Charles Gerena

English

Research Papers in Economics

6 Region Focus • Summer 2003
IN THE RED
Pressure on Local
Blood Markets
H
ad a tattoo done recently?
Visited the United King-
dom for more than a few
months between 1980 and
1996? Prospective blood donors
who answer “yes” to these
questions could be temporarily
disqualified because they could
harbor certain infections.
Such screening is neces-
sary to reduce the spread of
disease, but it also reduces
the donor pool. Meanwhile,
blood usage continues to
climb due to the increasing
quantity and complexity of
surgical procedures, notes Dr.
Jonathan Waters,
a blood conserva-
tion advocate who
directs autotrans-
fusion services at
The Cleveland
Clinic Foundation
in Ohio. These
are just a few
factors that have
contributed to
regular shortages
in some commu-
nities.
Blood is per-
ishable — red
blood cells last
only six weeks
refrigerated — so
ensuring that
hospitals always
have the right
amount is diffi-
cult. The quantity
demanded by local hospitals
remains steady during the
year, with occasional jumps
in emergencies. But the
quantity supplied fluctuates
because it depends on the
level of donations. 
For instance, fewer
donors give blood during
the summer and the holiday
season. The Southeast is no
exception, even though it
ranks near the top in terms
of number of blood banks,
says Marian Sullivan, execu-
tive director of the National
Blood Data Resource
Center. “The region tends
to be challenged in supply-
ing red blood cells during
the months that are typi-
cally lower for donations.”
Also, bad weather can
keep donors away. East
Coast storms last winter
reduced blood collection in
parts of North and South
Carolina, leaving some
blood banks with only a
day’s supply.
Even on sunny days,
blood shortages can develop
in some areas while sur-
pluses are occurring else-
where. For example, Sally
Foister says that her organ-
ization, The Blood Connec-
tion Inc., collects enough
blood for the eight counties
it serves in upper South
Carolina and Georgia. But
Virginia Blood Services
imports 15,000 units a year
to supplement what it col-
lects for hospitals in central
Virginia. 
Economist Paul Haas of
Bowling Green State Uni-
versity offers some possible
explanations for differences
in local blood markets. On
the demand side, metropol-
itan areas with denser pop-
ulations and regions with
well-known hospitals usually
need more blood. On the
supply side, some blood
banks are better at solicit-
ing donors than others.
It’s hard work to win the
hearts — and blood — of
potential donors. Foister
says some people dislike
needles, while others loathe
answering personal ques-
tions during the screening
process. Yet blood banks
don’t pay for blood because
they worry about attracting
too many people from the
low-end of the socioeco-
nomic scale. “You would get
more donors through your
doors that are at a higher
risk of being deferred,”
notes Foister.
More importantly, indi-
viduals don’t have to donate
to a blood bank to benefit
from it during times of
need. “People say, ‘I don’t
need to do it because some-
body else will,’” explains
Haas. “This is a basic eco-
nomic principle called the
‘free rider syndrome.’”
Blood markets illustrate
another economic rule —
when prices rise, buyers
normally curb their con-
sumption. As the increased
cost of screening has been
passed along to hospitals,
medical researchers have
found ways to reduce the
need for transfusions and to
recover lost blood. 
SHORTT AKES
Facts About America’s
Blood Supply
➤ Collection centers accounted
for 93 percent of the 15 million
units of whole blood and red
blood cells donated in 2001. The
American Red Cross is the single
largest collector, with commu-
nity blood banks like Virginia
Blood Services, The Blood
Connection, and hospitals
accounting for the remainder.
➤U.S. hospitals transfused nearly
14 million units of whole blood
and red blood cells to 4.9 million
patients in 2001. The volume of
blood transfused is increasing at a
rate of 6 percent a year.
SOURCE: National Blood Data Resource Center,
Food and Drug Administration
Virginia Blood Services
processes donations, then sends
them to Dallas for testing.
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SSummer 2003 • Region Focus 7 Summer 2003 • Region Focus 7
Anticoagulants like
heparin reduce bleeding
during surgery, while lasers
seal off blood vessels as they
cut tissue. Blood suctioned
from the surgical field is fil-
tered and packaged for reuse
instead of being discarded.
Blood conservation has
made a big difference with
certain surgical procedures,
according to Dr. Waters. A
liver transplant performed a
decade ago would have
required 200 to 300 units of
blood. The same procedure
requires only two to three
units today. 
A widespread reduction
in blood usage would require
changing how doctors prac-
tice medicine, notes Dr.
