C) ) 'Ill BULLETIN 429 FEBRUARY 1972 -N t~i, THE STRUCTURE of the ALABAMA ECONOMY: An Input-Output Analysis T-' -s Agric ultural Experiment Station UNIVERSITY Auburn, Alabomo I AUBURN E. V. Smith, Director CONTENTS Page OBJECTIVES ----- _4 PROCEDURE THE STATE MODEL----- --- 5 5 _11 _14 -14 -17 The Flow Table------Technical Coefficients-Interdependence Coefficients INCOME AND EMPLOYMENT MULTIPLIERS Income --- - Multipliers Multipliers--------------------------- Employment -- -20 _24 _25 -27 -29 -29 Combined Effects------- SUMMARY AND CONCLUSIONS __________ * ITERATURE CITED----- -------------------- A P PEN D IX ------------ ---- - - - - - - - - - - - - - - Composition of Sectors of the Alabama Model_ ACKNOWLEDGMENT Chastain, E. W. McAppreciation is expressed to E. Coy, L. E. Wilson, and C. L. Vanlandingham, members of the reading committee who reviewed this publication. Special thanks are due Ray Donaldson for summarizing and tabulating much of the data used in the study. D. FIRST PRINTING' 3M, FEBRUARY 1972. The Structure of the Alabama Economy: An Input-Output Analysis* WAYNE C. CURTIS** INCOME and employment opportunities in Alabama is of increasing concern to both public and private groups at various levels. Often, however, these attempts to alleviate low income, underemployment, and unemployment problems have been hampered by insufficient information concerning economic structure of the State. For orderly economic development, some means of assessing the impact of alternative developmental approaches should be devised. One device that may be used to estimate the total effects of a given change in economic activity is the input-output model. 1 This type of analysis could be useful to groups interested in promoting growth and development at various levels within the State. For example, it could be used to estimate total effects on income and employment from a new plant in a particular community. At a higher level, the effect that a regional marketing facility might have on the area it serves could be approximated. The comparative impact of various types of development could be evaluated through input-output techniques, and this could be especially helpful to planners at the state level. The same procedure could be used to estimate the negative effect on income and employment of the closing of a firm or industrial complex. IMPROVING * This report represents partial results of Alabama's contribution to S-79, a study of rural development and the quality of life in the rural South. *s* Assistant Professor, Department of Agricultural Economics and Rural Sociology. Input-output analysis refers to a systematic method of analyzing the interrelationships between an industry's output of goods and services and the volume of goods and services needed to achieve a given level of production. 4 ALABAMA AGRICULTURAL EXPERIMENT STATION OBJECTIVES The overall objective of this study was to estimate and evaluate the structural relationship of the various sectors of the Alabama economy. Particular emphasis was placed on agricultural and related sectors because of their economic importance to the State. Specific objectives were: (1) To delineate sectoral flows of goods and services within the Alabama economy; (2) To evaluate the direct, indirect, and induced effects on income and employment from changes in various economic activities; (3) To develop and interpret income and employment multipliers for the economy; and (4) To estimate the future income and employment impacts of various changes in sectoral output. PROCEDURE An input-output model for the Alabama economy was developed through the use of the adjusted national model and secondary data.2 The model was constructed for the year 1967 because latest detailed data on output, income, and employment were available for that year. Most of the data used in the study came from various census and other government publications. The Alabama economy was divided into 17 endogenous and 4 exogenous sectors. 3 The endogenous, or processing, sectors contain industries that are producing goods and services within Alabama. The exogenous portion of the model, on the other hand, comprises the final demand and final payments sectors. Final demand is composed of household consumption expenditures; State, local, and Federal government purchases; and exports. Final payments include imports of goods and services from outside Alabama, wages and salaries paid to households, rental income, proprietor income, and payments to the government sectors. Delineation of the above sectors was done basically according to the industry classification used by the Bureau of Labor Sta2 For a detailed discussion of the theoretical aspects of Leontief input-output analysis, methods and procedures used in developing the model, and interpretation and computational procedures used in deriving the coefficients, see references 2, 4, 5, 6,7, 8, 9, 11, and 12 in the Literature Cited section. SFor purposes of this study, a sector of the economy is assumed to be a unit composed of a group of similar industries. THE STRUCTURE OF THE ALABAMA ECONOMY 5 tistics. This aggregation procedure reflects the structural relationships of these sectors to the Alabama economy. Composition of each sector of the model is presented in the Appendix. THE STATE MODEL The Flow Table In the transactions or interindustry flow table for Alabama, Table 1, the upper left quadrant comprises the sectors that produce goods and services within the State - the endogenous or processing sectors. State and local government, Federal government, household, and export columns represent the final demand sectors. Final payment sectors are comprised of State and local government, Federal government, household, and import rows. Each row entry in the table represents sales by the specified producing sector to the purchasing sector represented by each column. For example, firms in the livestock sector grossed $67,740,000 in sales of goods and services to firms within that sector; $18,574,000 to the crops sector; $1,427,000 in sales to the farm forestry sector; $107,614,000 to the agricultural processing sector; and $581,000 in sales to the services sector. A total of $205,996,000 in sales of goods and services was made by this sector to the endogenous or processing sectors. The livestock sector also sold goods worth $63,778,000 to the Federal government, $28,318,000 to households, and $192,064,000 to businesses outside the State. Entries for the remaining rows in the table can be interpreted in a similar manner. Each column entry in Table 1 represents a purchase by the sector named at the top of each column from the specified producing sector. Column entries represent the input structure the mix of goods and services used in producing the final product - of each purchasing sector. For example, the livestock sector purchased $67,470,000 worth of goods and services from firms within the sector, $41,788,000 worth from the crops sector, $94,951,000 worth from the agricultural processing sector, $31,655,000 worth from the wholesale and retail trade sector, and a total of $263,324,000 worth of goods and services from the endogenous sectors of the State economy. Export figures were computed by estimating total demand of each sector (total gross output) and demand for final consump- TABLE 1. INTERINDUSTRY FLOWS OF C uODS AND SERVICES, ALABAMA ECONOMY, 1967 and apparel SFarm and wood Industry producing stock Crops frmst forestry AgricultuLumber Aricultural Mining processing Construction Thou. dot. Thou. dot. 18,574_ 2,909 0 43 110 5,804 540 329 0 33 10,892 2,724 3,948 1,312 21,942 25,275 4,115 98,550 44 122 83,151 0 181,867 Thou. dot. 1,427 534 25 1,013 0 487 0 0 14 24 302 676 6 1,744 53 124 6,429 Thou. dol. 107,614 14,922 54 159,344 29 1,519 675 206 0 8,737 1,710 4,885 20,349 2,028 43,759 5,257 7,266 378,354 Thou. dol. 0 0 0 15 3,437 6,495 50 397 0 355 7,340 8,810 22,580 6,300 23,846 Thou. dol. 0 449 0 248 427 239 576 7,206 152 1,084 1,070 24,751 17,641 1,577 105,871 6,695 7,900 682 276 386,225 956,275 1,519,344 Thou. dol. 6,487 4,956 21 1,910 16 1,284 132,635 106 16 4,288 27,032 3,075 7,755 1,963 53,304 6,304 2,984 254,136 Thou. dot. 0 1,451 568 101 6 1,922 Livestock - - - -- - -- -- -- C rop s -- --- -- --- --- -- --- -- Farm forestry-- -Agricultural processing M ining--- - - - - -- - - - - - Construction .