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The 2009 Report on Manufacturing Surgical Appliances and Supplies, Orthopedic Devices, Prosthetic Appliances, Surgical Dressings, Crutches, Surgical Sutures, and Personal Industrial Safety Devices Excluding Protective Eyewear: World Market Segmentati
ICON Group International, May 2009, Pages: 361
Market Potential Estimation Methodology
Overview
This study covers the world outlook for manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear across more than 2000 cities. For the year reported, estimates are given for the latent demand, or potential industry earnings (P.I.E.), for the city in question (in millions of U.S. dollars), the percent share the city is of the region and of the globe. These comparative benchmarks allow the reader to quickly gauge a city vis-à-vis others. Using econometric models which project fundamental economic dynamics within each country and across countries, latent demand estimates are created. This report does not discuss the specific players in the market serving the latent demand, nor specific details at the product level. The study also does not consider short-term cyclicalities that might affect realized sales. The study, therefore, is strategic in nature, taking an aggregate and long-run view, irrespective of the players or products involved.
This study does not report actual sales data (which are simply unavailable, in a comparable or consistent manner in virtually all of the cities of the world). This study gives, however, my estimates for the worldwide latent demand, or the P.I.E. for manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear. It also shows how the P.I.E. is divided across the world’s cities. In order to make these estimates, a multi-stage methodology was employed that is often taught in courses on international strategic planning at graduate schools of business.
What is Latent Demand and the P.I.E.?
The concept of latent demand is rather subtle. The term latent typically refers to something that is dormant, not observable, or not yet realized. Demand is the notion of an economic quantity that a target population or market requires under different assumptions of price, quality, and distribution, among other factors. Latent demand, therefore, is commonly defined by economists as the industry earnings of a market when that market becomes accessible and attractive to serve by competing firms. It is a measure, therefore, of potential industry earnings (P.I.E.) or total revenues (not profit) if a market is served in an efficient manner. It is typically expressed as the total revenues potentially extracted by firms. The “market” is defined at a given level in the value chain. There can be latent demand at the retail level, at the wholesale level, the manufacturing level, and the raw materials level (the P.I.E. of higher levels of the value chain being always smaller than the P.I.E. of levels at lower levels of the same value chain, assuming all levels maintain minimum profitability).
The latent demand for manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear is not actual or historic sales. Nor is latent demand future sales. In fact, latent demand can be lower either lower or higher than actual sales if a market is inefficient (i.e., not representative of relatively competitive levels). Inefficiencies arise from a number of factors, including the lack of international openness, cultural barriers to consumption, regulations, and cartel-like behavior on the part of firms. In general, however, latent demand is typically larger than actual sales in a city market.
Another reason why sales do not equate to latent demand is exchange rates. In this report, all figures assume the long-run efficiency of currency markets. Figures, therefore, equate values based on purchasing power parities across countries. Short-run distortions in the value of the dollar, therefore, do not figure into the estimates. Purchasing power parity estimates of country income were collected from official sources, and extrapolated using standard econometric models. The report uses the dollar as the currency of comparison, but not as a measure of transaction volume. The units used in this report are: US $ mln.
For reasons discussed later, this report does not consider the notion of “unit quantities”, only total latent revenues (i.e., a calculation of price times quantity is never made, though one is implied). The units used in this report are U.S. dollars not adjusted for inflation (i.e., the figures incorporate inflationary trends) and not adjusted for future dynamics in exchange rates (i.e., the figures reflect average exchange rates over recent history). If inflation rates or exchange rates vary in a substantial way compared to recent experience, actually sales can also exceed latent demand (when expressed in U.S. dollars, not adjusted for inflation). On the other hand, latent demand can be typically higher than actual sales as there are often distribution inefficiencies that reduce actual sales below the level of latent demand.