Waters, but it also would
save money and improve
surgical outcomes. “Patients
[who receive fewer transfu-
sions] generally experience
lower operative infection
rates and shorter hospital
stays, which gives hospitals
more available beds.”
—CHARLES GERENA
RESERVISTS DEPLOYED
Businesses Hold
Own — Fill Voids
T
he call-up of reservists
over the past several
months hasn’t had much effect
on business operations, or has
it? The answer depends on
whom you ask.
Large businesses shuffled
workloads or hired tempo-
rary workers to cover
responsibilities while those
serving were gone. “At
Capital One, the call-up
peaked in late February and
early March,” says Hamilton
Holloway, media relations
manager at the financial
services company. “Each
area pulled together and
spread out the work.”
Small businesses and the
self-employed had a much
harder time filling the void.
But few reservists own their
own companies. A 2000
survey by the Department
of Defense (DOD) indi-
cated that, of the 75 percent
of reservists who work in
civilian jobs, “30 percent of
reservists worked for gov-
ernment at the federal,
state, or local level; 63
percent worked for a private
sector firm; and 7 percent
were self-employed or
worked without pay in their
family business or farm.”
Businesses are required
by law to rehire those who
serve in the reserves and
National Guard. Yet many
went one step further and
made up any difference
between military and civil-
ian wages.
As of April 16, approxi-
mately 25,000 National Guard
members and reservists were
deployed from the Fifth Dis-
trict, according to the DOD.
“The reservists’ numbers are
so small that they’re not
having an impact on employ-
ment,” says William Metzger,
chief economist at the Vir-
ginia Employment Commis-
sion. The latest figures show
a slight drop in civilian
employment in the Hampton
Roads area — which has a
large military presence — but
some of that is due to the
absence of full-time military
personnel who were moon-
lighting in civilian jobs,
according to Metzger.
While companies have
seemed to handle personnel
shortages well for now, the
need for reservists has not
necessarily ended. The
verdict is still out as to
whether longer or multiple
call-ups may adversely affect
business operations in an
already sluggish economy.
—ELAINE MANDALERIS
WATER RESOURCES UPDATE
Rainfall Cures
Drought, But Other
Issues Remain
A
fter much of the Fifth
District suffered from
drought last summer, above-
average precipitation in the fall
and winter months replenished
reservoirs and helped com-
munities remove water-use
restrictions. As usual with
Mother Nature, however, her
bounty was a mixed blessing.
Drought conditions had
plagued the region periodi-
cally since 1998. Therefore, it
would take many more
months of heavy rain to make
up for the deficits accumu-
lated over that period, notes
Gloria Forthun, regional cli-
matologist for the Southeast
Regional Climate Center. 
Still, the fall and winter
deluges helped alleviate the
region’s long-term drought.
State officials in Virginia,
Maryland, North Carolina,
and South Carolina have
indicated that groundwater
sources are being replen-
ished. “The Southeast is
fairly lucky because the
recharge rate is faster than
in other parts of the
country,” explains Forthun.
“When we have rains like
this, groundwater sources
are quick to respond.”
While the rainfall helped
groundwater levels recover
in the Fifth District, it was
too much at the wrong time
for the region’s agriculture
industry. “We’ve gotten too
much rain,” notes H. V.
Mangum, information coor-
dinator at the North Car-
olina State Office of the
federal Farm Service Agency.
“The fields are so wet that
farmers have had to wait to
plant their crops for 2003.”
Wet conditions delayed
the planting of tobacco and
peanuts in the Tar Heel
State by several weeks and
prevented tobacco planters
from fumigating their land.
Some farmers in South Car-
olina also couldn’t tend to
their soggy fields. The only
“crops” that appear to have
benefited from all of the
rain are pastures, which had
been dry for years. Now,
there is more food for
poultry and cattle.
While communities cope
with the abundance of rain,
they’re continuing to strug-
gle with the financial fallout
of the five-year drought. In
April, Gov. Mike Easley
Winter storms helped
replenish reservoirs, enabling
communities to remove
water-use restrictions.
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O8 Region Focus • Summer 2003
approved $432,000 in
grants to Statesville and
Eden in North Carolina to
reimburse them for
increased spending on their
water supplies. Likewise,
Mangum says his agency is
still providing financial
assistance to drought-
stricken farmers.
Ultimately, the legacy of
the five-year drought is that
it “woke everybody up,” says
Forthun, prompting state
and local officials to re-eval-
uate their management of
water resources.
—CHARLES GERENA
ECONOMIC FREEDOM
Report Measures
Impact of Govern-
ment Regulation
on Free Markets
W
hat influences eco-
nomic prosperity and
growth? That’s the $64,000
question for development
officials and business leaders.
