Understanding Your Local Economy

Garen Evans

Department of Agricultural Economics

Mississippi State University

Why should I care about this?• We live here

• We work here

• Leaders are expected to make informed decisions

– Citizens, commuters, businesses, tourists

– Potential entrepreneurs (new business)

– Fiscal governance

Outline• How to study a community

• Anatomy of a local economy

• Economic indicators

• Comparative Summary – Oktibbeha County

• Fiscal Issues

• Capacity Issues

How to study a community…1. Qualitative

2. Ecological

3. Ethnographic

4. Sociological

5. Economic

How to study a community…1.1. QualitativeQualitative

2. Ecological

3. Ethnographic

4. Sociological

5. Economic

• HousingHousing

• SchoolsSchools

• NeighborhoodsNeighborhoods

• AttitudesAttitudes

How to study a community…1. Qualitative

2.2. EcologicalEcological

3. Ethnographic

4. Sociological

5. Economic

• Spatial distributionSpatial distribution

– Groups of peopleGroups of people

– ActivitiesActivities

– InteractionsInteractions

How to study a community…1. Qualitative

2. Ecological

3.3. EthnographicEthnographic

4. Sociological

5. Economic

• Communities as a way of Communities as a way of lifelife

• Cultural DimensionsCultural Dimensions

– FoodFood

– MusicMusic

– LanguageLanguage

How to study a community…1. Qualitative

2. Ecological

3. Ethnographic

4.4. SociologicalSociological

5. Economic

• Social relationshipsSocial relationships

• How and WhyHow and Why

– organizations of people organizations of people in societyin society

How to study a community…1. Qualitative

2. Ecological

3. Ethnographic

4. Sociological

5.5. EconomicEconomic

But first a little background…

ANATOMY OF A LOCAL ECONOMY

Class…

– What’s in the barrel?

• Natural Resources

– Air, water, land, minerals

• Producers

– Good and services

• Raw, intermediate, finished• Consumers:

– Labor force, children, students, retirees and tourists

The 4 Factors of Production

1.Land

2.Labor

3.Capital

4.Management

What are the returns to the four factors of production?

1.Land

2.Labor

3.Capital

4.Management

Class…

What are the returns to the 4 factors of production?

What are the returns to the four factors of production?

1.Land

2.Labor

3.Capital

4.Management

• RENT

• WAGES

• INTEREST

• PROFIT

The Barrel Gets Bigger…• Dollar$ from non-local purchases of locally produced

goods and services

– Commodities:

• Agricultural, mining

– Manufactured goods, services

– Transfer payments

– Tourism $

The Barrel shrinks!

• Non-local spending

– Consumer goods and services

– Producer inputs purchased elsewhere

How to study a community…1. Qualitative

2. Ecological

3. Ethnographic

4. Sociological

5.5. EconomicEconomic

• Linkages between economic Linkages between economic sectors.sectors.

• Types of existing jobs/skillsTypes of existing jobs/skills

• IncomeIncome

• SourceSource

• DistributionDistribution

• TemporalTemporal

• ResourcesResources

ECONOMIC INDICATORSDiscovering what is in the barrel, how it flows in, and why it leaks out…

Lots of metrics!• Demographics

– Pop., Income

• Economics

– Jobs, Output, TVA

– Distributional

• Fiscal

– Rev. & Exp.

Population Metrics• School-aged

– Infrastructure

• Elderly

– transfer payments

• social security

• Medicare

• Medicaid

Households• Owner-occupied

– Important goal for low income communities

– Important means for wealth accumulation

“In terms of lower income households, non-housing wealth accumulation is at best minor and, for minority families, often negative”

(1) Source: Wealth Accumulation and Homeownership: Evidence for Low-Income Households. U.S. Department of Housing and Urban Development, Dec. 2004.

Income• Total Personal Income

– Earnings

– Dividends, interest, and rent

• Investment income

• Capital income

• Property income– Transfer payments

Types of Employment• Civilian Labor Force (CLF)

– Employed Persons

– Unemployed Persons

– Unemployment Rate = unemployed / CLF

• Place of Work Employment

– Jobs

Economic SectorsGoods-Producing

Nat. res. & mining

Construction

Manufacturing

Services-Producing

Trade, Transportation, & Utilities

Information

Financial Activities

Prof. & Bus. Svcs.

Education and Health

Leisure & Hospitality

Source: Bureau of Labor Statistics

Economic Metrics• Industry Sales or Output (cf., GNP)

• Employment

• Labor Income

– Wages and salaries + proprietors incomes

• Total Value Added (cf., GDP)

Industry Sales – an example

• Farmer sells cow to butcher $0.50

• Butcher sells meat to McDonalds $0.75 [+0.25]

• McDonalds sells hamburger $1.75 [+1.00]

• Total Sales………………………………… $3.00

Total Value Added – an example

• Farmer sells cow to butcher $0.50

• Butcher sells meat to McDonalds +$0.25

• McDonalds sells hamburger +$1.00

• Total Sales………………………………… $1.75

Oktibbeha County• 1995-2004

– Comparisons with region and state.

