THE NON-METROPOLITAN MIDWEST AND THE GEOGRAPHY OF U.S. VALUE CHAINS

Transcription

1 THE NON-METROPOLITAN MIDWEST AND THE GEOGRAPHY OF US VALUE CHAINS Prepared for The Intersection of Agriculture and Rural Development Conference, Federal Reserve Bank of Chicago, 9 November 2010 Edward Feser University of Illinois at Urbana-Champaign feser@illinoisedu

2 2 Three messages The increasingly neglected appreciation of industries The importance of a flexible understanding of geography and of interfirm linkages over space The value of understanding the rural shadow economic base

3 3 Begin here: Rural role in national value chains Feser & Isserman, 2008, Regional Studies What role do industry clusters play in rural economies? Is there such thing as a rural cluster? Can we use cluster ideas to better characterize the evolving economic base of rural areas? How should policy makers utilize cluster ideas in rural development programs? What and where are the rural clusters in the US, and what are their characteristics?

4 4 Separating two cluster concepts Sector 1 Sector n Economic clustering Sectoral interdependence Cluster 1 Cluster m (n >m) Urban Rural Functional Specialization Spatial clustering

5 5 Top-down method: Identify an exhaustive set of industry clusters (or value chains) through comprehensive analysis of interdependence between all sectors Detailed interindustry transactions data: For each sector, sales to and purchases from every other sector Apply data reduction techniques (factor analysis, statistical cluster analysis, etc) Result: Cluster or Value Chain Benchmarks Cluster 1 Cluster 2 Cluster n 5

6 6 Table 1 US motor vehicles value chain ID Code IO Code IO Label 2002 NAICS Primary ID T ype Linkage Z-Score Heavy duty truck manufacturing Primary Motor vehicle body manufacturing Primary T ruck trailer manufacturing Primary Automobile & light truck manufacturing Primary Motor home manufacturing Primary T ravel trailer & camper manufacturing Primary Motor vehicle parts manufacturing Secondary Motorcycle, bicycle, & parts manufacturing Secondary All other transportation equipment manufactur Secondary Boat building Secondary Audio & video equipment manufacturing Secondary Electric lamp bulb and part manufacturing Secondary ID Code A unique ID assigned to each (1, 45) identified value chain cluster IO Code & Label Input-output classification code, Benchmark Input-Output Accounts of the United States, NAICS 2002 NAICS code (does not always concord directly to IO code) Primary ID Indicates the value chain cluster in which row sector is a primary member T ype Indicates whether industry is primary or secondary to the value chain Linkage & Z Score Measures of strength of the sector's linkage to overall chain (higher value = stronger linkage)

7 7 Rural or urban? Source: Isserman

8 8 Joined with metro/non-metro Integration and character Table 5 Rural population and shares by metro designation, 2000 Type Metro status Total pop Percent of total Rural pop Percent of rural Farm pop Percent of farm n Avg pop Percent Rural Percent Farm Rural Metro 6,589, ,134, , , Rural Non-metro 21,375, ,143, ,129, ,486 14, Mixed Rural Metro 59,132, ,971, , , Mixed Rural Non-metro 27,291, ,706, , , Mixed Urban Metro 40,333, ,018, , , Mixed Urban Non-metro 175, , , Urban Metro 126,524, ,052, , , Total 281,421, ,063, ,987, ,141 1,239, Source: US Census and authors' calculations 856 percent of US rural population Non-metro accounts for 489 percent

9 9 Census Urban Areas Rural, Non-metro Rural, Metro Mixed Rural, Non-metro Mixed Rural, Metro Urban/Mixed Urban

10 10 Separating two cluster concepts Sector 1 Sector n Economic clustering Sectoral interdependence Cluster 1 Cluster m (n >m) Urban Rural Functional Specialization Spatial clustering

11 11 Table 8 Rural-urban distribution of US value chains, 2002 Sorted in descending order of rural non-metro percentage ID Cluster Emp (000s) Percent of total US value chain employment Nonmetro Metro Total Nonmetro Metro Total Mixed Urban 6 Mining Wood processing 1, Feed products Farming Wood products & furniture Grain milling Chemical-based products Textiles & apparel Wood building products Leather products Packaged food products 1, Concrete, brick building products Dairy products Appliances Construction machinery & distrb equip Plastics & rubber manufacturing Motor vehicles 1, Nondurable industry machinery 1, Petroleum & gas 1, Plastics products Aluminum & aluminum products Copper & copper products Metalworking & fabricated metal goods A different picture of Machine tools 1, Rubber products the 178 US rural/non-metro Glass products Steel milling economic base 44 Breweries Rural Mixed Rural Urban

