks corresponding to variable costs (Questions 1 to 6), fixed costs (Questions 7 to 10) and a check for completeness (Question 11). These questions can generally be used to construct input demand function, cost functions, and production functions, all of which are needed to conduct the types of analyses mentioned previously. Distinguishing between variable and fixed costs is necessary for conducting analyses with different time horizons.

Questions 1 to 6 - Annual Variable Costs

These questions ask for total annual expenditures for labor inputs (crew and captain) and non-labor inputs (fuel and other trip expenditures). The categories are chosen as they each reflect a substantial part of the costs in this industry. Since these expenditures vary directly with the annual number of trips taken, they are generally related to, or a function of, the annual level of fishing effort, and hence variable costs in the economic sense.

Question 1 to 3 are meant to obtain total annual payments to the crew and captain. Labor is a major input to the production function and hence economic models. Further, these payments represent the flow of annual income to the crew members and captains associated with the vessel. From the captain and crew’s perspective, their share of the vessel revenues determines the incomes of their respective households. Changes in annual income received can affect the captain’s and crew members' decisions to continue working in this particular fishery, and/or in fishing as a vocation. These data will allow analysts to determine how various factors, such as changes in regulations, may affect the incomes of crew. Question 2 seeks to elicit expenditures, common in this industry, that actually represent payments to owner-operators. Such payments are more akin to income or profit than costs. For economic analysis we must have the ability to identify these.

Questions 4 and 5 collect annual fuel expenditures, the quantity of fuel used, and (an estimate of) the average price of fuel. After labor and the vessel itself, fuel is a major input for a trawl fishery; for some vessels it may even be the largest one. Given the importance of fuel to this fishery and the substantial fluctuations of its price, we are also requesting information on the annual quantity used. This will allow for policy simulations that explicitly take account of the price of fuel (since variation in total annual costs can be due to a change in quantity purchased or due to a change in the price per unit). The average fuel price for each vessel will serve as a test of the two other numbers. It is also hoped that the respondents will ‘do the math’ themselves and so enhance the quality of the data.

Question 6 intends to capture any other trip related costs not covered by previous questions and is needed to account for all variable costs.

Questions 7 to10 - Annual Fixed Costs

These questions ask for total annual expenditures related to physical capital (vessel, gear and equipment), including maintenance and repair costs, insurance, loan, and overhead (including all other expenditures). These costs are paid regardless of whether the vessel is used or not, or has generated revenue, and are borne entirely by the owner. Since these costs do not vary according to the level of fishing activity they are referred to as fixed costs by economists. If sufficiently high, fixed costs can affect the probability of entry and exit into and out of a fishery.

Question 7 collects information pertaining to costs related to vessel, gear and equipment maintenance, repair, replacement, and new purchases. These expenses all pertain to physical capital employed in fishing and are separated from the more business related expenses, loosely called overhead. While question 7 a) collects the total annual expenditures, with the help of question 7 b), we will try, at the population level, to roughly break them into average regular maintenance and repair expenditures, average major or haul-out expenditures, and average new investments which expand the functionality of the physical capital. We are not asking for dollar amounts in question 7 b), merely expense type, in order to keep the survey simple and short, and because retrieving exact amounts would be extremely difficult.

Questions 8 collects information on the cost of insuring the vessel. Vessel insurance, if purchased, is one of the largest elements of fixed costs for Southeast shrimp vessels. There is much policy interest in insurance-related questions; see also question 12.

Questions 9 collects information on payments on vessel loans. Loan payments, if the owner borrowed money to purchase the vessel, are a further large element of fixed costs for SE shrimp vessels. See also question 14.

Question 10 is intended to collect business and indirect costs pertaining to the vessel and any remaining costs not listed elsewhere. Typical examples are annual costs associated with docking or mooring arrangements, utilities while at the dock, fees, professional services, office expenditures, etc. This question is needed to account for all fixed costs.

Question 11 - Total Expenditure Verification

This question adds no additional information. Instead its purpose is to enhance the quality of the data collection by inducing the respondent to be comprehensive and avoid duplication while s/he is accounting for all expenses in questions 1 through 10. If the sum of questions 1 through 10 does not add up to the known or estimated total expenditures for the year, a conscientious respondent will find and correct the inaccuracies. It will also help with identifying data entry errors.

Other Important Economic Information

Question 12 - Insurance

This question collects information on the type of vessel insurance and the total amount for which the vessel is insured (coverage level). The lack of hull and other related vessel insurance is indicative of the industry’s economic health. Further, the level of insurance coverage is a measure of how exposed this industry is toward risk, such as losses due to hurricanes. There is much policy interest in insurance-related questions.