- - - - - - - - - - Textiles and apparel Lumber and wood Furniture and fixtures Paper and allied products Chemical and allied products products--_-utilities ----- M anufacturing .---------------- Transportation Communications ----------------and Wholesale and retail trade ------Finance, insurance, and real estateServices -- - -- - -- -- - - -- -- -- -- -TOTAL ENDOGENOUS----------- State and local government-----Federal govemnment------------- Households -------------------Impo rts -- - - - - - - - - - - - - - - - - - - - - TOTAL CROS5 OUTLAY---------. 67,740 41,788 0 _94,951 10 _4,424 241 _ 12 _ 0 121 608 990 10,834 947 3.1,655 6,724 2,279 -263,324 29 122 226,681 0 490,156 o 529 56,017 110 1,623 2,013 6,678 24,691 2,468 33,226 7,720 3,811 142, 934 I c m 36,074 3,795 119,494 249 146 6,390 0 13,214 498 561 165,021 373,766 918,200 931 749 69,728 60,489 251,391 175,86 183 1,213 428,428 553,740 1,237,700 242 565 100,296 73,463 317,500 0 C Continued R1 TABLE 1 (Continued). INTERINDUSTRY FLOWS OF GOODS AND SERVICES, ALABAMA ECONOMY, Industry producing Furniture and fixtures Paper and allied Chemical and allied Manufacturing Trans portation 1967 Wholesale and retail trade Communications and utilities Thou. dol. Thou. dol. Thou. dol. Thou. dol. 744 726 0 7,932 771 1,739 2,045 1 45 4,822 10,364 Thou. dol. Thou. dol. Thou. dol. M 0 0 0 Livestock ---------------------------------------------C rops ---------------------------------------0 0 94 11 0 0 Farm forestry-------------------------------8,011 13 4,334 Agricultural processing M ining ---------------------------------------5 234 1,037 Construction 349 2,309 3,270 350 1,725 5,017 Textiles and apparel 4,943 280 5,524 Lumher and wood-__ Furniture and fixtures 395 2 0 Paper and allied -__________________________________ 1,600 99,973 9,093 106,250 236 13,612 Chemical and allied 25 409 0 3,085 0 0 0 18 1,219 0 01 0 5,573 5 2,499 467 183 13 ----------------------------------------------------------------------------------------------------------------------------------------------7,128 3,975 831 15,762 4,386 20,957 3,770 8,370 14,240 5,857 35,723 32,919 9,357 2,931 38,508 33 22,456 251 25,294 0 14,831 62 4 0 Manufacturing--------------------Transportation Communications and Wholesale and retail utilities -------trade----------Finance, insurance, and real estate Services -----------_------------ ------------------------------------------------33,357 162 371 6,909 49,602 3,472 33,327 164 251 1,145 4,288 19,549 10,995 3,593 595 2,977 4,618 6,075 22,403 m 0 z 0 4,732 1,706 6,490 4,441 200,533 6,167 6,020 204,773 8,224 6,765 127,893 20,473 7,445 173,314 12,640 24,288 89,454 35,845 13,059 97,905 TOTAL ENDOGENOUS -------------_--------- State and local Federal Households Imports government -----_------- government------------------_ 47,273 154 1,178 352 678 520 942 245 1,268 37,115 1,885 6,342 6,391 5,453 7,994 .______--------------- 25,295 0 TOTAL GROSS OUTLAY_____________ 73,900 282,860 635,900 151,477 116,023 411,742 1,142,839 2,253,455 254,066 147,664 186,364 369,888 964,770 734,000 3,525,700 614,044 658,439 1,596,435 Continued 5205,313 TABLE 1 (Continued). INTERINDUSTRY FLOWS OF GOODS AND SERVICES, ALABAMA ECONOMY, 1967 Total gross output Inutypouig Inutypouigand insurance, real estate Finance, State Services Total and local Federal endogenous government government Households Exports Thou. dot. Thou. dot. Thou. dot. 205,996 Thou. dot. Thou. dot. Thou. dol. Thou. dol. 192,064 40,091 7,023 134,399 239,854 684,619 Thou. dol. Livestock - -- -- --Crops --- ------- --- - - Farm forestryAgricultural processing Mining - - - - -- -- - Construction -Textiles and apparel Lumber and wood Furniture and Paper and allied Chemical and allied Manufacturing------------- 2,804 1,716 0 581 52,049 4 451 2 70,405 681 0 40 .23,638 1,784 0 63,778 583 31 33,938 108 29 2 5,500 818 11 0 329,223 7,374 108,578 146,576 100,542 0 28,318 47,693 3,726 0 704 137,258 105 0 0 986 4,030 478 5,439 678 454,578 2,981 583,450 fixtures and 987 598 1,219 Transportation ------------- 103,256 44,105 53,678 533 1,040, 735 137,182 184,006 261,136 127,524 71,335 575,711 128,945 2,751,145 255,196 Communications real utilities. 1,520 16,611 5,174 75,995 12,202 153,517 7,571 271,860 597,626 1,040,035 9,461 Wholesale and retail trade--Finance, insurance, and 7,075 1,757 6,945 22,229 8,589 11,014 976 67,889 2,752 10,824 13,463 0 0 795 294 443,400 646,941 1,227,700 2,981 213,977 317,500 71,540 1,625 73,900 17,885 479,052 635,900 274,237 271,433 734,000 703,478 2,691,965 3,525,700 129,666 148,408 614,044 283,925 278,198 658,439 903,194 98,117 1,596,435 353,975 403,904 588,716 677,396 0 490,156 181,867 13,214 918,200 251,391 1,519,344 P- 0 C C Services----------Federal estate---------- ----------- TOTAL ENDOGENOUS-------- State and local government-H ouseholds---------------Imp orts---------------- --TOTAL GROSS government 30,528 20,745 217,376 3,948 4,483 7,359 6,088 366,387 590,564 1,040,035 1,136,860 m x z -------- OUTLAY------ 761,165 149,888 1,136,860 1,349 513 309 309 686,441 1,286,891 595,655 0 1,484,770 1,486,589 1,477,059 7,452,102 810,706 1,465,842 96,397 812,445 0 7,313,111 0 8,823,883 7,991,820 33,359,966 Im -{ z THE STRUCTURE OF THE ALABAMA ECONOMY 9 tion within the area, in the manner followed by Moore and Peterson (12) and Little and Doeksen (9). The amount produced above these demands was the net exports for each sector. From an examination of the export column, it becomes obvious that many sectors of the Alabama economy are large exporters. In terms of gross dollars of sales, the manufacturing sector had the greatest volume of exports (approximately $2.7 billion) and the furniture and fixtures sector had the smallest volume, $1.6 million. If exports are expressed as a proportion of total output, then the mining sector had approximately 95 per cent of its total product shipped to points outside Alabama. Both manufacturing and paper and allied products sectors exported more than 75 per cent of total output. Like amount exported, the amount imported is also a net figure. Demands in excess of endogenous production were considered to be imported. On this basis, the manufacturing sector was the largest importer, accounting for about $2.2 billion worth of goods and services. Other endogenous sectors importing large quantities of goods and services were the finance, insurance, and real estate; textiles and apparel; and wholesale and retail trade sectors. Total gross output of the Alabama economy approximated $33.4 billion. ESTIMATED EXPORT BALANCE. The position of the endogenous sectors of the economy with respect to import-export balance can be estimated as in Table 2. This information not only provides insight into the relative position of each sector within the State economy, but it also serves as an approximation of the Alabama economy's competitive position with the rest of the Nation. As noted in Table 2, the producing sectors in the State's economy had a net export balance of approximately $333 million in 1967. This resulted primarily from net export balances in the services, manufacturing, paper and allied products, and livestock sectors. Net exports of the three primary agricultural sectors totaled about $239 million, second only to those of the manufacturing sector. As might be expected, largest deficit occurred in the wholesale and retail trade sector since much of this sector's output is imported from other areas for resale in the State. Other large deficits occurred in the construction, agricultural processing, and finance, insurance, and real estate sectors. Data in Table 2 do not take into consideration imports and exports of the exogenous sectors. With these data included, particu- 10 TABLE 2. ALABAMA AGRICULTURAL EXPERIMENT STATION ESTIMATED IMPORTS, EXPORTS, AND NET EXPORT BALANCE, SECTORS, ALABAMA ECONOMY, 1967 ENDOGENOUST SetrNet Setrimports Net exports Net export balance Thou. Thou. dol. L rvrur, dol. rurrsrs~~dol. Thou. rr~ Livestock ------------------------192,064 40,091 40,091 Crops -----7,023 7,023 Farm forestry------- --------------239,367 373,766 134,399 Agricultural processing----------------------------179,365 239,854 60,489 ---------Mining6----------684,619 -271,656 956,275 Construction ---------------------------------------93,201 553,740 646,941 Textiles and apparel--------------------------------140,514 213,977 73,463 Lumber ard wood------------------------------------. 