Hastings, Steven E.

Tanjuakio, Rodolfo V.

English

Research Papers in Economics

The Economic  Contribution of
Agriculture in Delaware:  Reply
Rodolfo  V. Tanjuakio and Steven E. Hastings
Using  final  demand  as the  impact  variable  is  ad-  the  output required  from manufacturing  and  ser-
mittedly  the  original intent  of input-output  analy-  vices.  Since  all  sectors  (manufacturing,  services,
sis.  However,  to  account fully  for the  output  of a  and  agriculture  itself)  are  prevented  from  buying
particular  industry using this approach,  one would  from  agriculture,  no  additional  output is  required
need to identify all other industries that would have  from  agriculture.  The  total  economy-wide  output
production  links  to  the  industry.  This  can  be  a  multiplier,  however,  fully  accounts  for  agricul-
rather  tedious process,  especially  with an  industry  ture's  output  without  double  counting  and  at the
with many  interindustry  connections  in a detailed  same time includes the direct, indirect, and induced
input-output  table. In  our paper, the  use of output  output  effects  required  from  manufacturing  and
as the impact  variable circumvents  this identifica-  services.  The  only  output  effect  from  agriculture
tion process by simply using the output data of the  itself will be the original  output.
industry  or  industries  being  analyzed.  These  data  In the case  where the  RPCs of all three  sectors
are available for agricultural and manufacturing in-  are  set to  zero,  the total  output multiplier  of each
dustries  and are more  accurate  than  final  demand  sector will  be  1. This is clear  in IMPLAN,  where
data.  the  direct  coefficients  matrix  (A)  is  derived  by
Noting  the  double  counting  that  would  result  multiplying  the  regional  market  share  matrix  by
with the  use  of output  as  the impact  variable,  the  the regional absorption  matrix. When the RPCs  of
regional purchase coefficients (RPCs) of the indus-  all  sectors  are  set to zero,  the  regional  absorption
tries  being  analyzed  are  set  to  zero.  Setting  the  matrix is a null matrix. This makes A a null matrix
RPCs  of these  industries  to  zero  effectively  pre-  as well. The resulting multiplier matrix is simply (I
vents  other  local  industries  from  buying  from  - A)-'  =  (I - 0)- 1  =  I.  In  this  case,  the  total
them.  This means  that in the  impact analysis  with  output multipliers for each sector are equal to  1 and
output as the impact variable, the total impact of an  are consistent with the original output totals. How-
industry  will  exclude  any  additional  output  re-  ever, by  setting  only the  agriculture  RPC to zero,
quirements for the industry coming from the direct,  the A  matrix  elements  will  not  all  be  zero.  This
indirect, and induced effects  of the original output.  leads to a total economy-wide output multiplier for
For example,  in analyzing  the  contribution  of ag-  agriculture  that  is greater  than  1 with  no  double
riculture  in  an  economy  with  three  sectors-  counting  of the output of agriculture.
agriculture, manufacturing,  and services-with  to-
tal  agricultural  output as  the  impact variable  and
agriculture's  RPC set to zero,  the total output mul-  References
tiplier for agriculture  (column sum of elements in
the (I - A)-'  matrix for agriculture) will definitely  Tanjuakio,  Rodolfo V.,  Steven E.  Hastings, and Peter J. Tytus.
be greater than  1. It includes the  original output of  1996.  "The  Economic  Contribution  of  Agriculture  in
ric e as scified  in te im  a  is p  Delaware."  Agricultural and Resource Economics Review agriculture  as specified  in the impact  analysis plus  25:46-53.
the direct,  indirect, and induced effects  of and on the direct,  indirect,  and  induced effects  of and  on  Taylor,  Carol,  Susan  Winter, Greg  Alward,  and  Eric  Siverts.
1993.  Micro IMPLAN  User's Guide, Version 91-F.  U.S.
Rodolfo  V.  Tanjuakio  is  research  associate  and Steven  E. Hastings  is  Department  of  Agriculture,  Forest  Service,  May  1993.
professor,  Food  and  Resource  Economics  Department,  University  of  Modified by Douglas Olson  and Scott Lindall of the Min-
Delaware.  nesota IMPLAN  Group,  Inc.  March  1994.

be greater than 1. It includes the original output of 1996. &quot;The Economic Contribution of Agriculture in ric e as scified in te im a is p Delaware.&quot; Agricultural and Resource Economics Review agriculture as specified in the impact analysis plus

indirect, and induced effects of and on the direct, indirect, and induced effects of and on Taylor, Carol, Susan Winter, Greg Alward, and Eric Siverts.

THE ECONOMIC CONTRIBUTION OF AGRICULTURE IN DELAWARE: REPLY

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