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A SHORTCUT INPUT-OUTPUT MULTIPLIER ANALYSIS WITH MINIMUM DATA REQUIREMENTS: A METHODOLOGY AND ITS APPLICATION TO TIMBER SUPPLY POLICIES IN MASSACHUSETTS (ECONOMIC IMPACT, COST-BENEFIT ANALYSIS, PROJECT APPRAISAL, FOREST MANAGEMENT)

CHINLONG ZHENG, University of Massachusetts Amherst

Abstract

The impact of public forestry projects on regional economic development is an important concern of decision makers. A shortcut estimation function to calculate input-output (I-O) multipliers in the absence of I-O models is proposed in this study to measure such regional economic impact. The I-O multiplier quantifies the relationship between an initial investment and the subsequent increase in the total production of an economy resulting from the interdependency among the industries in that economy. The shortcut function employs only two variables: the internal purchase ratio and the intraregional sale ratio, both of which can be estimated easily from secondary data. The derivation of this function is based on certain properties of the real roots (eigenvalues) of I-O matrices. The shortcut function is validated by comparing the actual multipliers obtained from existing I-O models and their estimated values calculated by the function. The empirical test shows a close agreement between actual and estimated I-O multipliers. The shortcut function is then applied to measure the I-O multiplier effects of harvesting activities related to different timber supply policies in Massachusetts. An estimated I-O multiplier indicates that every one dollar invested in timber harvesting would add 2.454 dollars to the total production of the state. Because of its cost-efficiency, the shortcut method can be used frequently in regional economic impact assessment. The lack of reliable data on imports and exports may introduce a biased estimation of these I-O multipliers. Under further assumptions, the shortcut method can also calculate income and employment multipliers if additional information on wage and labor productivity are available.

Subject Area

Agricultural economics

Recommended Citation

ZHENG, CHINLONG, "A SHORTCUT INPUT-OUTPUT MULTIPLIER ANALYSIS WITH MINIMUM DATA REQUIREMENTS: A METHODOLOGY AND ITS APPLICATION TO TIMBER SUPPLY POLICIES IN MASSACHUSETTS (ECONOMIC IMPACT, COST-BENEFIT ANALYSIS, PROJECT APPRAISAL, FOREST MANAGEMENT)" (1986). Doctoral Dissertations Available from Proquest. AAI8622734.
https://scholarworks.umass.edu/dissertations/AAI8622734

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