1,625 1,625 Furniture and fixtures----------_-------196,192 479,052 282,860 Paper and allied .-.------------------------------------271,433 411,742 Chemical and allied 438,510 2,691,965 Manufacturing --- _------------------_----------------- 2,253,455 744 148,408 147,664 Transportation -------------------------------------------91,690 278,198 Communications and utilities --- _------------- 369,888 -422,196 98,117 520,313 Wholesale ard retail trade -231,239 366,387 597,626 Finance, insurance, and real estate .-----590,564 440,676 149,888 Services ----------------333,548 7,084,717 6,751,169 TOTAL .---------------1 Net exports less net imports. 192,064 ---------------------------------140,309 ---------------------- larly the household sector, Alabama was a net importer by about $832 million. STRUCTURAL INTERDEPENDENCE OF THE ECONOMY. Structural interdependence among endogenous sectors of the Alabama economy can be estimated by the relative size of the endogenous transactions of each sector in the interindustry flow table, Table 3. The livestock sector, for example, purchased 54 per cent of its inputs from other endogenous sectors and sold 42 per cent of its output to these sectors. In contrast, the manufacturing sector purchased only 4 per cent of its inputs endogenously and sold only 4 per cent of its output to other endogenous sectors. Manufacturing firms in Alabama import most of their raw material purchases and export the greatest proportion of their finished products. In a like manner, the wholesale and retail trade sector purchased only 6 per cent of its non-labor inputs from in-State firms. Furniture manufacturers, on the other hand, purchased 64 per cent of their inputs - mostly wood products - from other firms within Alabama but sold only 1 per cent of output to these firms. Most of the output of this sector was. sold to households. For those sectors where endogenous transactions constitute a large per cent of output, an increase in final demand will have a much greater impact on the state economy than would an equal THE STRUCTURE OF THE ALABAMA ECONOMY 11 THE STRUCTURE OF THE ALABAA ECONOMY 1 TABLE 3. ENDOGENOUS SALES AND PURCHASES OF EACHt SECTOR AS A PER CENT OF GROSS SECTORAL OUTPUT, ALABAMA ECONOMY, 1967 Sector Livesto ck ------ ---- ---Crop s - - - - - - - - - - - - - - -- - - - - - - - - - - - - Farm forestry-- -- - -- -- -- - - - -- Agricultural processing------ Sales Rank Purchases Rank Pct. 1 42 39 5 *36. 3 7 12 32 1 14 16 13 17 5 3 Pct.' 54 54 41 12 20 3 2 7 49 48 45 64 28 4 5 15 11 M in in g ------ ----- ----- Construction----------Textiles and apparel--_-Lumber and wood products Furniture and fixtures--------------Paper and allied Chemical and allied ____ ------ --- -- 10 7 products -------products--------and 1 22 25 4 42 6 9 6 1 10 32 4 28 14 6 15 8 17 9 14 16 13 M anufacturing---------------- -----Transportation --------------------- 15 2 12 4 8 Communications utilities -------- _ Wholesale and retail trade----------- Finance, insurance, and real --- -- --- - -- --- -- -- -- --- -- - S ervices estate----- 11 36 24 11 11 19 12 1Rounded to nearest whole per cent. demand increase in sectors where endogenous transactions con- stitute a small per cent of gross output. Increasing output in a sector brings forth increased input purchases by that sector. If these purchases are made from firms within the State, this will have a greater effect on the economy than if the inputs are purchased from sources outside Alabama. The same holds true for sales. Technical Coefficients Technical coefficients for the Alabama economy are presented in Table 4. Each column entry represents an estimate of direct requirements of that purchasing sector from each producing sector (row entry) per dollar of output. In other words, technical coefficients indicate direct purchases of each processing sector from every other processing sector per dollar of output. These coefficients estimate only the first-round effects of a change in output of one sector on the other sectors from which it purchases goods and services. For example, the livestock sector required the following purchases per $1 of output: 13.8¢5 from the livestock sector; 8.50 from crops; 19.40 from agricultural processing .9¢ sale and retail trade establishments; 1.3¢/ from the finance, insur- firms; from construction; 2.2¢ from transportation; 6.5¢ from whole- TABLE 4. TECHNICAL COEFFICIENTS, ALABAMA ECONOMY, 1967 Textiles and apparel 0.00524 Live- Fm forest Agriprocessing cultural sv-tOCKCrops Livestock - - rCrops _____ Farm forestry-- -- Mining srCon Lumber and wood Furniture and fixtures 0.13820 0.018525 0.00000 Agricultural processing M ining -- - - - - - - - - Construction -Textiles and apparel Lumber and wood products Furniture and fixtures Paper and allied products Chemical and allied products M anufacturing------------- 0.19372 0.00002 0.00903 0.00049 0.00002 0.00000 0.00025 0.00124 0.00202 0.02210 0.00193 0.06458 0.01372 0.00465 0.00006 0.00025 0.46247 0.00000 1.00000 Transportation.-----------_ Communications and and retail trade--- Wholesale utilities- Finance, insurance and real estate .---.---------Services ----- ---------- --State and local government -Federal 0.10213 0.01600 0.00000 0.00024 0.00060 0.03191 0.00297 0.00181 0.00000 0.00018 0.05989 0.01498 0.02171 0.00721 0.12065 0.13898 0.02263 0.00024 0.00067 0.45721 0.00000 1.00001 0.10799 0.04041 0.00189 0.07666 0.00000 0.00000 0.03685 0.00000 0.00000 0.00106 0.00182 0.02285 0.05116 0.00045 0.13198 0.00401 0.00938 0.01884 0.01105 0.48358 0.11720 0.01625 0.00006 0.00000 0.00000 0.00000 0.00006 0.01367 0.02584 0.00020 0.00158 0.00000 0.00141 0.02920 0.03505 0.08982 0.02506 0.09486 0.14350 0.01510 0.00000 0.00030 0.00000 0.00016 0.00028 0.00016 0.00038 0.00474 0.00010 0.00071 0.00070 0.01629 0.01161 0.00104 0.06968 0.00441 0.00000 0.00457 0.00179 0.00032 0.00002 0.00605 0.00167 0.176,43 0.00035 0.00511 0.00634 0.02103 0.07777 0.00777 0.10465 0.02431 0.00000 0.00000 0.00000 0.00018 0.00007 0.00472 0.06789 0.07475 0.00535' 0.02165 0.00319 0.09645 0.05379 0.01124 0.21329 0.17354 0.00003 0.00165 0.00074 0.00022 0.00000 0.00952 0.00186 0.00532 0.02216 0.00221 0.04766 0.005730.00791 0.00054 0.00061 0.17972 0.407016 0.99999 0.00400 0.00002 0.00154 0.0000-1 0.00104 0.10716 0.00009 0.00001 0.00346 0.02184 0.00248 0.00627 0.00159 0.04307 0.00509 C C r- 0.00520 0.00045 0.00018 0.25421 0.62940 1.00000 0.00241 0.00015 H ouseholds --------------- government--------_ Imp orts---------------- --TOTAL ----------- ----------- 0.00000 0.99998 0.003701 0.00298 0.27737 0.24062 1.00002 0.00098 0.34615 0.44739 0.99999 0.06403 0.02309 0.00076 0.00208 0.00178 0.01594 0.31589 0.34229 0.23138 0.00000 0.99999 1.00000 Continued 0.01200 m -v m X z CA z TABLE 4 (Continued). TECHNICAL COEFFICIENTS, ALABAMA Paper alid ECONOMY, uiliies 1967 C Chemical andu-anda alid alled M-u facturing llid rnportation Communicatsalnsaand uatilitis n 0.00000 0.00000 0.00000 0.00003 0.00185 sale-nd retail trade insurance, Finance, and Services real estate m 0 -I m r- Livestock-- - - - - - - - - - - - Crops -- - - - - - - - - - - - - Farm forestry-Agricultural processing Mining - - - - - - - - - - - Construction- - - - - - - Textiles and apparel Lumber and wood products Furniture and fixtures 0.00000 0.00000 0.00000 0.00682 0.00037 0.00363 0.00271 0.00777 0.00000 Paper and and allied products .---allied products Chemical -------- M anufacturing------------ --.