Economics impacts on Tennessee\u27s state and regional gross product of three value added forestry development strategies : an integrated linear programming input-output approach

Tennessee has a sizable timber resource encompassing more than 13.3 million acres that spread across the state. Tennessee\u27s forest products industry is one of the basic industries with $4 billion of direct contribution to the gross state product. Although Tennessee\u27s forest resource base is comparable with neighboring states such as Mississippi and North Carolina, state wood processing industries remain behind their counterparts in neighboring states. At the same time, many rural counties have been declared as persistent low income non-metro counties characterized by low rates of growth and high levels of unemployment. The forestry sector has the potential to became an engine of growth and jobs not only in these depressed counties but also in other rural counties, bringing stability and maximizing economic contribution. This study attempts to measure the economic impacts in terms of value added, output, and employment of three value added development strategies: import substitution of roundwood by local production; reduction in out-of state roundwood exports and increase in wood processed products; and value added driven development growth policy by identifying which industry sectors will contribute more to the regional and gross state product. The study areas are the five economic areas developed by the Bureau of Economic Analysis Division of the Department of Commerce. Theses regions are Knoxville, Nashville, Chattanooga, Tricities, and Memphis areas. To evaluate these value added strategies, an integrated Input-Output and Linear Programming model was implemented, Tennessee Agricultural and Industrial Model (TNAIM). A non-survey input-output model, IMPLAN, was used to create input-output regional models. These regional models were adjusted to incorporate agricultural output data to improve the overall accuracy of the I/O models. These hybrid models allowed the construction of the regional baselines for 1994. The baseline I/O models supplied I/O coefficients to the TNAIM. In addition, the Forestry Inventory Database (FIA), and Tennessee timber production and timber trade data was used to developed timber, land and trade coefficients for the TNAIM. A baseline for the TNAIM for 1994 also was developed. The alternative scenarios designated to evaluate the alternative development strategies were implemented in TNAIM. The comparison between the baseline and Scenario runs captured both the direct and indirect economic impacts. Then, the induced effects were estimated by placing the changes in industry outputs into the regional I/O IMPLAN Models. The summation of direct, indirect and induced effects constituted the total economic effects. In the import substitution strategy Scenario I-A, a reduction in 10 percent of roundwood out-of-state imports has a positive effect on the regional economy. Total state output increases $22.03 million, value added is $7.84 and employment is 206 jobs. A reduction of one million dollars in output of imported logs brings to the state economy an increase of $2.64 million in total output, $ 0.97 million in value added and 25 additional jobs. In the import substitution strategy Scenario I-B, a reduction of 20 percent in roundwood out-of-state imports increases state gross product by $14.16 million, industry output by $38.63 and employment by 369 new jobs. The reduction of out-of-state exports of roundwood and increase in wood processed products exports have a greater economic impact over the state economy. Total industry output increases to $182.16 million, value added in $93.90 million and employment in 2,758 new jobs. Similarly, a reduction in 20 percent of out-of-state exports of roxmdwood and increase in wood processed products have a positive impact in industry output of about $287.56 million, value added in $173.10 million and employment in 3,770 new jobs. The last strategy scenario III-A, an increase of timber supply, a 5 percent in softwood and 10 percent in hardwood and increase in wood processed exports brings to the state economy about $ 305.93 million, value added in $183.54 and in employment in 3,892 new jobs. Finally, the scenario III-B, an increase of timber supply of about 10 percent for softwood and 20 percent for hardwood brings to the economy an increase in industry output of about $411.13 million, in value added $242.56 million and in employment 5,596 additional jobs