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 2007 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 56 agriculturally based commodities or combinations of agriculture, food processing, tobacco, and fiber and textile products;
- Are only for open multipliers at either the producer (farm or manufacturer) or port stage of export (see below for further detail); and
- Are downloadable in Microsoft Excel format.
The 2014 Data Overview of model results shows that each $1 of U.S. farm exports stimulated another $1.27 in U.S. business activity in calendar year 2014. The $150.0 billion of agricultural exports in 2014 produced a total domestic economic output of $340.6 billion and 1,132,000 jobs. Previous assessments of the Effects of Trade on the U.S. Economy are also available.
The open model of economic activity in this data product here 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.
- Trade Multipliers-Open Model: For agricultural exports in the calendar year, ERS estimates of 1) the national employment per $1 billion of agricultural exports of a commodity or from an industry and 2) the total economy wide output per $1 of commodity or sector exports at the producer and port stage of export. Last updated: November 2013.
Benchmark Input/Output Trade Margins: Trade margins reflect the value of transportation and wholesale-and-retail trade services provided in delivering commodities from producers to purchasers. They are used in the ERS estimates for port-value multipliers. Last updated: December 2014.
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 2009 export data, the producer open model multiplier for corn is 3.55.
This multiplier analysis assumes that 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). These assumptions oversimplify how an economy operates. But simplification is the nature of most economic models, which use simplifying assumptions to distill basic relationships.
For more information on the ERS estimates, see: