Strategic investments in agricultural industries and Oregon's economic development Public Deposited

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http://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/6108vf17j

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  • This research is concerned with the current debate among Oregonians on how to improve the standard of living and accelerate economic development in Oregon. The main question is what economic activities make Oregon, and regions within Oregon grow? To find out where Oregon's economic strength and weaknesses lie, first we have to understand the income and employment contributions of different industries in Oregon. Second, decisions for improving Oregon's economic growth may be guided by investment in the production of goods for which Oregon is competitive relative to other goods in domestic and international regions. Third, we can investigate and hypothesize about reasons for strengths and weaknesses of Oregon's industries relative to other industries locally, nationally, and internationally. To provide a guideline for Oregon economic development, this study first classifies Oregon's economic activities into eight major economic sectors: agriculture, lumber and wood, high-tech, other manufacturing, non-financial private services, financial services, other private services, and government services. In 1995, it is estimated that these sectors generated about $72 billion in gross state product (GSP) for Oregon's economy, employed over 1.4 million people and provided total payroll of about $36.5 billion. Oregon's aggregate service sector, which includes both nongovernment private services and government services, generated about 76% of Oregon's gross state product (64% and 12% respectively), received about 76% of Oregon's payroll (58% and 18% respectively), and employed about 80% of Oregon's total employment (64% and 16% respectively). The wood sector contributed about 7% to Oregon's GSP, received 6% of Oregon's payroll, and employed about 5% of Oregon's employment. The agriculture sector generated about 7% of Oregon's GSP, received about 4% of Oregon's payroll, and accounted for about 5% of Oregon's employment. The high-tech industries contributed about 5% of Oregon's GSP, received 7% of Oregon's payroll, and employed about 4% of employment. Oregon exported about $ 9.43 billion in 1995. High-tech equipment exports were about 46% of Oregon's total exports. The agriculture sector accounted for 26%, of exports, the wood sector exported 15%, and other manufacturing products 13%. While Oregon's recent growth has accured mostly through aggregate service activities, the trade oriented sectors including agriculture, wood, and high-tech injected nearly nine and half billion dollars of foreign revenue into the state's economy in 1995. Second, this research utilizes state-level statistics along with "revealed comparative advantage" methodology and computes competitiveness indexes. These are calculated for individual industries in Oregon relative to the Pacific Northwest and the United States economies to illustrate the strengths and weaknesses of the Oregon economy. The comparison of Oregon's efficiency in the agricultural sector relative to the PNW and U.S. indicates that, in the last seven years, Oregon's comparative advantage in agricultural farm production (crops) has increased but its comparative advantage in food processing has been declining since 1992. In fact, in 1994 and 1995 Oregon exhibited a comparative disadvantage in food products relative to both the PNW and the United States economies. One hypothesis advanced in this study is that such decline may be due to the Oregon's higher labor costs relative to other states in the PNW and U.S. The possibility that Oregon pays higher wages to workers in food production relative to the PNW and U.S., combined with the notion that food production in Oregon is more labor-intensive relative to the PNW and U.S. may account for the fact that Oregon's comparative advantage in food processing has declined in recent years. With regard to the wood sector, Oregon has a comparative advantage in lumber and wood products relative to both the PNW and U.S. economies In the furniture and fixtures category Oregon holds a clear comparative advantage against the PNW region, however it has a distinct disadvantage compared to the United States economy. In the paper products, Oregon holds a comparative advantage relative to the U.S., however, Oregon is at a comparative disadvantage relative to the PNW (except for 1991 and 1992 when Oregon had a slight comparative advantage). During the 1989-1995 time period, Oregon has been more competitive relative to the PNW region in industrial machinery and computer equipment. However, the degree of advantage has declined from 157% in 1989, to 105% in 1995. Relative to U.S., Oregon improved its comparative advantage in the production of same goods from -16% comparative disadvantage in 1989, to being +25% more efficient in 1995. Similarly, Oregon held its comparative advantage in the production of electric equipment and measuring instruments relative to PNW during 1989-1995 time period. Relative to U.S., Oregon improved its efficiency in the production of electric equipment from -37% inefficiency in 1989, to +5% of comparative advantage in 1995. Oregon's comparative advantage in measuring instrument varied between 11% and 26% over 1989-1995 time period. With regard to recent arguments advanced against high-tech industries, the results of this study indicate that Oregon is becoming more efficient (regionally as well as nationally) in manufacture of high-tech products, this may be partially be due to economies of scale associated with this sector. With regards to food processing industries, it may be that costs associated with labor, materials, capital investment, and other inputs are high relative to other regions. Hence, we cannot be competitive in those industries. Alternatively, one may argue that labor productivity in Oregon's food industry is lower than other regions. If this is the case, increasing training and education programs to increase labor productivity, in addition to changing infrastructure, could improve efficiency in food industries and thereby improve Oregon's economic development.
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