Their answers range from
proximity to transportation to
the availability of relocation
subsidies. 
In a 2002 report, The
Fraser Institute in Canada
and the National Center for
Policy Analysis in Dallas,
Texas, explored another set
of influences on business
activity. They used a 10-point
scale to score U.S. states and
Canadian provinces on their
“economic freedom,” or how
much government interferes
with the ability of buyers and
sellers to make mutually ben-
eficial transactions.
“The freest economies
operate with a minimal level
of government interference,
relying upon personal choice
and markets to [determine]
what is to be produced, how
it is to be produced, how
much is produced, and for
whom production is
intended,” wrote Amela
Karabegovi´ c, Fred McMahon,
and Dexter Samida in the
report. “As government
imposes restrictions on these
choices, the level of eco-
nomic freedom declines.”
Some would argue that
it’s the government’s respon-
sibility to intervene in the
marketplace when busi-
nesses aren’t playing fair or
producing desirable goods
and services such as parks.
“While government can
fulfill useful roles in society,
there is a tendency for [it] to
undertake superfluous activ-
ities as it expands,” argues
the report’s authors. “Gov-
ernment spending…reduces
economic freedom once [it]
exceeds what is necessary to
provide a minimal level of
protective and productive
functions.”
Since the size of govern-
ment influences economic
freedom, it was one of the
variables analyzed in the
report. The authors also ana-
lyzed the level of taxation in
communities and legal
requirements on labor
markets, including minimum
wage laws and occupational
licensing. The result was
economic freedom scores for
U.S. states and Canadian
provinces for each year
between 1981 and 2000.
Over that period, Mary-
land, North Carolina, South
Carolina, and Virginia
improved their scores on an
all-government index, which
captured the effects of
federal, state, and local gov-
ernment activity on eco-
nomic freedom. Maryland
improved the most, going
from a score of 4.8 in 1981
to 6.3 in 2000.
West Virginia’s score on
the all-government index
didn’t improve, however.
Fred McMahon, director of
the Centre for Trade Glob-
alization Studies at The
Fraser Institute, says the
Mountain State’s score for
size of government “came
behind six provinces, which
is remarkable given how
much smaller government is
on average in the United
States.” The state’s taxation
score was a little better,
coming ahead of most
Canadian provinces and one
state. “On the labor market
side, West Virginia comes
ahead of all provinces and at
least some states, though it
remains in the bottom third
of the rankings.”
While many factors affect
local economies, McMahon
and the report’s other
authors found that states like
West Virginia with a low
level of economic freedom
tend to be less wealthy, on a
per capita basis, than their
neighbors. This link also has
been demonstrated by The
Fraser Institute’s Economic
Freedom of the World studies,
which have scored nations
around the globe for the last
20 years.
—CHARLES GERENA
TRAVEL AND TOURISM
INDUSTRY
Fifth District 
Does Well in a
Difficult Year
F
or the travel and tourism
industry, 2002 was a
challenge, to say the least. “We
had to battle a recession, the
aftereffects of the Sept. 11
terrorist attacks, the threat of
terrorism, and conflict in the
Middle East,” recounts Greer
Beaty, director of public
How the Fifth District Stacks Up
Scores on All-Government Index, 2000
SIZE OF LEVEL OF LABOR MKT. TOTAL NATIONAL
GOV’T. TAXATION FREEDOM SCORE RANK
Maryland 6.9 5.8 6.1 6.3 41
North Carolina 8.1 6.3 6.7 7.0 15
South Carolina 7.0 5.8 8.1 7.0 15
Virginia 6.9 6.2 6.5 6.5 35
West Virginia 5.4 4.8 6.5 5.6 50
NOTE: Scores are based on a 10-point scale, with 10 being the best score for a particular set of economic freedom variables.
SOURCE: “Economic Freedom of North America,” The Fraser Institute/National Center for Policy Analysis, 2002Summer 2003 • Region Focus 9
relations for the North
Carolina Division of Tourism,
Film, and Sports Development.
“These factors have influenced
people to take shorter trips,
stay closer to home, and drive
rather than fly.”
In response, tourism offi-
cials in the Fifth District have
focused on strengthening
their existing market of
regional travelers. “Our adver-
tising focused more on close-
in markets to encourage
people in the suburbs to make
a trip to Washington, D.C.,”
says Rebecca Pawlowski,
media relations manager of
the city’s Convention and
Tourism Corporation. 
