How Local Foods Fit Into a Local Economy
Steven Deller
Professor and Extension Specialist
Department 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 WisconsinStevens Point and Randy Fortenbery, Washington State University
Low and Vogel 2011 (USDA ERS)
Goals of Food Systems Initiatives
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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
Growth vs Development
Growth
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More Jobs
More Population
More Income
More Businesses
More Tax Revenue
Development
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Equality
Sustainable
Balance
Economic Opportunity
Quality of Life
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
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
Conceptual Problems with Modeling Local Foods
What Defines “Local” Foods?
Varies across consumers, retailers,
intermediaries
Varies across product line
Do Local Foods Contribute to Economic
Growth and Development?
What we know..
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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) Direct Sales (2007):
$1.2 billion
Inter-mediated Sales (2008):
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$4.8 billion
Our research suggests that local foods (mainly direct market
sales) have little impact on measures of economic growth.
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)
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.
First step, how do we measure Local Foods?
• Number of farms with direct sales to individuals for human consumption
(2002)
• Total sales value of direct sales to individuals for human consumption
($1,000, 2002)
• Number of farms with Sales of $100,000 to $249,999 (2002)
• Number of farms, including nursery and greenhouse, selling vegetables,
melons, potatoes, and sweet potatoes (2002)
• Number of farms selling sheep, goats, and their products (2002)
• Number of farms, including nursery and greenhouse, selling fruits, tree nuts,
and berries (2002)
• Number of farms certified organically produced commodities (2002)
A simple correlation matrix of the different
elements that describe local foods.
Vegetabl
Number
Sales of
Sheep,
Fruits,
es,
farms Value of
$100,000
goats,
tree
melons,
with
direct
to
and their nuts, and
and
direct
sales
$249,999
products berries
potatoes
sales
Number of farms with Sales of $100,000 to $249,999 (2002)
Number of farms, including nursery and greenhouse, selling vegetables, melons, potatoes, and sweet potatoes (2002)
──
0.23428
(0.0001)
Number of farms selling sheep, goats, and their products (2002)
Number of farms, including nursery and greenhouse, selling fruits, tree nuts, and berries (2002)
Number of farms with direct sales to individuals for human consumption (2002)
Total sales value of direct sales to individuals for human consumption ($1,000, 2002)
Number of farms certified organically produced commodities (2002)
Marginal significance or p-value in parentheses.
0.21538
0.22802
(0.0001)
(0.0001)
0.06203
0.27794
0.24858
(0.0057)
(0.0001)
(0.0001)
0.24854
0.56082
0.54552
0.4171
(0.0001)
(0.0001)
(0.0001)
(0.0001)
0.20768
0.53381
0.32774
0.38587
0.72844
(0.0001)
(0.0001)
(0.0001)
(0.0001)
(0.0001)
0.21326
0.36703
0.38218
0.37388
0.63162
0.45909
(0.0001)
(0.0001)
(0.0001)
(0.0001)
(0.0001)
(0.0001)
Use Principal Components to
Build a Simple Index
Table 1: Local Foods Indicators and Index
Eigenvectors
Number of farms with Sales of $100,000 to $249,999 (2002)
0.2071
Number of farms, including nursery and greenhouse, selling vegetables, melons, potatoes, and sweet potatoes (2002)
0.3763
Number of farms selling sheep, goats, and their products (2002)
0.3351
Number of farms, including nursery and greenhouse, selling fruits, tree nuts, and berries (2002)
0.3139
Number of farms with direct sales to individuals for human consumption (2002)
0.4963
Total sales value of direct sales to individuals for human consumption ($1,000, 2002)
0.4401
Number of farms certified organically produced commodities (2002)
0.4059
The Index accounts for 47.8% of the
variation observed in the correlation matrix.
A Simple Mapping of the Local Foods Index
Are the patterns in the simple mapping random?
Or are there patterns?
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.
Table 2. Spatial Correlation in Residuals: Local Foods and Non-Metro U.S. Counties
Population Growth
Employment Growth
Moran's I Statistic
2
Lagrange Multiplier c
Likelihood Ratio c2
21.3899
(0.0001)
17.6110
(0.0001)
6.6350
(0.0001)
Marginal significance in parentheses.
13.2637
(0.0001)
17.6110
(0.0001)
131.8486
(0.0001)
Per Capita Income Growth
19.0343
(0.0001)
17.6110
(0.0001)
6.6350
(0.0001)
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Population 2000
Employment 2000
Per Capita Income 2000
Percent of the Population Under Age 18
Percent of the Population Over Age 75
Youth Poverty Rate
Percent of Employment in Manufacturing
Percent of Employment in Health Services
Percent of Employment in Lodging and Food Establishments
Population -- Employment Ratio
Number of Banks per 10K Population
Population Density
Ethnic Mix Index
Percent of Population Speaking Non-English at Home
Percent of Housing Stock Built Before 1939
Percent of Persons Residing in Same House 1995-2000
Percent of Employment in State Government
Percent of Employment in Local Government
GINI Coefficient of Income Equality
Table 3: Global Estimates of Local Foods on Non-Metropolitan Growth
Population
Employment
Local Foods Index
0.0022
0.0032
0.0008
0.0008
(0.0123)
(0.0023)
(0.6553)
(0.6677)
Marginal significance in parentheses.
Per Capita Income
-0.0048
-0.0075
(0.0082)
(0.0005)
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?
?
Social
Capital
Local
Foods
?
Growth
Development
?
Public
Health
?
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.
Financial
Capital
Built
Capital
Political
Capital
Viable
Communities
Natural
Capital
Social
Capital
Cultural
Capital
Human
Capital
But, does this systems thinking
approach take us back to
story telling and away from
rigorous analysis?
THANK YOU!