As mentioned earlier, this study is strategic in nature, taking an aggregate and long-run view, irrespective of the players or products involved. If fact, all the current products or services on the market can cease to exist in their present form (i.e., at a brand-, R&D specification, or corporate-image level) and all the players can be replaced by other firms (i.e., via exits, entries, mergers, bankruptcies, etc.), and there will still be an international latent demand for manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear at the aggregate level. Product and service offering details, and the actual identity of the players involved, while important for certain issues, are relatively unimportant for estimates of latent demand.
The Methodology
In order to estimate the latent demand for manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear on a city-by-city basis, I used a multi-stage approach. Before applying the approach, one needs a basic theory from which such estimates are created. In this case, I heavily rely on the use of certain basic economic assumptions. In particular, there is an assumption governing the shape and type of aggregate latent demand functions. Latent demand functions relate the income of a country, city, state, household, or individual to realized consumption. Latent demand (often realized as consumption when an industry is efficient), at any level of the value chain, takes place if an equilibrium in realized. For firms to serve a market, they must perceive a latent demand and be able to serve that demand at a minimal return. The single most important variable determining consumption, assuming latent demand exists, is income (or other financial resources at higher levels of the value chain). Other factors that can pivot or shape demand curves include external or exogenous shocks (i.e., business cycles), and or changes in utility for the product in question.
Ignoring, for the moment, exogenous shocks and variations in utility across countries, the aggregate relation between income and consumption has been a central theme in economics. The figure below concisely summarizes one aspect of problem. In the 1930s, John Meynard Keynes conjectured that as incomes rise, the average propensity to consume would fall. The average propensity to consume is the level of consumption divided by the level of income, or the slope of the line from the origin to the consumption function. He estimated this relationship empirically and found it to be true in the short-run (mostly based on cross-sectional data). The higher the income, the lower the average propensity to consume. This type of consumption function is labeled 'A' in the figure below (note the rather flat slope of the curve). In the 1940s, another macroeconomist, Simon Kuznets, estimated long-run consumption functions which indicated that the marginal propensity to consume was rather constant (using time series data across countries). This type of consumption function is show as 'B' in the figure below (note the higher slope and zero-zero intercept). The average propensity to consume is constant.
Is it declining or is it constant? A number of other economists, notably Franco Modigliani and Milton Friedman, in the 1950s (and Irving Fisher earlier), explained why the two functions were different using various assumptions on intertemporal budget constraints, savings, and wealth. The shorter the time horizon, the more consumption can depend on wealth (earned in previous years) and business cycles. In the long-run, however, the propensity to consume is more constant. Similarly, in the long run, households, industries or countries with no income eventually have no consumption (wealth is depleted). While the debate surrounding beliefs about how income and consumption are related and interesting, in this study a very particular school of thought is adopted. In particular, we are considering the latent demand for manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear across some 230 countries. The smallest have fewer than 10,000 inhabitants. I assume that all of these counties fall along a 'long-run' aggregate consumption function. This long-run function applies despite some of these countries having wealth, current income dominates the latent demand for manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear. So, latent demand in the long-run has a zero intercept. However, I allow firms to have different propensities to consume (including being on consumption functions with differing slopes, which can account for differences in industrial organization, and end-user preferences).
Given this overriding philosophy, I will now describe the methodology used to create the latent demand estimates for manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear. Since ICON Group has asked me to apply this methodology to a large number of categories, the rather academic discussion below is general and can be applied to a wide variety of categories, not just manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear.