In recent years, fewer
people have flown in and out
of the United States. Overseas
arrivals dropped 12.3 percent
in 2001 and 8.3 percent in
2002, while overseas depar-
tures fell 6 percent in both
years. Security concerns weigh
heavily on everyone’s minds,
while apprehension over the
state of the economy weighs
on wallets and checkbooks. 
State travel and tourism
markets have weathered
these changes differently.
Those that rely on air traffic,
foreign visitation, or business
travelers have faced greater
challenges, while those with
mostly regional tourists have
done better. Much of the
Fifth District fell into the
latter category, according to
state tourism officials. 
Traditionally, most trav-
elers to the region arrive by
car, ranging from about 50
percent of travelers in the
District of Columbia to 95
percent in West Virginia.
Visitors tend to come from
within the region and north-
ern states like New York. 
As a result, tourism offi-
cials in the Fifth District say
they have fared relatively well
during the travel downturn.
Several states managed to
increase their visitor flow in
2002, including North Car-
olina (up 3.2 percent), Virginia
(up 6.4 percent), and West
Virginia (up 8.5 percent).
Maryland and the District of
Columbia saw slight declines
in visitation for 2002 (down
1.6 percent and 3.6 percent,
respectively). (South Carolina
hadn’t released their 2002
numbers as of press time.)
Officials aren’t sure how
much of these increases were
due to people choosing
domestic destinations over
foreign travel. But they’re
confident that focusing on
travelers within driving dis-
tance paid off. “Our equity
in these markets came to
fruition when people wanted
to drive more,” notes Martha
Steger, public relations direc-
tor at the Virginia Tourism
Corporation.
Some states will con-
tinue to focus on regional
tourism, partly because of
the challenges of developing
air service in small markets.
“We fish where the fish are,”
notes Chris Canfield, West
Virginia’s tourism and mar-
keting director. Others are
widening their net, though.
Virginia wants to attract
Europeans to the state
during Jamestown’s 400th
anniversary in 2007, while
North Carolina hopes that
the centennial of the Wright
Brothers’ flight in Kitty
Hawk will be a global draw
this December. 
—CHARLES GERENA
PAYING AT THE PUMP
War, Winter, and
Unrest Spike 
Gas Prices
G
as prices fluctuated last
spring, spiking up to an
average price of about $1.71 per
gallon at the pump just about
the time U.S. troops invaded
Iraq. It wasn’t just wartime
uncertainty that helped drive
prices, though. Contributing
to the price hikes were an
abnormally cold winter,
especially in the Northeast,
and a strike in Venezuela,
which provides 10 percent of
the United States’ crude oil.
Civil unrest in Nigeria has also
constricted supply, as oil
companies have pulled out
personnel because of fears for
personal safety.
“There are still a lot of
‘ifs’ out there,” says Lon
Anderson, director of public
and government relations
for AAAMiddle Atlantic. In
late April, the Organization
of the Petroleum Exporting
Countries increased its pro-
duction quotas. Also, the
United States is working to
return Iraqi oil fields to full
production.
Summer gas prices are
expected to average $1.46
per gallon, 7 cents higher
than 2002 summer prices
and above the average of
2000 and 2001, according
to the Energy Information
Administration’s short-term
energy outlook. 
Price increases typically
are passed on to the con-
sumer, says Anderson. “The
tough thing about oil and
gas prices is they’re a com-
ponent of virtually every-
thing — clothing, food,
everything that comes to
market has a price built in.”
Gale Ellsworth, presi-
dent and CEO of Fairfax,
Va.-based Trailways Trans-
portation System, says the
firm’s charter bus companies
offset the fuel costs.
“When they price those
trips, they calculate in a sur-
charge for increased fuel
prices,” she says. “And
scheduled route operators
are buying in bulk, but they
have to pass along the rate
hike to the passenger as
well.” Typically, the sur-
charge is roughly the same
percentage as the price
increase, she says. The
charge is removed when
prices drop, she notes. 
Someone has to absorb
the price increase. Pity the
poor pizza delivery driver,
though. Pie Works of
Greensboro, N.C., says its
pizza prices are stable and
its delivery drivers, who use
their own vehicles and are
paid a per-trip fee, have
absorbed the increase.
Oh well, maybe they get
good tips.
—BETTY JOYCE NASH
Summer 2003 • Region Focus 9
Trailways Transportation
System’s charter bus
companies use a surcharge to
offset increased fuel costs.
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In the red : pressure on local blood markets

http://www.richmondfed.org/publications/research/region_focus/2003/summer/pdf/short_takes.pdf

In the red : pressure on local blood markets

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