--Transportation -------- -------Communications and utilities----retail trade-------- Wholesale and Federal Finance, insurance, and real estate S ervices--- - -- - - - - - -- - - - - - - - - - State and local government------- government------------- 0.15721 0.02141 0.00690 0.03296 0.00593 0.05246 0.01021 0.00698 0.00055 0.00107 0.00000 0.00013 0.00001 0.01091 0.00141 0.00446 0.00048 0.00038 0.00000 0.01239 0.00021 0.00021 0.00000 0.00004 0.00067 0.00000 0.00225 0.00022 0.00049 0.00058 0.00000 0.00001 0.00502 0.00005 0.03657 0.00041 0.04119 0.00000 0.00000 0.00000 0.00000 0.00349 0.00000 0.00270 0.00165 0.00000 0.00056 0.00003 0.02252 0.00009 0.00001 0.00000 0.00025 0.00038 0.00157 0.00029 0.00011 0.00001 0.00225 0.00037 0.03263 0.00010 0.00003 0.00000 0.00051 0.00040 0.00000 0.03699 0.00000 0.00484 0.00072 0.00001 0.00000 wo 0.14475 0.01140 0.01940 0.00137 0.00294 0.00934 0.00265 0.00026 0.00060 0.01125 0.08078 0.00174 0.00651 0.02969 0.01670 0.01920 0.03689 0.00963 0.00971 0.00186 0.00289 0.00381 0.01403 0.02245 0.00818 0.00342 0.00501 0.00095 0.00057 0.00117 0.00146 0.00047 0.00091 m n 0 0.00798 0.04867 0.00840 0.00820 0.00071 0.00128 0.0083 0.01092 0.00233 0.00192 0.00007 0.00036 0.32415 0.63915 1.00000 0.00565, 0.05427 0.03334 0.01212 0.06044 0.00307 0.41376 0.24048 0.99997 0.00497 0.01597 0.07307 0.01173 0.00728 0.00910 0.26140 0.00902 0.03880 0.00622 0.04722 0.02685 0.01825 0.00347 0.00394 0.66953 0.13184 0.99999 z 0 H ouseholds-------------------Im p orts ------------------------ 0.23821 0.44482 0.15807 0.56096 0.99999 0.28302 0.56177 0.99999 0.60433. 0.32592 0.99999 0.57462 0.99999 I TO TA L - ----------- -- -- --- 1.00001 A~A~~ r 14 ALABAMA AGRICULTURAL EXPERIMENT STATION ance, and real estate sector; and 46.20 in services, such as wages and salaries, from the household sector. Input requirements per dollar of output can be similarly interpreted for other sectors of the economy. These data provide an indication of the degree of direct dependency among the various sectors of the Alabama economy. Interdependence Coefficients Interdependence coefficients for the Alabama economy, shown in Table 5, indicate the total output - both direct and indirect required from each sector in the economy per 1-unit increase in output of a particular sector. For example, a $1 increase in output of the livestock sector would cause direct purchases of this sector from itself to increase by 210. However, increased output by the livestock sector necessitates increased purchases from other endogenous sectors in the economy. As purchases by the livestock sector from other sectors increase, each sector will be forced to alter its output to meet the resulting new demand for its products. Final result in this case will be for the crops sector to change its output by 11.0¢, agricultural processing sector by 28.60, wholesale and retail sector by 11.3¢, and finance, insurance, and real estate by 4.10. Total direct and indirect change in output generated by $1 change in output of the livestock sector will be $1.86. Column totals in the interdependence coefficients matrix represent output multipliers for each sector of the Alabama economy. They estimate the total output generated in the economy per dollar change in output of each sector. Highest output multipliers in the economy were those of the three primary agriculture sectors and the furniture and fixtures industry. Agricultural processing also exhibited a high output multiplier. Lowest multipliers were in manufacturing and wholesale and retail trade, where a $1 change in output would generate only a $1.04 and $1.08 change in the economy, respectively. These multipliers point out that there is a higher degree of interdependency between each agricultural sector and the rest of the economy than is true for manufacturing and some of the service industries. INCOME AND EMPLOYMENT MULTIPLIERS In addition to describing the flow of goods and services within the economy and assessing the degree of interdependence among -I m TABLE 5. INTEBDEPENDENCE COEFFICIENTS, ALABAMA ECONOMY, Constructio 1967 Textiles and apparel C m Livestock -Livestock -- - - - C rop s - - - - - - - - - - - - Farm forestryAgricultural processing M ining .-- - - - - -Construction .Textiles and apparel Lumber and wood products _Furmiture and fixtures------Paper and allied products .--- Crops Farm forestry Agricultural processing Mining Lumber and wood Furniture and fixtures 0 on r- 1.21240 0.10989 0.00002 0.28574 0.00014 0.01819 0.00138 0.00255 0.00000 Chemical and allied M anufacturing ------------Transportation Communications and and retail trade insurance, and Wholesale ------------utilities_-___ products. 0.00417 0.01040 0.00502 0.00703 0.04050 0.11272 0.04119 0.01296 1.86429 Finance, real --- 0.12694 1.02817 0.00001 0.03336 0.00078 0.04156 0.00371 0.00424 0.00001 0.00243 0.07280 0.01878 0.03285 0.01051 0.14934 0.16330 0.02952 1.71832 0.15032 0.05661 1.00191 0.13029 0.00007 0.00709 0.04188 0.00358 0.00000 0.00365 0.00803 0.02663 0.06615 0.00296 0.16560 0.02330 0.01556 1.70365 0.17466 0.03591 0.00008 1.25235 0.00010 0.00720 0.00137 0.00248 0.00000 0.01459 0.00604 0.00870 0.03713 0.00437 0.08148 0.01985 0.01353 1.65984 0.00104 0.00056 0.00001 0.00311 1.01400 0.03657 0.00044 0.00737 0.00001 0.00294 0.03524 0.03891 0.10298 0.02867 0.11343 0.16559 0.02158 1.57243 0.00022 0.00040 0.00001 0.00101 0.00030 1.00118 0.00050 0.00649 0.00010 0.00116 0.00107 0.01702 0.01391 0.00162 0.07316 0.00761 0.00639 1.13215 0.00815 0.00538 0.00002 0.00491 0.00007 0.00238 1.12012 0.00068 0.00002 0.00526 0.02920 0.00362 0.00936 0.00252 0.05327 0.00928 0.00403 1.25828 0.00164 0.00612 0.00219 0.00345 0.00008 0.01348 0.00259 1.21975 0.00043 0.00814 0.01006 0.02821 0.10577 0.00151 0.14077 0.04134 0.01880 0.00151 0.00119 0.00017 0.00424 0.00016 0.01184 0.07695 0.09521 1.00541 0.02785 m 0.00783 0 0 0.10230 0.07148 0.01489 0.24226 0.08294 0.03005 1.77627 estate---------_ Services---- - --- ---------TO TAL ---------------- -- 1.61435 Continued In 0ma TABLE 5 (Continued). INTERDEPENDENCE COEFFICIENTS, ALABAMA ECONOMY, 1967 Paper and allied Livestock ---- -- -- -- -Crop s .- - - - - - - - - - - - - - - - - - - Farm forestry- - - - -- Agricultural processing Mining -- - - - - - - - - - - Construction ._ _ _ 0.00174 0.00050 *( ).00003 -( Chemical MConmuniand facturin allied dlli uttu alled llid Manu- Trans- sl cations and tlte uiliies 0.00040 0.00014 0.00000 WholeF sale an insurance, and Services iane retail n trade real estate 0.00249 0.00072 0.00002 0.00073 0.00034 0.00000 0.00149 0.00136 0.00010 0.00079 0.00020 0.00000 0.00398 0.00222 0.00000 0.00749 0.00196 0.00001 rw -- Textiles and apparel------------Lumber Furmiture and wood -------------- 0.01171 0.00051 .00721 ).00373 ).01356 ).00001 and fixtures----------- Paper and allied --------------Chemical and allied------------M anufacturing ----------------Transportation ---------------Communications and utilities----Wholesale and retail trade.------Finance, insurance, and real Services estate- ---------------------T O T A L --- -- -- -- -- -- -- -- -- -- - 1.18747 ).03013 ).00991 ).04566 ).00839 ).07114 ).01789 ).01074 1.42032 0.01719 0.00171 0.00727 0.00076 0.00212 0.00000 0.01765 1.17001 0.01449 0.02709 0.01042 0.06333 0.01451 0.01162 1.36140 0.00316 0.00023 0.00083 0.00068 0.00020 0.00001 0.00177 0.00359 1.00962 0.00336 0.00102 0.01220 0.00323 0.00229 1.04325 0.00816 0.00010 0.04224 0.00070 0.05502 0.00002 0.00111 0.00151 0.01474 1.09449 0.00754 0.07169 0.04373 0.01597 1.35997 0.00210 0.00195 0.02467 0.00017 0.00065 0.00000 0.00048 0.00067 0.00287 0.00975 1.03122 0.02253 0.02389 0.03955 1.16103 0.00496 0.00002 0.00274 0.00036 0.00039 0.00001 0.00282 0.00059 0.00219 0.00399 0.00424 1.01614 0.02525 0.00908 1.07377 0.00243 0.00006 0.03574 0.00018 0.00042 0.00001 0.00137 0.00100 0.00217 0.00318 0.00582 0.02181 1.08062 0.01366 0.04804 0.00003 0.00819 0.00094 0.00236 0.00000 0.00138 0.00155 0.01049 0.04518 0.00740 0.05624 0.03358 1.02088 C r- m x z -I -v m 1.17468 1.24572 z THE STRUCTURE OF THE ALABAMA ECONOMY 17 its sectors, the input-output model may be used for analytical purposes. This is especially true with respect to income and employment multipliers. If household income changes in one sector, the income multiplier indicates the magnitude of total income change in the economy. The employment multiplier, on the other hand, provides a measure of the total change in employment resulting from a 1-unit employment change in a