Graduate Thesis Or Dissertation
 

Estimating import substitution potential and multiplier effects for basic sectors in rural Oregon counties

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https://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/p8418q49z

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  • Regional input-output models provide useful information about the purchasing and selling patterns of industries and the estimated impacts of anticipated changes. However, survey input-output studies are costly and time consuming to construct, and are outdated in several years. Recent attempts to develop substitutes for survey input-output models indicate that useful information about the economic structure of rural regions can be acquired without a full survey input-output study. Yet these techniques still require either some survey information or extensive work with secondary sources. Regional economic theory indicates that two useful products of input-output studies—business income multipliers and the propensity to purchase locally for select industries—are functions of the characteristics of the region, industry, and economic environment. Using data on such characteristics for nine Oregon counties this study develops and tests regression models which theoretically explain the size of basic sector business income multipliers and the propensity of basic sectors to purchase locally. The empirical results of this study indicate that multipliers for the basic industries in rural Oregon counties are significantly affected by county characteristics (population, per capita income, and geographic isolation), industry characteristics (type of industry and size of an industry's plants), and characteristics of the economic environment (the business cycle and secular trends). The propensity to purchase locally for the same basic sectors is also significantly affected by the same industry and economic environment characteristics as the multiplier, but influenced by a different set of county characteristics (population and population growth). Yet, these independent variables do not explain much of the variation in the observed multipliers and propensities. The coefficient of determination for the final multiplier and propensity models were 0.452 and 0.524 respectively. Consequently, these models do not predict with much precision. The propensity model is used to illustrate how such a model, if it had narrow prediction limits, could be utilized to estimate the growth or import substitution potential for the basic industries in both Baker and Morrow Counties. Import substitution is assumed to exist where the actual propensity to purchase locally is less than the estimated propensity to purchase locally. However, given the wide prediction limits for the propensity model developed in this study, it was not possible to determine the import substitution potential for the basic industries in these two counties.
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