Estimating Economic Impacts of Programming

This article outlines a technique to estimate regional economic impacts of production-oriented Extension programs. The methodology is a valuable tool to use in the effective allocation of scarce Extension resources.

Extension education often leads to changes in the availability of products within a region. For instance, programs in crop production, animal science, and timber management regularly lead to higher yields and more product availability given the same producer input. Certain educational programs may also decrease the availability of a product within a region. Examples of these might include workshops in low-input sustainable agriculture, less intensive timber management, or increased awareness of land set-aside programs.

Forestry Extension programs often target the nonindustrial private forest (NIPF) landowner. Traditionally, these lands have produced only a fraction of their economic and biological potential. Forestry Extension programs have been successful in influencing timber management activities of NIPF clientele.1 Through increased awareness, landowners have adopted practices that improve their land's production of timber. This, in turn, increases regional timber supply that results in a range of economic changes. The question then becomes: How can Extension programs measure these economic development impacts that are a result of their programs?

Faculty involved in Extension program planning and evaluation should consider questions about the nature of a region's economy. Which key economic sectors drive the economy? On which sectors are work forces most dependent? Furthermore, Extension administrators need to ask difficult questions about resource allocation. Do the Extension staff positions fit the region's needs and can they be justified economically? What economic benefits can be expected from production-oriented Extension programming?

Answers to these questions should guide the allocation of resources for specialized personnel and program needs. This analysis demonstrates how Extension planners can use economic development tools to address these important questions.

The economic impact potential of Extension forestry programming in southeastern Oklahoma was analyzed in three phases: (1) identifying clientele within a region and assessing their ability and willingness to improve management through adopting new technologies, (2) developing an impact model using an available computer software package, and (3) analyzing change using impact analysis based on supply changes.

The study focused on a 10-county region. Within this region, about 3,300 resident landowners manage 600,000 acres of commercial timberland.2 Extension faculty can't expect to reach all these landowners. Research indicates social groups classified as technology innovators, early adopters, and the early majority are those most receptive to adopting new forest management technologies.3 These groups are about half the population in any particular social structure. If focused Extension programming in timber management reached the controllers of half the commercial NIPF timberland within southeastern Oklahoma (about 1,650 landowners), regional timber output could be significantly altered.

A total of 220 workshop participants were surveyed at 1990 and 1991 Oklahoma forestry Extension meetings. As a direct result of the workshop attended, landowner participants reported they would use the information presented to increase timber productivity within a range of $20 to $75 an acre. Applying $50 an acre to the potential clientele group would mean a $14.5 million increase in timber production within this region. The validity of this rough estimate could be challenged;4 however, it's important to note that a production increase of this magnitude is still well below both the financial and productive potentials of these sites.5

The USDA Forest Service developed IMPLAN (IMpact Analysis for PLANning) to perform economic impact analyses for any region of the United States. IMPLAN's database represents county-level economic activity for a total of 528 sectors and can, in addition to describing regional economies, show the effects of introducing new industries, removing existing industries, and changing demand or supply of some product in the economy.

The computer version of IMPLAN6 for the 10-county region was used to assess timber production programs targeting the NIPF landowner in southeastern Oklahoma. Sectors were grouped within IMPLAN based on the Extension discipline under examination and economic similarity. Extension programs in timber production relate to the IMPLAN sector entitled "forestry products." This timber production sector consists of those who operate timber tracts or tree farms to sell standing timber.

Educating NIPF owners in improved management of their timber resources would increase the relative importance of regional timber production. As the region adjusts to this increase in supply of timber, how will the economy change?

Impact analysis based on increased supplies of products was first suggested by Ghosh7 in 1958 and has been routinely applied since. The basic assumption of supply-driven impact analyses is that output distribution patterns are stable in an economic system. If output of a sector changes, sales of this output to each of the interrelated sectors also changes with the same magnitude.8 Industries that are primarily supply-constrained with demand for the final product being determined outside of the region are most appropriately addressed by supply-side impact analysis. This characterizes the forest products industry within small regions.