particular sector. Income Multipliers Income multipliers estimate total change in income throughout the economy resulting from a $1 change in income in a sector. The basis for the income multiplier is that a certain amount of income is generated with each change in output. Total change in income per unit change in output can be separated into three components: direct, indirect, and induced effects. Direct income effect represents an estimate of the initial impact on household income per dollar change in output. It is the proportion of each dollar of output that goes to households in the form of wages and salaries, proprietor income, dividend income, or rental income. Direct income effect for each sector is shown in the household row of the technical coefficients matrix, Table 4. Direct and indirect income effects estimate the total change in income in the economy resulting from a $1 income change in a particular sector. Calculation of these effects requires that local consumption expenditures remain at the same level despite changes in household income generated by this output change. A third type of income effect - the induced effect - results from changes in household purchases of locally produced goods and services as household income changes. This recognizes that a change in household receipts initiates a change in the level of household expenditures, which results in adjustments in output in the endogenous sectors and further changes in payments to local households. Hence, "induced" changes in household income result from sectoral adjustments to an initial change in the level of local household expenditures. From the above income effects, two types of income multipliers were computed, Table 6. The Type I multiplier is an estimate of the total direct and indirect change in household income in the economy per dollar change in direct income payments to households by sector. Similarly, it may be viewed as the total amount of income generated in the economy assuming that local 18 TABLE 6. TYPE I ALABAMA AGRICULTURAL EXPERIMENT AND TYPE II INCOME MULTIPLIERS, ALABAMA ECONOMY, 1967 BY STATION SECTOR, Sector Type I multiplier multiplier Type II 2.39 2.29 2.28 3.26 2.51 1.79 1.83 2.54 Livestock----------------------1.68 C rop s ----------------- --------------1.61 Farm forestry-------- --------------1.60 Agricultural processing .--------------------------2.30 M in in g --- ----------------- ------- ------1.77 Construction -------------------1.26 Textiles and apparel-------------------------------1.28 Lumber and wood products-------------------1.78 Furniture and fixtures .-----------------------------1.95 Paper and allied products .----------------------1.58 Chemical and allied products------------------1.68 Manufacturing ------------------------------1.05 Transportation 1.35 Communications and utilities-----------------1.24 W holesale and retail trade---------------------1.05 Finance, insurance, and real estate---------- 1.23 Services-----------------------1.14 ECONOM Y------------------------1.50 - 2.78 2.25 2.39 1.50 1.91 - -------------------------- 1.76 1.49 1.75 1.63 2.14 consumption expenditures do not change. As can be seen from Table 6, the agricultural processing, furniture and fixtures, lumber and wood products, and mining sectors had large Type I income multipliers. Lowest multipliers occurred in manufacturing and wholesale and retail sectors. Average Type I multiplier for the Alabama economy was 1.50. Type II income multipliers indicate the amount of household income generated throughout the economy with each additional $1 increase in income in a particular sector. They also reflect income effects of changes in local consumption as income increases. Average income multiplier for the economy was 2.14. In each case, the Type II multiplier was greater than its Type I counterpart because new rounds of household expenditures are generated within the local economy as a result of changes in output of the endogenous sectors. Care is necessary in interpreting and using the income multipliers described previously. These multipliers reflect the total impact on household income of changes in sectoral income, not of changes in sectoral output. They merely indicate how income will change in the economy if personal income is increased in a given sector; they do not consider how much change in output would be required to provide the increase in income. Perhaps this can best be illustrated by assuming a $1 million increase in output in each sector, Table 7. If the $1 million increase were realized in THE STRUCTURE OF THE ALABAMA ECONOMY 19 the livestock sector, the direct change in household income would be $462,470. This analysis assumed that final demand remains constant in other sectors. Additional output of the livestock sector might be increased sales of calves, pigs, feeder cattle, dairy products, eggs, or any combination of these products. Additional output indirectly required from other sectors of the economy to support this increased output of the livestock sector would raise the household income of this sector by the amount of the Type I income multiplier. Thus, direct and indirect household income generated by the initial increase in income resulting from expanded output of the livestock sector would approximate $776,950. When output adjustments resulting from additional rounds of induced household expenditures are included, the direct change of $462,470 will generate $1,105,303 in household income - by the amount of the Type II income multiplier. The other two primary agricultural sectors exhibit like patterns of personal income generation primarily because of a high degree of interdependence with the rest of the economy. If sales of the TABLE 7. $1 CHANGE IN TOTAL HOUSEHOLD INCOME RESULTING FROM A MILLION CHANGE IN OUTPUT, BY SECTOR, ALABAMA ECONOMY, 1967 Sector Direct change in income Dol. Per $1 million change in output II Direct Tmp i nd Typ tiplier indirec tiplier change' Dol. 776,950 7836,108 773,728 413,356 490,945 320,305 443,072 562,284 667,466 376,372 265,558 340,358 558,576 350,945 634,546 321,522 763,264 2.39 2.29 2.28 3.26 2.51 1.19 1.83 2.54 2.78 2.25 2.39 1.50 1.91 1.76 1.49 1.75 1.63 DTe irect, indirect, induced change' Dol. 1,105,303 1,047,011 1,102,562 585,887 696,199 455,036 633,454 802,360 951,566 535,972 377,787 486,225 790,282 498,115 900,452 457,450 1,091,334 1.682 462,470 Livestock 1.61 457,210 Crops... 483,580 1.60 Farm forestry 179,720 2.30 Agricultural processing 1.77 277,370 Mining 1.26 254,210 Construction.. 346,150 1.28 Textiles and apparel 315,890 1.78 Lumber and wood products 1.95 Furniture and fixtures....... 342,290 1.58 238,210 Paper and allied products 1.68 Chemical and allied products__ 158,070 1.05 324,150 Manufacturing 1.85 413,760 Transportation 1.24 283,020 Communications and utilities 1.05 Wholesale and retail trade--- 604,330 Finance, insurance, and 261,400 1.23 real estate_.............. Services........... 669,530 1.14 1 $1 million times direct household coefficient. ' From Table 3. SDirect income change times Type I multiplier. Direct income change times Type II multiplier. 