Step 1. Product Definition and Data Collection
Any study of latent demand across countries requires that some standard be established to define “efficiently served”. Having implemented various alternatives and matched these with market outcomes, I have found that the optimal approach is to assume that certain key countries or cities are more likely to be at or near efficiency than others. These are given greater weight than others in the estimation of latent demand compared to others for which no known data are available. Of the many alternatives, I have found the assumption that the world’s highest aggregate income and highest income-per-capita markets reflect the best standards for “efficiency”. High aggregate income alone is not sufficient (i.e., China has high aggregate income, but low income per capita and can not assumed to be efficient). Aggregate income can be operationalized in a number of ways, including gross domestic product (for industrial categories), or total disposable income (for household categories; population times average income per capita, or number of households times average household income per capita). Brunei, Nauru, Kuwait, and Lichtenstein are examples of countries with high income per capita, but not assumed to be efficient, given low aggregate level of income (or gross domestic product); these countries have, however, high incomes per capita but may not benefit from the efficiencies derived from economies of scale associated with large economies. Only countries with high income per capita and large aggregate income are assumed efficient. This greatly restricts the pool of countries to those in the OECD (Organization for Economic Cooperation and Development), like the United States, or the United Kingdom (which were earlier than other large OECD economies to liberalize their markets).
The selection of countries is further reduced by the fact that not all countries in the OECD report industry revenues at the category level. Countries that typically have ample data at the aggregate level that meet the efficiency criteria include the United States, the United Kingdom and in some cases France and Germany.
Latent demand is therefore estimated using data collected for relatively efficient markets from independent data sources (e.g. Euromonitor, Mintel, Thomson Financial Services, the U.S. Industrial Outlook, the World Resources Institute, the Organization for Economic Cooperation and Development, various agencies from the United Nations, industry trade associations, the International Monetary Fund, and the World Bank). Depending on original data sources used, the definition of “manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear” is established. In the case of this report, the data were reported at the aggregate level, with no further breakdown or definition. In other words, any potential product or service that might be incorporated within manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear falls under this category. Public sources rarely report data at the disaggregated level in order to protect private information from individual firms that might dominate a specific product-market. These sources will therefore aggregate across components of a category and report only the aggregate to the public. While private data are certainly available, this report only relies on public data at the aggregate level without reliance on the summation of various category components. In other words, this report does not aggregate a number of components to arrive at the “whole”. Rather, it starts with the “whole”, and estimates the whole for all cities and the world at large (without needing to know the specific parts that went into the whole in the first place).
Given this caveat, this study covers “manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear” as defined by the North American Industrial Classification system or NAICS (pronounced “nakes”). For a complete definition of manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear, please refer to the Web site at http://www.icongrouponline.com/codes/NAICS.html. The NAICS code for manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear is 339113. It is for this definition of manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear that the aggregate latent demand estimates are derived. “Manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear” is specifically defined as follows:
339113
This U.S. industry comprises establishments primarily engaged in manufacturing surgical appliances and supplies. Examples of products made by these establishments are orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices (except protective eyewear).