Questions 13-15 - Capital, Net-Equity and Depreciation

Questions 13 to 15 try to discern the total amount of financial capital invested in the vessel, the current value of that capital, the owner’s net equity in the vessel, and the annual amount the capital is depreciating by. This information is required to estimate economic profit and then to calculate various rates of return on the owner’s investment. The expected rate of return is a critical factor in the owner’s decision to invest further in the vessel, and whether to remain in the fishing industry. Changes in the levels of net equity should be indicative of the industry’s economic health.

Question 13 asks for the market value of the vessel with or without commercial fishing permits, either from insurance records or as estimates. These are proxies for the current value of invested capital. Further, the question asks for the purchase price since many used vessels are recently

changing hands at very low prices (due in part to hurricane impact). Since historically the vessel purchase price has been the greatest barrier to entry, we need to quantify this development.

Question 14 gathers information about outstanding loans and the interest and principal payments on these. With the help of this information we can calculate the owner’s net equity tied up in the vessel. In terms of cash flow and investment decisions, loan payments can be critical to annual financial performance of the vessel operation and can be used as an indicator of the health of the industry. The amount of principal repaid during the year is required in order to correctly identify economic profits (by reducing total expenditures by this amount). Interest payments will help identify the relevant cost of capital in this industry. Many economic analyses, beyond the ones directly related to this survey, require the applicable cost of capital.

Question 15 serves to help estimate the appropriate economic depreciation that should be added as a further cost to total expenditures for the vessel when calculating profits. Calculating economic depreciation is difficult, and we will attempt, at the population level, to econometrically estimate¹ it with the help of vessel market prices and information about each vessel’s age and characteristics. Question 15 will allow for an independent check on our results. Depreciation, as claimed for tax purposes, is a rough proxy for economic depreciation (especially if adjusted for the age of vessel) and is important in its own right for cash-flow analyses.

Question 16 - Vessel Revenues

Question 16 is comprised of six check boxes to indicate revenues received by the vessel from i) any shrimp fishery, ii) any other commercial fishery, iii) BP oil spill-related (any), iv) any non-fishing activities generating income, v) government payments, or vi) none/no activity. This question will allow us to sort vessels into specific categories (e.g. active/inactive, pure shrimpers/crossover to other fisheries).

Question 17 - BP Oil Spill-related Revenues

In the summer of 2010, the BP oil-spill in the Gulf of Mexico had a large effect on the federally-permitted Gulf shrimp harvesting industry. Impacts included the closure of many fishing areas for substantial amounts of time during the prime shrimping season. Many shrimpers made claims against BP/Gulf Coast Claims Facility and received substantial compensation. Further, BP hired shrimp vessels to stand by or actively participate in clean-up work (e.g., vessels of opportunity program). Oil-spill related payments to shrimpers comprised a substantial portion of total 2010 revenue/earnings for a large fraction of vessels in the northern Gulf. Some payments are

expected in future years, depending on claims status. We anticipate dropping this question as soon as most claims have been settled.

Question 18 - Revenues Beyond Shrimp

Other data collection efforts allow us to calculate the total revenue each vessel generates from shrimp. In the case where a vessel also engages in other commercial fisheries, portions of the reported costs will apply to these activities rather than to the catching of shrimp. This question allows us to identify the portion of costs actually incurred catching shrimp (“pro-rated” costs based on revenue share). The question will also serve as an indicator for how specialized the shrimp industry is.

Question 19 – Anti-Dumping and other Government “Revenues”

In recent years the United States (U.S.) shrimp fishery has seen increasing imports of aquaculture shrimp flooding the market and lowering the price. This has been ruled a case of dumping and import duties have been imposed. As a result, shrimp fishing vessels have received payments ‘in compensation’ from the government. Government payments received due to imports and low shrimp prices (tariff money; trade assistance adjustment payments, etc.) are treated as taxable revenue and are relevant to the economic success or failure of each operation. Further, some fishermen qualify for disaster relief funds related to hurricane damage.

At the bottom of the last page of the survey (page 2) voluntary questions asks the respondent for any comments on the survey effort and if they would like to receive annual results.

NMFS will retain control over the information and safeguard it from improper access, modification, and destruction, consistent with NOAA standards for confidentiality, privacy, and electronic information. See response to Question 10 of this supporting statement for more information on confidentiality and privacy. This information collection is designed to yield data that meet all applicable information quality guidelines. Prior to dissemination, the information will be subjected to quality control measures and a pre-dissemination review pursuant to Section 515 of Public Law 106-554.

3. Describe whether, and to what extent, the collection of information involves the use of automated, electronic, mechanical, or other technological techniques or other forms of information technology.

The data collection is conducted as a self-administered mail survey. Given the southeast region’s past experiences with surveys of this population, a very low impact (burden) approach is necessary to obtain fishermen’s cooperation. A mail survey is less intrusive, more convenient, and less time-intense than one based on in-person interviews.