20 ALABAMA AGRICULTURAL EXPERIMENT STATION crops sector were increased by the same $1 million, total personal income generated in the economy would change by $1,047,011. Likewise, a similar increase in output of the farm forestry sector would generate about $1.1 million in personal income. The agricultural processing and chemical and allied products sectors have relatively small direct household coefficients. That is, they are both capital-intensive rather than labor-intensive sectors. A $1 million increase in output would add only $179,720 and $158,070 in direct household payments, respectively. However, the structural relationships of each with other endogenous sectors are strong enough that an increase in sectoral output directly and indirectly increases household income by $413,356 and $265,558. When induced consumption changes are included, estimates of total household income generated increase to $585,887 and $377,787. In the case of agricultural processing, strong structural ties with other sectors would generate an amount of income over three times as large as the initial or direct change, as compared with 2.4 times as large for the chemical and allied products sector. In contrast to the above sectors, the manufacturing and finance, insurance, and real estate sectors would add much smaller amounts to household income through increased output. Both have relatively weak structural ties to the economy. Thus, both magnitude of the direct change in household income by sector and the degree of structural interdependency are important in evaluating the impact of increased or decreased sectoral output on the level of household income in the economy. Since the Type II income multiplier is always larger than its Type I counterpart, policymakers or others using these multipliers must decide which type of multiplier provides the most realistic estimate of income effects in the Alabama economy. For planning purposes, income multipliers may more nearly approximate a simple average of the two estimates. Employment Multipliers Employment multipliers estimate how total employment is effected by a change in final demand for the output of each endogenous sector. Changes in employment resulting from changes in final demand depend on the employment function of each endogenous sector. The basic assumption was made that employment in each endogenous sector increases at the same rate as output in that sector. This relationship may not hold for all sectors. For in- THE STRUCTURE OF THE ALABAMA ECONOMY 21 dustries where employment has not increased at the same rate as output, employment multipliers may be too high. Agriculture is also a special case because technology is changing so fast that capital has been and still continues to be substituted for labor at a rapid rate. There are also many underemployed resources in agriculture that may be put to other uses as the opportunity presents itself. For these reasons, employment multipliers were not computed for the three primary agricultural sectors. Total effect of a change in final demand on employment within the economy has three components: direct employment changes that result from a specific sector's response to a change in final demand; indirect employment changes resulting from endogenous output adjustments required to directly and indirectly support a change in output; and induced employment changes arising out of sectoral responses to a change in level of local household consumption expenditures. Direct employment effects were computed as a ratio expressing employment per $1,000 of gross output in the manner developed by Bills and Barr (2). Estimated nonagricultural employment for the endogenous sectors is shown in Table 8. To obtain direct employment effects for each sector, sectoral employment was divided by sectoral output. The wholesale and retail and services sectors had the largest direct employment per $1,000 of gross output, whereas the chemical and allied products, paper and allied products, and agricultural processing sectors had the smallest. This is TABLE 8. ENDOGENOUS EMPLOYMENT, NONAGRICULTURAL ALABAMA ECONOMY, 1967 SECTORS, Sector Employment No. Agricultural processing Min ing --------------------------. C onstruction ------------------------------------- ----- 23,600 9,920 50,700 Textiles and apparel Lumber and wood products Furniture and fixtures Paper and allied products -15,000 Chemical and allied products Manufacturing Transportation Communications and public utilities Wholesale and retail trade Finance, insurance, and real estate Services 82,700 19,600 4,400 11,700 131,800 31,600 21,700 179,600 39,800 125,200 Source: United States Department of Labor, Employment and Earnings Statistics for States and Areas 1939-67. 22 ALABAMA AGRICULTURAL EXPERIMENT STATION because the first group of sectors utilizes much more labor than the latter sectors per $1,000 of output. Two types of employment multipliers, analogous to the two types of income multipliers, were computed, Table 9. The Type I employment multiplier is the ratio of the direct and indirect effect to the direct effect; it estimates the total employment generated in the economy by a 1-unit change in employment in a particular sector. For example, a 1-unit change in employment in the agricultural processing sector was estimated to create directly and indirectly 2.72 units of employment in the economy. Likewise, a 1-unit change in employment in the wholesale and retail sector would generate directly and indirectly only 1.04 units of employment. Type I employment multiplier for the aggregate economy was estimated to be 1.56. The Type II employment multiplier introduces the induced effects of household consumption expenditures on employment. As employment increases throughout the economy as a result of a 1-unit change in a given sector, additional employment is created as consumption expenditures increase. Average Type II employment multiplier for the Alabama economy was 2.31. The effect of employment multipliers may be expressed in more meaningful terms by assuming a given increase in output of a particular sector and illustrating the direct, indirect, and induced effects of this output increase on total employment in the economy. Direct, indirect, and induced employment effects of an assumed $1 million increase in output are shown in Table 10. It TABLE 9. EMPLOYMENT MULTIPLIERS, NONAGRICULTURAL ALABAMA ECONOMY, 1967 SECTORS, Sector Agricultural processing Mining -1.82 Construction Textiles and apparel Lumber and wood products Furniture and fixtures Paper and allied products Chemical and allied products Manufacturing Transportation Communications and utilities.... Wholesale and retail trade Finance, insurance and real estate--------Services ECONOMY Type I multiplier 2.72 1.34 1.27 1.68 1.92 1.83 1.98 1.07 1.44 1.32 1.04 1.25 1.14 1.56 Type II multiplier 3.82 3.01 1.99 1.72 2.30 2.68 2.92 3.12 1.69 2.18 2.04 1.42 1.82 1.62 2.31 THE STRUCTURE OF THE ALABAMA ECONOMY 23 THE STRUCTURE OF THE ALABAA TABLE 10. ECONOMY 2 CHANGES IN EMPLOYMENT RESULTING CHANGE IN OUTPUT, NONAGRICULTURAL ALABAMA ECONOMY, 1967 FROM A $1 SECTORS, MILLION Per $1 million change in output Direct: Sector in Type I empoy-multiplier ment Direct Type II Direct, and employ- indirect, indirect ment induced changed multiplier change employ- No. No. 3.82 3.01 1.99 1.72 2.30 2.68 2.92 No. 99 117 66 115 143 161 70 Agricultural processing-----------26 2.72 70 Mining ---------------------------------------39 1.82 71 Construction -------------------------- 44 33 1.34 Textiles and apparel--_ 67 1.27 85 Lumber and wood products 62 1.68 104 Furniture and fixtures 60 1.92 115 Paper and allied products 24 1.83 44 Chemical and allied products-__16 1.98 32 M anufacturing ----------------------------37 1.07 40 Transportation _------------------- 51 1.44 73 Communications and utilities__. 33 1.32 44 Wholesale and retail trade 112 1.04 116 Finance, insurance, and real estate___---------38 1.25 48 Services .---------------------- _------ _------ 110 1.14 125 ----------------------------------- ---------------- 3.12 1.69 2.18 50 63 111 ------- 2.04 1.42 1.82 67 159 69 _---------------- 1.62 178 'Rounded to nearest whole number. was assumed that the increase in output occurred within one sector at a time, output of all other sectors remaining constant. As was pointed out in the discussion of income multipliers, care also must be exercised in interpreting and using employment multipliers. Employment multipliers are nothing more than ratios of changes. They indicate; the generative effect that a 1-unit change in employment in a particular sector will have on total employment in the economy. As can be seen from Table 10, greatest total employment impact on the economy would occur in the services sector. However, neither Type I nor Type II employment multipliers for this sector are nearly as high as those of the agricultural processing sector. The main difference is in the direct employment requirement - high in the services sector and relatively -low in the agricultural processing sector. Again this illustrates that Alabama's service industries are highly labor-intensive, whereas agricultural processing has a low labor-output