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How Local Foods Fit Into a Local Economy

How Local Foods Fit Into a Local Economy. Steven Deller Professor and Extension Specialist Department of Agricultural and Applied Economics University of Wisconsin-Madison.

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How Local Foods Fit Into a Local Economy

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  1. How Local Foods Fit Into a Local Economy Steven Deller Professor and Extension SpecialistDepartment of Agricultural and Applied Economics University of Wisconsin-Madison This work is part of a team effort: Laura Brown with the Center for Community Economic Development, UW-Extension, Anna Haines, University of Wisconsin-Stevens Point and Randy Fortenbery, Washington State University

  2. Low and Vogel 2011 (USDA ERS)

  3. Goals of Food Systems Initiatives • Improved nutrition-health and diet related disease • Environmental sustainability • Transparency and food safety • Food quality • Social justice • Social capital or relationship building • Rural or agricultural revitalization • Community economic growth and development

  4. Growth vs Development • Growth • More Jobs • More Population • More Income • More Businesses • More Tax Revenue • Development • Equality • Sustainable • Balance • Economic Opportunity • Quality of Life

  5. Growth vs Development Economic Development can be defined as a program, group of programs, or activity that seeks to improve economic well-being and quality of life for a community by retaining jobs that facilitate growth and provide a stable tax base. International Economic Development Council

  6. Local Foods and Economic Growth • The rationale offered to support the community economic growth argument ranges from • shorter supply chains resulting in higher profits • the ability to charge higher prices • more profits retained in the local economy

  7. Conceptual Problems with Modeling Local Foods What Defines “Local” Foods? Varies across consumers, retailers, intermediaries Varies across product line

  8. Do Local Foods Contribute to Economic Growth and Development? What we know.. • A lot about direct markets (farmer markets, CSA’s, direct sales for human consumption.) • Little about inter-mediated markets (restaurants, hospitals, schools) “which may account for significantly more local food sales than direct to consumer sales alone.” (Low and Vogel, 2011) • Our research suggests that local foods (mainly direct market sales) have little impact on measures of economic growth. Direct Sales (2007): $1.2 billion Inter-mediated Sales (2008): $4.8 billion

  9. A Simple Model of Economic Growth A three equation partial adjustment model looking at growth in population, employment and income. P* = f(E*,I* | P) E* = g(P*,I* | E) I* = g(P*,E* | I)

  10. First step, how do we measure Local Foods? If direct sales for human consumption is our “baseline” then we want to identify farm characteristics that are most closely tied to direct sales. Using these characteristics we can develop a proxy for areas (counties) that have higher concentrations of those characteristics.

  11. First step, how do we measure Local Foods?

  12. A simple correlation matrix of the different elements that describe local foods.

  13. Use Principal Components to Build a Simple Index The Index accounts for 47.8% of the variation observed in the correlation matrix.

  14. A Simple Mapping of the Local Foods Index

  15. Are the patterns in the simple mapping random? Or are there patterns?

  16. The presence of “hot” and “cold” spots suggests that there is spatial dependency in the data. If this is the case tradition statistical methods, such as ordinary least squares, will be problematic.

  17. Positive influence on population growth: An Amenity Effect? No influence on employment growth: Insufficient Job Generation? Negative influence on income growth: Profitability of these types of farms?

  18. Social Capital ? ? Local Foods Growth Development ? ? Public Health

  19. In their studies of rural communities and development Jan and Neil Flora have identified seven types of “capital”, assets or resources that are part of any community. Each is a “piece of the puzzle” that defines the community. By investing in these different types of capital the community can improve its viability both economically and socially.

  20. But, does this systems thinking approach take us back to story telling and away from rigorous analysis?

  21. Thank you!

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