All respondents are contacted by mail. They are asked to return the completed survey instrument to us in an enclosed, pre-paid envelope. If no response is received, up to two further letters are sent (including additional survey instruments). Non-responders are also contacted by phone and urged to return the survey. Information is not collected during the phone call (a further survey instrument is sent – by mail, fax, or email – if requested).

There will be no other means, electronic or otherwise, to submit data or information for the purposes of this study. When asked in 2008, there was little interest by the industry for an online submission option for this survey. The survey responses will be entered into an electronic Oracle database by NMFS or a contractor. The analytical results of studies based on this data will be disseminated in internal, management related, and peer-reviewed publications. Some of these will be available over the Internet.

4. Describe efforts to identify duplication.

This is the only systematic, region-wide, and continuous economic data collection in the Gulf and South Atlantic shrimp fisheries. Hence, there is no duplication of economic information. Experts on these fisheries in academia and state agencies have been consulted.

The data collection is set up in a way to avoid duplicating the time burden for vessels that hold a Gulf shrimp moratorium permit and one or more South Atlantic shrimp permits. For example, there are 625 unique vessels that hold the South Atlantic penaeid shrimp permit, and 250 of these vessels also have Gulf shrimp moratorium permits. Southeast commercial shrimp vessels will be treated as a single fleet for sampling purposes (thereby ensuring every vessel can only be selected once).

5. If the collection of information involves small businesses or other small entities, describe the methods used to minimize burden.

To trawl for shrimp in federal waters of the Gulf of Mexico requires the use a large, specialized fishing vessel with 3-5 person crews. As such, owners must invest substantial sums to participate in this fishery (new vessels might cost anywhere from $100,000 to $1,000,000) and employ other individuals (mates; usually paid as contractors (1099-MISC) rather than hired as employees). About half the owners captain their own vessels (owner-operators; usual legal form: sole proprietors or S-corporations), while the other half hire captains. Some own multiple vessels. As such, they run small businesses.

Only the minimum data to meet the current and future needs of NMFS management and permitting programs are collected. The information requested should be available to the respondent in the course of normal business operations. Keeping additional records is not needed and hence the burden is low. To simplify the process further, the survey collects aggregate annual data and will be timed to coincide with tax season. The results of this study are expected to improve the economic conditions of small fishing entities by affording fishery management agencies the information needed to consider economic factors in management plans and regulations.

6. Describe the consequences to the Federal program or policy activities if the collection is not conducted or is conducted less frequently.

Previous attempts to collect costs data have been plagued by their small geographic scope, their limited duration, refusal by the industry to be surveyed, and delineation issues between inshore and offshore fleets. Current and statistically valid economic data is needed for the southeast shrimp fisheries in order to accurately assess the positive and negative impacts of federal rules and regulations. Such assessments are mandated under EO 12866, the RFA, MFCMA (and the National Standards attached thereto), and the Endangered Species Act, among others. Additionally, legal decisions against the federal government have been handed down based on the absence of social and economic data (i.e. summer flounder litigation: North Carolina Fisheries Association, et al. versus Daley - Civil Nos. 2: 97cv339; 2: 98cv606).

If current and accurate economic data are not available, then the social and economic assessments of management alternatives will be impossible or inaccurate, thereby potentially leading the Council and NMFS to make poor management decisions. Thus, continuous economic data collection is needed to satisfy these various mandates and help ensure that good management decisions are made.

The purpose of collecting this data annually is to identify and track changes and trends through time. This fishery has recently been experiencing substantial upheaval (dumping of product on the U.S. market by foreign competition and large fuel price fluctuations). Further reasons to collect this data annually include the paucity of existing economic data in the shrimp fishery (especially about costs); the fact that there can be wide fluctuations in all costs, not just variable, from year to year; and that future, proposed management strategies are substantially different from the current management structure. In the absence of annual data, the Council and NMFS cannot satisfy the various mandates described above and in the response to Question 1; cannot fully assess the social and economic impacts of potential management changes; and generally cannot ensure that good management decisions are made.

7. Explain any special circumstances that require the collection to be conducted in a manner inconsistent with OMB guidelines.

The collection is consistent with OMB guidelines.

8. Provide information on the PRA Federal Register Notice that solicited public comments on the information collection prior to this submission. Summarize the public comments received in response to that notice and describe the actions taken by the agency in response to those comments. Describe the efforts to consult with persons outside the agency to obtain their views on the availability of data, frequency of collection, the clarity of instructions and recordkeeping, disclosure, or reporting format (if any), and on the data elements to be recorded, disclosed, or reported.

A Federal Register Notice was on February 10, 2012 (77 FR 7134) for the extension of this data collection. Public comments were solicited on the proposed data collection reporting program. No comments were received.