ratio. Nevertheless, the services sector does not have the job-generating capacity throughout the economy as is found in the agricultural processing industries. Another example might be the contrast between the finance, insurance, and real estate sector and the mining sector. These two sec- 24 ALABAMA AGRICULTURAL EXPERIMENT STATION tors have approximately the same direct requirement, but the total employment created by an output change in mining is almost twice as great as that created by a like output change in finance, insurance, and real estate. A similar contrast exists between the textiles and apparel and lumber and wood products sectors. A $1 million sectoral output change will bring forth a total of 115 jobs in the latter sector and 66 in the former, even though the direct employment requirement is approximately the same. In both mining and lumber and wood products, a high degree of structural interdependence caused a greater generative capacity. As was noted in the discussion of sectoral income changes, however, both direct employment requirement and degree of structural interdependence must be considered in evaluating employment effects. Combined Effects Total impact of a change in sectoral output on both income and employment can be estimated by combining the income and employment data from Tables 7 and 10. Estimated direct, indirect, and induced changes in both income and employment resulting from an assumed $1 million change in final demand for each nonagricultural sector in the Alabama economy are summarized in Table 11. Only income changes are presented for the primary agricultural sectors. Taking agricultural processing as an example, a $1 million increase in sectoral output will directly create an annual income flow in the amount of $179,720 and sustained employment for 26 people. Direct and indirect effects - changes that occur in other sectors as a result of direct changes in agricultural processing - will be the creation of $413;356 in household income and 70 new jobs. When increased consumption resulting from greater income and employment is considered, total effect on the economy will be $585,887 of income and 99 new jobs. Greatest total combined income and employment effects occur in the services sector because of high direct labor requirements in its industries. Direct, indirect, and induced changes resulting from a $1 million change in output would be for the creation of 178 new jobs and a sustained annual income flow of approximately $1.1 million. Income and employment multipliers are low within this sector, but it had the highest direct requirements of both. Further, there is relatively little capital outlay associated with expanding the services sector, as with agricultural processing, paper and allied products, or chemical and allied products. THE STRUCTURE OF THE ALABAMA ECONOMY TABLE 11. ESTIMATED CHANGES IN INCOME AND EMPLOYMENT RESULTING FROM A $1 MILLION CHANGE IN OUTPUT, BY SECTOR, ALABAMA ECONOMY, 1967 25 2 Per $1 million change in output Sector Direct change Direct and indirect change Direct, indirect, and induced change Income Employment Income Employ- Income Employment ment Dol. Livestock -----462,470 Crops-----------------457,210 Farm forestry----483,580 Agricultural processing-179,720 M ining .-------------277,370 Construction ----254,210 Textiles and apparel346,150 Lumber and wood products .-----------. 315,890 Furniture and fixtures.--- 342,290 Paper and allied products. 238,210 Chemical and allied No. Dot. No. 1 1 Dot. 1(15 Thfn No. 1 __1 776,950 ___ 736,108 ___ 773,728 26 413,356 490,945 39 33 320,305 67 443,072 62 70 71 44 85 104 1,102,5632 585,887 696,199 455,036 633,454 802,360 99 117 66 115 60 24 562,284 667,466 376i,372 265,558 340,358 558,576 350,945 634,546 321,522 115 44 32 40 73- 951,566 535,972 377,787 486,225 790,282 143 161 70 products ------------Manufacturing ---------- 158,070 16 37 324,150 50 63 Transportation----------.413,760 Communications and utilities--------------,283,020 51 33 111 67 159 44 116 48 498,115 900,452 Wholesale and retail trade ---------------- 604,330 112 38 Finance, insurance, and real estate----------Services 457,450 69 1,091,334 178 1 Employment multipliers were Dot computed for the three primary agriculture sectors. --------------- 261,400 669,530 110 763,264 125 Information such as that presented in Table 11 provides some valuable quantitative estimate of the comparative impact of various types of development activities on the Alabama economy. Too often expenditure decisions for development are made with- out adequate knowledge of probable effects on the remainder of the economy. If there are choices as to types of industries that might be attracted to the State, then wide use could be made of information such as the above in planning for economic development. Of course, development planning must consider the level and state of technology and available resources in the area - including human, natural, and capital resources. af-so SUMMARY AND CONCLUSIONS The purpose of this study was to estimate and evaluate the structural relationship of the various sectors of the Alabama econ- 26 ALABAMA AGRICULTURAL EXPERIMENT STATION omy. Emphasis was placed on the agricultural and related sectors because of their economic importance. An input-output model consisting of 17 endogenous and 4 exogenous sectors was developed for the, State. Two types of economic multipliers resulted from the model and should be of use to those interested in economic development at various levels of planning. Income multipliers, indicating the extent to which personal income would be expanded as a result of a $1 income change in a particular sector, were highest in the agricultural processing, furniture and fixtures, lumber and wood products, and mining sectors. Lowest multipliers were in the manufacturing and wholesale and retail trade sectors. Employment multipliers, on the other hand, estimate total employment created throughout the economy as employment changes one unit in a given sector. These values were large for agricultural processing, chemical and allied products, and mining sectors, but low for the wholesale and retail trade sector. To provide some quantitative assessment of the impact of a change in sectoral output on income and employment, a $1 million change in final demand was assumed for each sector. Greatest income effect would occur in the three primary agricultural sectors, but greatest total combined income and employment impact would show up in the services sector because of the high direct labor requirements of its industries. One obvious conclusion from this study concerns the benefits that can accrue to the Alabama economy if greater interdependence between industrial sectors can be established. Stronger linkages between sectors could increase the total generative effect of a change in final demand for locally produced goods and services. As pointed out in a similar study (5), there exists in Alabama a tremendous need for additional research in the broad area of interindustry economics. Much more work is needed on State and local levels to ascertain the actual flows of goods and services between industrial sectors. This would provide more precise data so that researchers would not have to rely so heavily on national models. Surveys should be taken to establish the nature and origin of certain critical sectoral flows, and this information should be updated periodically, say every 3 to 5 years. If this were accomplished, individual researchers in the field could concentrate their time and efforts on much needed analysis and interpretation. THE STRUCTURE OF THE ALABAMA ECONOMY LITERATURE CITED 27 (1) ALMON, CLOPPER, JR. 1967. Matrix Methods in Economics. AddisonWesley. (2) BILLS, NELSON S. AND ALFRED L. BARR. 1968. An Input-Output (3) (4) Analysis of the Upper South Branch of West Virginia. W. Va. Agr. Exp. Sta. Bull. 568T. BORQUE, PHILLIP J. 1967. The Washington Economy: An InputOutput Study. Univ. of Wash. Bus. Studies No. 3. 