Economic Impacts of a Drought on the Southwest Georgia Regional Economy

The importance of the food and fiber system to Southwest Georgia

An input-output model for the 20-county regional economy in southwest Georgia has been developed to analyze the potential impacts of a drought. First, it was found that Southwest Georgia's economy produced $14.4 billion in goods and services, it generated $7.6 billion in income and 185,800 jobs in 1996, the most recent year for which data are available. Then, the model was used to analyze the importance of the food and fiber system. The five industry groups that make up the food and fiber system are:Farm inputs and machinery

Food and fiber production

Food and fiber processing

Wholesale and retail activities

Food service and restaurants

• These food and fiber sectors contributed $5.2 billion (or 36.2 percent) towards the region's goods and services production.
• The sectors generated $2.1 billion in income, or 28.1 percent of its total income.
• The five sectors employed 41,900 people, or 22.5 percent of the total employment in southwest Georgia.
  

Thus, the food and fiber sectors together are a vital part of the regional economy. The next largest industrial group, manufacturing, generated about half as much income and jobs.

Economic impacts (multipliers) of agricultural production changes

The input-output model also generated economic impact multipliers. These multipliers measure the ripple effects that spread through an economy when a shock disrupts the normal flow of dollars and goods in and out of the economic region. These multipliers could be applied to the decreased sales and employment that might be caused by drought conditions if: (1) there are no disaster assistance payments and (2) there are no crop insurance payments for losses. The economic impact multipliers for food and fiber production are:

• 1.7 for the value of production, or gross sales
• 2.1 for income generation
• 2.4 for employment
  

These multipliers are interpreted as saying that if ag production declines $1 million, this would ripple through the economy to generate an additional $700,000 decline, for a total decline of $1.7 million. A similar interpretation applies to income: for each $1 million of lost farm income an additional $1.1 million income loss would be felt. The employment multiplier says that for each job lost, an additional 1.4 jobs would be lost because of the ripple effect.

For more information contact: Warren Krisesel (706-542-0748, Department of Agricultural and Applied Economics, College of Agricultural and Environmental Sciences, Cooperative Extension Service, The University of Georgia.