Center for Economic Analysis

Introduction

This study describes the methodology used by the Center for Economic Analysis (CEA) at Michigan State University (MSU) to estimate the economic contribution of production and consumption of Michigan-grown food. The input‐output framework for estimating the value of Michigan’s local food system in this study utilizes three primary data sources and establishes a protocol for estimating the economic contribution of local foods. Estimates can be made for county, multi‐county regions, and for state economies. Data sources consist of data readily provided by the USDA National Agricultural Statistics Service (NASS) and the IMPLAN modeling system. Finally, a survey of major Michigan food processors was conducted for comparison with IMPLAN data.

Economic development professionals are increasingly looking at local food systems as economic development opportunities (Marsden, Banks, and Bristow, 2000; Bellows and Hamm, Meter, 2008). This has led to several estimates of economic impacts of local food (NA, 2010; Otto, 2010; Shuman, n.d.; Sonntag, 2008; TXP Inc., 2013), including academic studies (Brown and Miller 2008, Bubinas, 2009; Hughes and Isengildina‐Massa, 2013; Hughes, Brown, Miller, and McConnell, 2008; Myles and Hood, 2008; Swenson, 2009). A review of these studies reveals that there is wide variation in the estimates themselves as well as in the approaches (O’Hara and Pirog 2013). Along with direct impacts, most approaches employ some method of estimating secondary impacts of local food systems. These secondary impacts relate changes in direct expenditures to all expenditures within the defined economy. However, there is not a consensus as to how to measure secondary impacts, nor is there agreement as to what comprises “local” food (O’Hara and Pirog 2013).

Researchers suggest that the promotion of local food systems is an economic development proposition that places economic growth prospects within the control of the community (Campbell 1997; King, Gomez, DiGiacomo 2010). That is, policies promoting the development of local food systems may operate in conjunction with or compete with more traditional economic development strategies, such as industry attraction. This follows greater recognition of the failure of traditional economic development paradigms and increased interest in developing regional economies from within (Loveridge 1996, Nizalov and Loveridge 2005). Such strategies focus on expanding existing businesses and supporting the development of new businesses using existing human capital in the local region. The perception of such policies is that they facilitate greater local control over the economic development effort. This perception also contributes to the popularity among local policy makers of developing local food systems, especially within smaller and rural economies.

The empirical research presented in this report measures the economic contribution of local foods to Michigan’s economy. More specifically, we propose a method of measuring the economic contribution of local food systems using resources readily available by economic development researchers. The first section presents the input‐output framework, especially as it relates to local economies. The second section describes the approach used to estimate the economic contribution of Michigan’s local food system. This methodology may also be appropriate for measuring other state’s local food systems or for measuring local foods at a smaller level of unit, e.g., county or MSA. For purposes of this report, “local food” is defined as food grown in Michigan that remains within the state for processing and for consumption. The data sources for this study and the use of the IMPLAN economic impact simulation system are discussed in greater detail in the methods sections. While the proposed methodology is intended to capture the full view of local foods systems, shortcomings of our approached are discussed in the forthcoming sections. The final section of this report summarizes the CEA’s findings.