3391131
Surgical, orthopedic, prosthetic, and therapeutic appliances and supplies
33911311
Orthopedic and prosthetic artificial joints and limbs
3391131101
Orthopedic and prosthetic artificial joints
3391131104
Orthopedic and prosthetic artificial limbs
33911312
All other orthopedic and prosthetic appliances
3391131207
Orthopedic and prosthetic mechanical braces
3391131211
Orthopedic and prosthetic elastic braces, suspensories, and other elastic supports
3391131214
Orthopedic and prosthetic elastic stockings
3391131217
Orthopedic and prosthetic surgical corsets
3391131221
Orthopedic and prosthetic splints and trusses
3391131224
Orthopedic and prosthetic crutches, canes (orthopedic), and other walking assistance devices
3391131227
Orthopedic and prosthetic arch supports and other foot appliances
3391131231
Orthopedic and prosthetic intraocular lenses, orthopedic and prosthetic appliances
3391131234
Other orthopedic and prosthetic appliances
33911313
Surgical dressings
3391131337
Surgical dressings, elastic bandages
3391131341
Surgical dressings, other bandages, including muslin, plaster of paris, etc, excluding self~adhering bandages
3391131344
Surgical dressings, adhesive plaster, medicated and nonmedicated, including self~adhering bandages
3391131347
Surgical dressings, gauze (absorbent and packing)
3391131351
Surgical dressings, cotton, including cotton balls (sterile and nonsterile)
3391131354
Other surgical dressings, including sponges, compresses, pads, etc
33911314
Disposable surgical drapes, including O/B and O/R packs
3391131457
Disposable surgical drapes, including O/B and O/R packs
33911315
All other surgical and orthopedic items
3391131567
Sterile surgical sutures
3391131571
Breathing devices, excluding anesthetic apparatus but including incubators, respirators, resuscitators, inhalators, etc
3391131574
Patient transport devices, wheelchairs
3391131577
Other patient transport devices, including stretchers, tables, etc., except wheelchairs
3391131581
Therapeutic appliances and supplies, hydrotherapy equipment, including full body and limb tanks (portable and stationary)
3391131584
Other therapeutic appliances and supplies, excluding electromedical
3391131587
Surgical kits
3391131591
Other surgical and orthopedic products, nec
3391131594
Parts for surgical, orthopedic, prosthetic, and therapeutic appliances and supplies
33911316
All other surgical and orthopedic items
3391132
MEDICAL AND SURGICAL APPLIANCES AND SUPPLIES, INCLUDING ORTHOPEDIC, PROSTHETIC, AND THERAPEUTIC APPLIANCES AND SUPPLIES
33911321
Artificial joints and limbs
3391132101
Artificial joints
3391132104
Artificial limbs
33911322
Other orthopedic and prosthetic appliances
3391132207
Orthopedic and prosthetic mechanical braces
3391132211
Orthopedic and prosthetic elastic braces, suspensories, and supports
3391132214
Orthopedic and prosthetic elastic stockings
3391132221
Orthopedic and prosthetic splints and trusses
3391132224
Orthopedic and prosthetic crutches, canes, and other walking assistance appliances
3391132227
Orthopedic and prosthetic arch supports and other foot appliances
3391132231
Intraocular lenses
3391132235
Other orthopedic and prosthetic appliances, including surgical corsets
33911323
Surgical dressings
3391132337
Surgical dressings, elastic bandages
3391132341
Surgical dressings, other bandages, including muslin and plaster of Paris, excluding self_adhering bandages
3391132344
Surgical dressings, adhesive plaster, medicated and nonmedicated, including self_adhering bandages
3391132347
Surgical dressings, gauze, absorbent and packing
3391132351
Surgical dressings, cotton, sterile and nonsterile, including cotton balls
3391132354
Other surgical dressings, including compresses, pads, and sponges
33911324
Disposable surgical drapes, including obstetric and operating room packs
3391132457
Disposable surgical drapes, including obstetric and operating room packs
3391132581
Hydrotherapy appliances, including full_body and limb tanks
3391132584
Other therapeutic appliances and supplies, excluding electromedical and hydrotherapy appliances and supplies
3391132587
Surgical kits
3391132588
Stents
3391132592
Other medical and surgical appliances and supplies, excluding parts
3391132594
Parts for medical and surgical appliances and supplies
33911326
Other medical and surgical appliances and supplies
3391132667
Sterile surgical sutures
3391132669
Rubber medical and surgical gloves, including rubber household gloves
3391132671
Breathing devices (including incubators, inhalators, respirators, and resuscitators), excluding anesthetic apparatus
3391132674
Wheelchairs
3391132677
Other patient transport devices (including stretchers, tables, and wheeled chairs), excluding wheelchairs