– Population

– Employment

– Income

– Sales

– Commuting

Population

40,623

43,769

39,00039,50040,00040,50041,00041,50042,00042,50043,00043,50044,00044,500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Population Growth 

1995-2004 2004-2010O ktibbeha 7.74% 2.21%Lowndes -0.01% 7.25%M ississippi 7.15% 4.81%

Population Growth

1.13%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Lowndes Oktibbeha MS

Civilian Labor ForceCLF = Employed + Unemployed

UER = 100* (Unemployed / (Employed + Unemployed))

or

100* UER/CLF

Unemployment Rate

3.48

7.09

5.65

0.00

2.00

4.00

6.00

8.00

10.00

12.00

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Oktibbeha Lowndes MS

Civilian Labor Force

15,000

17,000

19,000

21,000

23,000

25,000

27,000

29,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Oktibbeha Lowndes

Where Do We Work?

-2,0004,000

6,0008,00010,00012,000

14,00016,00018,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

AGRI MINE CONST MFG TRADE SVC TCPU FIRE

Jobs in the Top Three Sectors

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

MFG SVC TRADE

Job Growth by Sector1995-2004

80.4%

32.9%

48.0%

65.1%

-2.1%

-20%

0%

20%

40%

60%

80%

100%

120%

AGRI MINE CONST MFG TRADE SVC TCPU FIRE

Earning Trends by Sector ($M 2000)

$-$10$20$30$40$50$60$70$80$90$100

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

MINE CONST MFG TRADE SVC TCPU FIRE

Earnings Growth, 1995-2004

105.5%

14.4%

37.0%

53.8%

71.5%

9.1%

278.3%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

160.0%

180.0%

MINE CONST MFG TRADE SVC TCPU FIRE

Components of Income

Earnings64%

Dividens, Interest & Rent

19%

Transfer Payments

17%

Total Personal Income

$-

$200.0

$400.0

$600.0

$800.0

$1,000.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

DIR TP EARN

FISCAL ANALYSIS

Revenues and Expenditures• Revenues

– Taxes, charges, fees, transfers, bonds

• Expenditures

– Health, hospitals, education, public welfare, highways, public safety: police and fire protection

Tax RevenuesAd Valorem

“according to the value”

Property Taxes

Retail Sales

State Tax Levies

State Transfers

Property Taxes• Assessed Value

• Taxable Value

– 10% Residential Property

– 15% Commercial Property

– 30% Motor Vehicles, et al.

• Tax Rate: Millage

Millage Rate• Millage Rate is the tax rate per $1000 of value.

• One Mill = 1/10th of One Cent

(0.001)

Example – Class 1 Property• Assessed Value: $120,000

• Taxable Value: $12,000 (120000/10)

• Millage Rate: 111.09

• Tax Levy: 12 * 111.09 = $1,333.08

Retail Taxes• Mississippi collects 7% sales tax on many retail products.

• Eligible municipalities receive part of sales taxes collected in their jurisdiction

• 18.75%• City (ie., incorporated municipalities)

Retail Sales in 2000• Oktibbeha County: $408 million

• $302 million in eligible municipalities:

• City Diversions:

– Maben: $86,899

– Starkville: $3,687,185

– Sturgis: $40,838

Commuting

• Oktibbeha County

– 18,401 total

– 15,071 own-commute

– 3,330 out-commute

Out-commuters

3,330

MS: 3,134

AL: 73

TN: 17

LA: 26

Other: 80

In-Commuters

IN O UT NETM ississippi 3,557 3,134 423 Alabam a 92 73 19 Tennessee 26 17 9 Louisiana 16 26 (10) O ther 42 80 (38) Total* 3,733 3,330 403

Other Issues1. Local infrastructure

– Capacity

2. Health Care

– Impact of poor health – a case study

1. Capacity IssuesCapacity

5.76 Mgal/day

Average

3.6 MGal/day

Peak

4.4 Mgal/day

• Daily per-capita usage: 84 gallons (avg)

• Population growth: 2%

– Exceed system cap by 2027

– Exceed system peak by 2017

2. Health Issues• Mississippi ranks highest for

– Obesity

– Heart Disease

– Diabetes

– Infant Mortality

• Employers

– Educated workforce

– Access to healthcare

Health = Wealth (or vice versa?)

• “During the past 30 days, how many days did poor physical or mental health keep you from doing your usual activities?”

20.4% of all respondents

8.1% of workers

Health $$$

$32.9 Million

Of LOST INCOME

$144 Million in present value losses accumulate over 30 years

Understanding Your Local Economy

Garen Evans

Department of Agricultural Economics

Mississippi State University

Thank you !

Community Economic Analysis• Technical and structural analysis of community decisions.

For example:

– Boundaries: geographic, political, social, economic

– Infrastructure:

– Capacity

– Potential

• Improve decision making associated with community economic development

• Community Development

Increase capacity of local population to collectively pursue its own interests.

– Local leadership

– Citizen participation

– Collective decision making

– Community organization

• Community Economic Development

– Community:

• A group of people in a physical setting with geographic, political, social, and economic boundaries, and with discernable communication linkages

Shaffer, Deller, and Marcouillier (2004)

• Community Economic Development

– Community

• Group of people who know each other and plan together for long-term improvements

– Economic

• Monetized returns, Measurable results– Development

• Structural change (not just growth)