We use call-backs (conducted to get clarity on or verify questionable answers) to understand the difficulties respondents encountered. We have also asked respondents to “Please use the reviser side or a separate piece of paper for any comments. We appreciate any comments concerning this survey effort and any ideas on how to improve or simplify it”.

9. Explain any decisions to provide payments or gifts to respondents, other than remuneration of contractors or grantees.

No monetary payments or other remuneration will be made to respondents.

10. Describe any assurance of confidentiality provided to respondents and the basis for assurance in statute, regulation, or agency policy.

The cover letter sent with the survey will explicitly state that all data that are submitted are treated as confidential, in accordance with NOAA Administrative Order 216-100 and the Magnuson-Stevens Act, Section 402(b), Confidentiality of Information.

11. Provide additional justification for any questions of a sensitive nature, such as sexual behavior and attitudes, religious beliefs, and other matters that are commonly considered private.

No questions will be asked of survey participants about sexual behavior and attitudes, religious beliefs, or similar sensitive activities. Questions pertaining to a respondent’s business costs and expenses will be used, together with revenue data collected elsewhere, to establish their profitability. Business income (not directly collected) is sometimes considered private. This information is necessary for the development of economic assessment models and analyses described extensively in Questions 1 and 2. In-depth justifications for individual survey questions are also provided in Question 2. The data will be used and reported only at the aggregate or representative (average) levels. The respondents will be informed of this in the cover letter.

12. Provide an estimate in hours of the burden of the collection of information.

To allow for possible fluctuations in the survey population over the next three years (the South Atlantic penaeid and rock shrimp permits are open access), we are asking for burden hours equivalent to completing a total of 800 surveys annually. The public reporting burden for this collection of information is estimated to average 45 minutes per response including the time for reading the instructions, gathering the data from business records, and completing and mailing the survey instrument. Thus, there will be an estimated annual burden of up to 600 hours (45/60 minutes x 800).

13. Provide an estimate of the total annual cost burden to the respondents or record-keepers resulting from the collection (excluding the value of the burden hours in Question 12 above).

There will be no financial cost to the public to participate in this study. Postage paid envelopes are supplied with the survey.

14. Provide estimates of annualized cost to the Federal government.

This study will be conducted by the Social Science Research Group of the SEFSC of NMFS. This includes annual development of the sampling frame and sampling, conducting the survey,

administration and supervision of a student intern or contractor, continued database development, and preparation of reports.

The total annual cost of this data collection (including staff time) is estimated at about $50,000 per year. The estimate of annual costs for NMFS staff involvement is $30,000 (staff time and benefits). In recent years, $18,000 was spent to hire a student intern or contractor to help with the implementation of the survey, including mail handling, telephone follow-up, and data entry and verification. Additional cash expenses are approximately $2,000 for supplies and postage.

15. Explain the reasons for any program changes or adjustments.

No changes or adjustments are requested.

16. For collections whose results will be published, outline the plans for tabulation and publication.

Summary statistics of these data are published in standardized tables in annual NMFS economic reports; one for the Gulf and one for the South Atlantic shrimp fisheries. These reports provide documentation about the survey methodologies, survey instrument, statistical and random sampling design, an assessment of the validity of the collected data, and basic descriptive statistics (see Table 2 at the end of this supporting statement as an example). The reports are available on the web at: http://www.sefsc.noaa.gov/socialscience/shrimp.htm. The analytical results of studies based on this data will be disseminated in internal, management related, and peer-reviewed publications. Some of these will be available over the internet.

17. If seeking approval to not display the expiration date for OMB approval of the information collection, explain the reasons why display would be inappropriate.

Not Applicable.

18. Explain each exception to the certification statement.

Not Applicable.

1 Econometrics is a combination of mathematical economics and statistics. The two main purposes of econometrics are to give empirical content to economic theory and to subject economic theory to potentially falsifying tests. For example, economic theory may predict that a given demand curve should slope down. Econometric estimates can either verify or falsify that prediction, and shed light on the magnitude of the effect.

Econometric analysis is divided into time-series analysis and cross-sectional analysis. Time-series analysis examines variables over time, such as the effects of population growth on a nation's GDP. Cross-sectional analysis examines the relationship between different variables at a point in time; for instance, the relationship between individuals' income and food expenditures. When time-series analysis and cross-sectional analysis are conducted simultaneously on the same sample, it is called panel analysis. If the sample is different each time, it is called repeated cross section data. Multi-dimensional panel data analysis is conducted on data sets that have more than two dimensions. For example, some forecast data sets provide forecasts for multiple target periods, conducted by multiple forecasters, and made at multiple horizons. The three dimensions provide more information than can be gleaned from two dimensional panel data sets.

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