3391135
Personal industrial safety devices
33911351
Personal industrial safety devices
3391135101
Personal industrial safety devices, respiratory protection equipment, including gas masks, abrasive masks, canister masks, etc
3391135106
Personal industrial safety devices, helmets (hardhats)
3391135111
Personal industrial safety devices, eye and face protection devices (face shields, welding helmets, masks), excluding industrial goggles and eye protectors
3391135116
Personal industrial safety devices, protective clothing, except shoes
3391135121
First aid, snake bite, and burn kits, both household and industrial types
3391135126
Other personal safety devices, including motorcycle and auto racing helmets
3391136
PERSONAL INDUSTRIAL AND NONINDUSTRIAL SAFETY EQUIPMENT AND CLOTHING
33911361
Personal industrial and nonindustrial safety equipment and clothing
3391136101
Respiratory protection equipment, including abrasive masks, canister masks, and gas masks
3391136106
Industrial helmets (hardhats)
3391136111
Eye and face protection equipment, including face shields, masks, and welding helmets (excluding eye protectors and industrial goggles)
3391136114
Industrial rubber gloves
3391136116
Other protective clothing (except footwear and gloves), including rubber and rubberized protective clothing
3391136121
First aid, snake bite, and burn kits, including household and industrial kits
3391136131
Other personal safety equipment, including life preservers (buoys, jackets, and vests) (except cork life preservers), and auto racing and motorcycle helmets
3391137
HOSPITAL BEDS
33911371
Hospital beds
3391137100
Hospital beds
339113M
Miscellaneous receipts
339113P
Primary products
339113S
Secondary products
339113SM
Secondary products and miscellaneous receipts
Furthermore, the definition of NAICS code 339113 includes the following:
Adhesive tape, medical, manufacturing
Arch supports, orthopedic, manufacturing
Artificial limbs manufacturing
Bandages and dressings, surgical and orthopedic, manufacturing
Biohazard protective clothing and accessories manufacturing
Bulletproof vests manufacturing
Cervical collars manufacturing
Clean room suits and accessories manufacturing
Colostomy appliances manufacturing
Corn remover and bunion pad manufacturing
Corsets, surgical, manufacturing
Cotton and cotton balls, absorbent, manufacturing
Cotton tipped applicators manufacturing
Crutches and walkers manufacturing
Depressors, tongue, manufacturing
Drapes, surgical, disposable, manufacturing
Dressings, surgical, manufacturing
Elastic hosiery, orthopedic, manufacturing
Firefighting suits and accessories manufacturing
First aid, snake bite, or burn kits manufacturing
Foot appliances, orthopedic, manufacturing
Gas masks manufacturing
Gauze, surgical, made from purchased fabric
Gloves, rubber (e.g., electricians, examination, household-type, surgeons), man
Gynecological supplies and appliances manufacturing
Hard hats manufacturing
Helmets (except athletic), safety (e.g., motorized vehicle crash helmets, space h
Hosiery, orthopedic support, manufacturing
Hydrotherapy equipment manufacturing
Implants, surgical, manufacturing
Incubators, infant, manufacturing
Infant incubators manufacturing
Intra ocular lenses manufacturing
Intrauterine devices manufacturing
Iron lungs manufacturing
Life preservers manufacturing
Limbs, artificial, manufacturing
Metal fabric and mesh safety gloves manufacturing
Noise protectors, personal, manufacturing
Nose and ear plugs manufacturing
Orthopedic canes manufacturing
Orthopedic device manufacturing and sale in retail environment
Orthopedic devices manufacturing
Orthopedic extension shoes manufacturing
Orthopedic hosiery, elastic, manufacturing
Personal safety devices, not specified elsewhere, manufacturing
Prosthetic appliances and supplies manufacturing
Radiation shielding aprons, gloves, and sheeting manufacturing
Respiratory protection mask manufacturing
Restraints, patient, manufacturing
Shoes, orthopedic extension, manufacturing
Space suits manufacturing
Splints manufacturing
Sterilizers, hospital and surgical, manufacturing
Stretchers, medical, manufacturing
Suits, firefighting, manufacturing
Suits, space, manufacturing
Supports, orthopedic (e.g., abdominal, ankle, arch, kneecap), manufacturing
Surgical dressings manufacturing
Surgical implants manufacturing
Surgical supplies (except medical instruments) manufacturing
Sutures, surgical, manufacturing
Tapes, medical adhesive, manufacturing
Tongue depressors manufacturing
Traction apparatus manufacturing
Ultrasonic medical cleaning equipment manufacturing
Welders hoods manufacturing
Wheelchairs manufacturing
Whirlpool baths (i.e., hydrotherapy equipment) manufacturing.
