Overview
Agricultural trade multipliers provide estimates of employment
and/or output effects
of trade in farm and food products on the U.S. economy.
These effects, when expressed as multipliers, reflect
the amount of economic activity and/or jobs generated
by agricultural exports.
ERS annually estimates agricultural trade multipliers
for the most recent calendar year available. The estimates:
- Are derived from the 1997 Benchmark Input-Output (I/O)
tables published by the U.S. Department of Commerce,
Bureau of Economic Analysis;
- Are adjusted annually to account for changes in prices
and labor productivity (see the nonbase
year estimation section of the Methodology page
for details);
- Include 69 agriculturally based commodities or combinations
of agriculture, food processing, tobacco, and fiber
and textile products;
- Are for both open and partially
closed models at either the producer (farm
or manufacturer) or port stage
of export (see below for
further detail); and
- Are downloadable in Microsoft Excel format.
Economy-wide estimates of total agricultural trade are
published annually in the U.S. Agricultural Trade Update. The
articles are available on the U.S.
Agricultural Trade Briefing Room's articles page.
Data
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Open Model Multipliers and Margins
An open model measures the direct and indirect effects
of an economic activity (exports); that is, the impacts of sales and purchases
between all goods and service sectors of the economy, sales to final demand (consumption,
investment, government, and net exports), and purchases of land, labor, and capital
services. Open model multipliers are best suited to describe what has already
happened in an economy or the interrelatedness of sectors in a base period.
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Partially Closed Model Multipliers and Margins
A partially closed model measures the direct, indirect, and induced effects
of an economic activity (exports); that is, the impacts of sales and purchases
between all goods and service sectors of the economy, sales to final demand (investment,
government, and net exports), purchases of land, labor, and capital services,
and the income that is generated by industry to households and the consumption
demanded by households because of that income. It is appropriate to use
partially closed input-output models only when estimating impacts associated
with new economic activity that uses unused resources or production. |
Understanding Open Versus Partially Closed Multipliers
To understand the working of the multiplier process, it is useful to keep
the different components of a multiplier separate. Open model multipliers reflect
the value of the exported commodity or product to the originating sector (direct
effects) plus the value of the activity in supporting sectors (indirect effects),
such as inputs, processing, distribution, and other services. Multipliers are
measured either at the producer level (which includes just the activity embodied
in the commodity as it leaves the farm gate or manufacturer's door) or at the
port level (which includes shipping, handling, and storage charges in addition
to the farm or manufacturing sector's value). Using corn as an example and
2006 export data, the producer open model multiplier for corn is 2.64 (household
sector effects are not considered).
Partially closed model multipliers reflect the direct and indirect effects
of agricultural exports, as well as the induced effects, that is, personal
income and spending associated with new and sustained activities arising from
new resources or production. In a partially closed I/O model and again using
corn and 2006 export data as an example, we find personal income (household
income) generated per dollar of corn exports is 2.27. Consumption spending
spurred by this income growth generated an additional 3.36 of output. Thus,
the partially closed producer output effect per dollar of corn exports comprises
2.64 (direct effects plus indirect output), 2.27 (personal income) and 3.36
(output induced by new consumption).
To get this full (2.64 + 2.27 + 3.36) 8.27 output effect for corn, presented
in the closed multipliers table as the partially closed producer output multiplier,
the household sector must 1) continue to receive as income the constant share
of each sector's output, 2) continue consuming the same fixed bundle of goods
and services, and 3) spend about 80 percent of its income on those goods and
services during the year measured.
These multipliers assume the only limit on the output of an economy is a lack
of markets for its production. I/O models assume that as new demands emerge,
such as increased exports, new production to meet these new demands uses idle
resources (labor, land, and production capacity). Yes, these assumptions oversimplify
how an economy operates. But simplification is the nature of most economic
models; they use simplifying assumptions to distill basic relationships.
Documentation
For more information on the ERS estimates, see:
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