1959. Interindustry Eco- CHENERY, HOLLIS B. AND PAUL G. CLARK. nomics. John B. Wiley and Sons. (5) CURTIS, WAYNE C. AND JOHN E. WALDROP, JR. 1971. Construction of an Input-Output Model for a Sub-State Region through the Use of National Coefficients and Secondary Data Sources. Miss. Agr. Exp. Sta. Tech. Bull. 61. (6) (7) Economic System of the United States. Rev. of Econ. and Stat. 18: 105-125. . 1941. The Structure of the American Economy, 1919-1929. Oxford Univ. Press. LEONTIEF, WASSILY. 1936. Quantitative Input-Output Relations in the (8) ........ . 1951. The Structure of the American Economy, 1919-1939. Oxford Univ. Press. (9) LITTLE, CHARLES H. AND GERALD A. DOEKSEN. 1968. An Input-Out- put Analysis of Oklahoma's Economy. Bull. T-124. (10) MARTIN, WILLIAM E. AND HAROLD O. Okla. Agr. Exp. Sta. Tech. CARTER. 1962. A California (11) (12) (13) (14) Interindustry Model Emphasizing Agriculture. Calif. Agr. Exp. Sta. Res. Rept. 250. MIERNYK, WILLIAM H. 1967. The Elements of Input-Output Analysis. Random House. MOORE, FREDERICK T. AND JAMES W. PETERSON. 1955. Regional Analysis: An Inter-Industry Model for Utah. Rev. of Econ. and Stat. 38: 368-383. U.S. DEPARTMENT OF AGRICULTURE. 1969. Farm Income: State Estimates, 1949-1968. Econ. Res. Ser. USDA. U.S. DEPARTMENT OF COMMERCE. 1970. Census of Business, 1967: Selected Services Area Statistics. Bur. of Census. . 1970. Census of Business, 1967: (15) Retail Trade Area Statistics. Bur. of Census. . 1970. Census of Business, 1967: ---------------(16) Wholesale Trade Area Statistics. Bur. of Census. (17) ------ -----------------.. ---... --------... 1970. Census of Manufacturers, 1967: Area Statistics. Bur. of Census. 1971. Census of Minerals Indus(18) -------------------------------------------------. tries, 1967: Area Statistics. Bur. of Census. 28 ALABAMA AGRICULTURAL EXPERIMENT STATION (19) ---------1967. Bur. of Census. (20) ----------.---------------44: 35-48. Off. of Bus. Econ. (21) --------------- ---------- -----------50: 38. Off. of Bus. Econ. 1968. County Business Patterns, 1964. Survey of Current Business. . 1970. Survey of Current Business. 1971. Minerals Yearbook, 1970. (22) U.S. DEPARTMENT OF THE INTERIOR. Bur. of Int. (23) U.S. DEPARTMENT OF LABOR. 1964. Consumer Expenditures and Income, Cross-Classification of Family Characteristics, All Places in the Southern Region, 1960-61. Bur. of Labor Stat. (24) . 1964. Consumer Expenditures and Income, Cross-Classification of Family Characteristics, Rural Places in the Southern Region, 1960-61. Bur. of Labor Stat. (25) -- ------------------------. 1968. Employment and Earnings Statistics for States and Areas, 1939-1967. Bur. of Labor Stat. (26) U.S. TREASURY DEPARTMENT. 1968. Statistics of Income, 1967: U.S. Business Tax Returns. Int. Rev. Ser. 1968. 1967. Corporation Income Tax ReReport of the Commissioner, turns, 1967. Int. Rev. Ser. (27) --------------------------. (28) ----................... 1968-1966. Int. Rev. Ser. THE STRUCTURE OF THE ALABAMA ECONOMY 29 APPENDIX Composition of Sectors of the Alabama Model Model Sector 1 - livestock and livestock products c. Meat animals a. Dairy products b. Poultry and eggs Model Sector 2 - crops a. b. c. d. Cotton Food grains Feed grains Fruits and tree nuts e. Vegetables f. Oil bearing crops g. Greenhouse crops Model Sector 3 - farm forestry a. Posts and poles b. Pulpwood c. Sawtimber d. Crossties Model Sector 4- agricultural proce ssing g. Animal and fowl feeds a. Processed meat products h. Milling products b. Processed dairy products i. Bakery products c. Seafood products j. Other processed foods and d. Processed fruits and drinks vegetables k. Cottonseed and soybean mills e. Pickles, sauces, and salad 1. Vegetable oil mills dressing m. Other processing services f. Flour and cereal Model Sector 5-mining Iron ore mining a. b. Nonferrous ores c. Coal mining Model Sector 6 - construction a. New construction d. Crude petroleum and natural gas e. Chemicals and fertilizer mining b. Maintenance and repair construction Model Sector 7- textiles and appar el c. Apparel a. Broad and narrow fabrics d. Miscellaneous fabricated b. Miscellaneous fabricated textile products textile goods Model Sector 8 - lumber and wood products c. Veneer and plywood a. Logging camps d. Prefabricated wood structures b. Sawmills Model Sector 9 - furniture and fixtuires a. Wood household furniture e. Office furniture f. Public building furniture b. Metal household furniture c. Upholstered household furniture g. Partitions and fixtures h. Venetian blinds and shades d. Mattresses and bedsprings 30 ALABAMA AGRICULTURAL EXPERIMENT STATION Model Sector 10 - paper and allied products d. Sanitary paper products a. Pulp mills b. Paper mills e. Converted paper products c. Paperboard mills f. Paperboard containers and boxes Model Sector 11- chemicals and allied products a. Industrial chemicals d. Other chemical products e. Plastic and plastic products b. Fertilizers c. Agricultural chemicals Model Sector 12 - other manufactur ring a. Ordnance m. Metal containers b. Tobacco products n. Screw machine products c. Printing and publishing o. Fabricated metal products d. Drug and toilet preparations p. Engines and turbines e. Paints and allied products q. Construction, mining, oil field f. Rubber and miscellaneous machinery and equipment plastics products r. Other industrial machinery and equipment g. Leather products h. Footwear s. Household appliances t. Electric lighting and wiring i. Glass and glass products u. Electronic components j. Stone and clay products k. Primary iron and steel v. Transportation equipment manufacturing w. Professional instruments 1. Primary nonferrous metals x. Miscellaneous manufacturing manufacturing Model Sector 13 - transportation a. Railroads b. Motor freight transportation c. Water transportation d. Air transportation e. Pipeline transportation f. Transportation services and warehousing Model Sector 14- communications and utilities a. Radio and television d. Gas utilities b. Other communication e. Water and sanitary services c. Electric utilities Model Sector 15- wholesale and retail trade a. Wholesale trade b. Retail trade Model Sector 16 - finance, insurance, and real estate a. Banking c. Security commodity broker d. Insurance agents and brokers b. Credit agencies Model Sector 17 - services a. Hotels and lodging places b. Personal repair services c. Business services d. Automotive repair and service e. Amusements f. Medical, educational services, and nonprofit organizations THE STRUCTURE OF THE ALABAMA ECONOMY 31 Model Sector 18 - state and local government a. County governments b. Municipal governments c. Separate school districts d. State government Model Sector 19 - federal government a. Federal expenditures Model Sector 20- households a. Wages and salaries b. Proprietor income c. Rental income d. Household consumption expenditures b. Federal receipts AGRICULTURAL EXPERIMENT STATION SYSTEM OF ALABAMA'S LAND-GRANT UNIVERSITY W'ith ,.i, .tc A' a r research unit in every major soil area, Auburn0 University serves theo needs of field crop, livestock, forestry, and borticultural producers in 0 each region in Alalbaira. Every citizen oI 0O O 00 0 0 * the State ha', a stake ii. this research progra i since any advantage from new and more economical ways of producing and handling farm products directly benefits the consumning 0 0 Research Unit Identifictioni * Main Agricultural Experiment Station, Auburn. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Sand Mountain Substation, Crossville. North Alabama Horticulture Substation, Cullman. Upper Coastal Plain Substation, Winfield. Forestry Unit, Fayette County. Thorsby Foundation Seed Stocks Farm, Thorsby. Chjilton Area Horticulture Substation, Clanton. Forestry Unit, Coosa County, Piedmont Substation, Comp Hill. Plant Breeding Unit, Tallossee. Forestry Unit, Autauga County. Pratt',ille Experiment Field, Prattville. Bloc-k Belt Substation, Marion Junction. luskegee Experiment Field, Tuskegee. Lo wer Coastal Plain Substation, Camden. Forestry Unit, Barbour County. Monroeville Experiment Field, MWrroeville. Wiregrass Substation, Headlland, Brewton Experiment Field, Brewton. Ornamental Horticulture Field Station, Spring Hill. Gulf Coast Substatiori, Fairhope. Tennessee Valley Substation, Belle Mina. 1.3 14. 5. 1 6. 19. 20. 21. 17. 18.