Step 2. Filtering and Smoothing
Based on the aggregate view of manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear as defined above, data were then collected for as many similar countries and cities as possible for that same definition, at the same level of the value chain. This generates a convenience sample from which comparable figures are available. If the series in question do not reflect the same accounting period, then adjustments are made. In order to eliminate short-term effects of business cycles, the series are smoothed using an 2 year moving average weighting scheme (longer weighting schemes do not substantially change the results). If data are available for a country, but these reflect short-run aberrations due to exogenous shocks (such as would be the case of beef sales in a country stricken with foot and mouth disease), these observations were dropped or 'filtered' from the analysis.
Step 3. Filling in Missing Values
In some cases, data are available for countries or cities on a sporadic basis. In other cases, data may be available for only one year. From a Bayesian perspective, these observations should be given greatest weight in estimating missing years. Assuming that other factors are held constant, the missing years are extrapolated using changes and growth in aggregate national income. Based on the overriding philosophy of a long-run consumption function (defined earlier), cities which have missing data for any given year, are estimated based on historical dynamics of aggregate income for that country.
Step 4. Varying Parameter, Non-linear Estimation
Given the data available from the first three steps, the latent demand is estimated using a “varying-parameter cross-sectionally pooled time series model”. Simply stated, the effect of income on latent demand is assumed to be constant across cities unless there is empirical evidence to suggest that this effect varies (i.e., the slope of the income effect is not necessarily same for all countries). This assumption applies across cities along the aggregate consumption function, but also over time (i.e., not all cities are perceived to have the same income growth prospects over time and this effect can vary from city to city as well). Another way of looking at this is to say that latent demand for manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear is more likely to be similar across cities that have similar characteristics in terms of economic development (i.e., African cities will have similar latent demand structures controlling for the income variation across the pool of African cities).
This approach is useful across cities for which some notion of non-linearity exists in the aggregate consumption function. For some categories, however, the reader must realize that the numbers will reflect a city’s contribution to global latent demand and may never be realized in the form of local sales. For certain category combinations this will result in what at first glance will be odd results. For example, the latent demand for the category “space vehicles” will exist for cities in “Togo” even though they have no space program. The assumption is that if the economies in these countries did not exist, the world aggregate for these categories would be lower. The share attributed to these cities is based on a proportion of their income (however small) being used to consume the category in question (i.e., perhaps via resellers).
Step 5. Fixed-Parameter Linear Estimation
Nonlinearities are assumed in cases where filtered data exist along the aggregate consumption function. Because the world consists of more than 2000 cities, there will always be those cities, especially toward the bottom of the consumption function, where non-linear estimation is simply not possible. For these cities, equilibrium latent demand is assumed to be perfectly parametric and not a function of wealth (i.e., a city’s stock of income), but a function of current income (a city’s flow of income). In the long run, if a city has no current income, the latent demand for manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear is assumed to approach zero. The assumption is that wealth stocks fall rapidly to zero if flow income falls to zero (i.e., cities which earn low levels of income will not use their savings, in the long run, to demand manufacturing surgical appliances and supplies, orthopedic devices, prosthetic appliances, surgical dressings, crutches, surgical sutures, and personal industrial safety devices excluding protective eyewear). In a graphical sense, for low income cities, latent demand approaches zero in a parametric linear fashion with a zero-zero intercept. In this stage of the estimation procedure, low-income cities are assumed to have a latent demand proportional to their income, based on the city closest to it on the aggregate consumption function.
Step 6. Aggregation and Benchmarking
Based on the models described above, latent demand figures are estimated for all cities of the world, including for the smallest economies. These are then aggregated to get world totals and regional totals. To make the numbers more meaningful, regional and global demand averages are presented. Figures are rounded, so minor inconsistencies may exist across tables.
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