Regional Description

A description of this 10-county regional economy, including its timber-related sectors, is shown in Table 1. Timber makes up 10% of the region's output and accounts for six percent of the regional employment. Primary agricultural production, the majority of which is cattle and other livestock, makes up another 10% of the region's output and accounts for five percent of regional employment. Other valuable applications can be made with the IMPLAN database to describe regional economies in detail.

Extension's Impact

Applying supply-driven impact analysis to the IMPLAN database, the effects of Extension's forestry workshops on the regional economy can be seen. As discussed earlier, the reports of workshop participants indicated that a set of Extension forestry workshops could increase regional timber production value by 50%. The supply-side analysis calculation indicates total employment resulting from this type of production increase would be 81 new permanent jobs. The distribution of this impact identifies important employment linkages existing within the economy (see Figure 1).

Figure 1. Extension's impact on employment change.

The timber production sector on which Extension programming had a direct impact, accounts for only 22% of total change in employment. To accomodate the increased timber supply, 36% of the total employment change is found in the timber harvesting sector, 20% in primary forest processing, 13% in secondary forest processing, and six percent in the paper sector. The only nonforestry sector affected is the construction sector that accounts for about three percent of the total change.

A 50% increase in regional timber production generates a $7.5 million increase in regional value-added. The distribution of this value-added impact is more limited. As shown in Figure 2, 77% of the value-added change occurs in the timber production sector, which was affected by Extension programming. Most of the change in regional value-added stays within this sector. Eleven percent of the change is estimated in the timber harvesting sector, seven percent in primary forest processing, two percent in secondary forest processing, two percent in paper production, one percent in construction and other sectors, including the bulk of retail and wholesale trade.

Figure 2. Extension's impact on value-added change.

Extension program planners should have a good understanding of the regional economic structure of the clientele they approach with programming. A regional economic description should be done to highlight and describe individual sectors most appropriate to program planners.

The analysis described in this article rests on the assumption that Extension programming directly affects commodity production. Continued effort is needed to best quantify this direct impact. However, the assumption is valid in the forestry arena given the biological and financial potential of forest management on nonindustrial private land, the state of current landowner management intensity, the receptiveness of landowners to new technologies, and the efforts of able, well-equipped technology transfer specialists.

Analyzing Extension's impact this way provides planners with information about how the current economy will react to a change in the output of a given sector.

The use of available economic impact analysis tools, such as IMPLAN, can assist county, area, and state-level Extension specialists develop educational programs in tune with regional economies.

Analysis based on changes in raw material supplies is an effective way to estimate the impacts of production-oriented Extension programming on regional employment and income. It also provides perspective in determining the realistic extent of Extension programming impacts on regional economic development.

Extension programs can focus on economic development objectives. Understanding regional economic structures is an important part of analyzing the options available to Extension planners. This understanding is fundamental to developing programs addressing unemployment, underemployment, or substandard per capita incomes.

1. D. Decker and others, "Do Workshops Work?" Journal of Extension, XXVI (Winter 1988), 19-21.

2. D. D. Donovan, "Non-industrial Private Forest Landowners of Oklahoma," Extension Forestry Report Number 1 (Stillwater: Oklahoma State University, 1987).

3. R. M. Muth and J. C. Hendee, "Technology Transfer and Human Behavior," Journal of Forestry, LXXVIII (No. 3, 1980), 141-44.

4. Regardless of its magnitude, impact resulting from change in timber production will be distributed as discussed in the section titled Findings. Continued effort is needed in survey design that appropriately evaluates direct impacts associated with Extension workshops to minimize potential sources of information and hypothetical bias.

5. D. K. Lewis and J. P. Goodier, "The South's Fourth Forest: Oklahoma," MP-130(Stillwater: Oklahoma Agricultural Experiment Station, July 1990), pp. 55-68.

6. IMPLAN release #89-03 Version IMPLAN 82. The computer version of IMPLAN and its associated database for respective states is available from most state-level agricultural economics Extension programs.

7. A. Ghosh, "Input-Output Approach to an Allocative System." Economica, XXV (February 1958), 58-64.

8. R. E. Miller and P. D. Blair, Input-Output Analysis (Englewood Cliffs, New Jersey: Prentice Hall, Inc., 1985), pp 317 -22.