Analyzing a Forest Resource Based Region Facing Economic Change

One of the most perplexing problems facing the forest industry today is that of uncertainty. Two major sources of uncertainty come from federal policies relative to the allowable cut on national forests and monetary policy, which in turn influences the interest rate and the demand for construction materials. When forest products manufacturers are forced to close their operations, the direct impacts on wages, income, and employment are quite apparent. The more subtle effects in terms of indirect and induced reductions in income and employment are not as easily measured. Input-output analysis allows economists to measure not only direct, but also indirect and induced effects on income and employment when regional firms cease to operate. Results from the analysis of Benewah County, Idaho are presented in terms of both the expansion and contraction of the local economy. If local firms are forced to cease operations, as much as 70 percent of the income and employment is affected in the short run. Should local people be forced to relocate, because of the loss of employment in the longer run, the impacts on income and employment would be even greater than shown. This methodology, while requiring rather specific data, may be applied to regions of any size (from counties to states, or nationally) to measure the impacts of exogenous government policies on a region.

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