12 12 Findings Based on 2002 employment data, rural non-metro counties capture 47% of overall US private non-farm employment but 50% or more of US employment in 28 of 45 national value chains Mostly natural resource-based/ag, but Among the 28 are several manufacturing chains, including chemical-based products, construction machinery and distribution equipment, motor vehicles, non-durable industry machinery, and machine tools Rural America is closely tied to a wide range of national industries Rural places not exclusively based in low-wage and secondary industries in given chains

13 13 But an imperfect measure of value chains Top down (2008 results) Analyze buyersupplier patterns among n industries and organize into r groups Example: 400 industries organized into 45 fixed clusters or chains Bottom up (new results) Identify the linked industries associated with each individual industry Example: 400 value chains identified for each of 400 industries

14 14 Bottom up implementation requires A measure of how closely linked a given industry is to all other individual industries Linkage has several dimensions 1 Proximity in an extended value chain 2 Directionality in exchange between industries (for industries A and B, where A buys supplies from B, A is a buyer and B is a supplier A has a backward linkage relationship with B B has a forward linkage relationship with A 3 Magnitude of exchange Industries buy more from (or sell more to) some industries than others

15 15 Hypothetical Exports and purchases by consumers and governments are sources of final demand Exports Wheel manufacturing is a direct supplier to automotive assembly and steel is an indirect supplier (through wheel manufacturing) Wheel manufacturing is closer in proximity to automotive assembly in the automotive assembly value chain Wheels Consumers Governments Rubber Tires Steel Rubber molding Automotive assembly Vehicle rental services Engine and rubber molding manufacturing occupy a similar position in the automotive assembly value chain but the magnitude of sales of engine manufacturing to automotive assembly is much higher Engines Legal services Advertising The direction of automotive assembly s linkage to rubber molding is backward The direction of its linkage to vehicle rental services is forward The direction of vehicle rental services linkage to automotive assembly is backward Automotive assembly s forward linkages Purchases by vehicle rental services are a source of intermediate demand Automotive assembly s backward linkages Direction of sales

16 16 Complications In reality, all industries are linked to all other industries but some industries are more closely linked than others No single index captures the complexity effectively Purchases and sales flows eg, in input-output tables capture only one dimension (financial exchange) of inter-industry linkages

17 17 Illustrative US chain for a hypothetical core industry Metal stampings, nec Eating & Drinking Wholesaling Computer Manf Logging Legal Services Marketing Organic Chemicals Aircraft Manf Sawmills and planing mills Non-upholstered wood furniture Inorganic Chemicals Petroleum refining Metal furniture Retail Trade Carbon Black Veneer and plywood Tires Truck Transport Poultry

18 18 Revealing a value chain in space? Metal stampings, nec Logging Urban industrial? Wholesaling Marketing Urban advance d services? Coastal regions? Petroleum refining Sawmills and planing mills Rural counties? Non-upholstered wood furniture Retail Trade Veneer and plywood Ubiquitous? What is a regional cluster?

19 19 Exploratory analysis Metal stampings, nec Logging Wholesaling Marketing Sawmills and planing mills Non-upholstered wood furniture Petroleum refining Retail Trade Veneer and plywood Absolute Size Specialization CORE INDUSTRY Historic Growth Forecast Growth Employment Location Quotient Region Region Output State/Province State/Province Nation Region/Int l Nation Region/Int l Absolute Size Specialization LINKED INDUSTRIES Historic Growth Forecast Growth Employment Location Quotient Region Region Output State/Province State/Province Nation Region/Int l Nation Region/Int l Explore as a group or individually

20 20 Some findings: Non-metro Midwest Study year: 2008 Number of industries Core LQ > 11 = 217 of 399 Of those, with Linked LQ > 11 = 123 of 217 Of those, with core jobs > 10,000 = 29 of 123 Of those, highly education-intensive = 1 of 50 (forest nurseries and forest products) Of those, moderately education-intensive = 25 of 109 Core LQ < 09 = 159 of 399 Of those, with Linked LQ > 11 = 32 of 159 Of those, highly education-intensive = 1 of 50 (junior colleges) Of those, moderately education-intensive = 9 of 109

21 21 Non-metro Midwest economic base? Core Linked NIIO NIIO Label Jobs LQ Jobs LQ 251 Household laundry equipment manufacturing 6, ,814, Oilseed farming 91, ,163, Grain farming 251, ,067, Farm machinery and equipment manufacturing 20, , Beet sugar manufacturing 2, ,619, Wet corn milling 2, ,094, Iron ore mining 1, , Animal production, except cattle and poultry and eggs 119, , Cheese manufacturing 10, ,578, Animal (except poultry) slaughtering, rendering, and processing 73, ,104, All other transportation equipment manufacturing 3, ,126, Dry, condensed, and evaporated dairy product manufacturing 3, , Rubber and plastics hoses and belting manufacturing 5, , Other animal food manufacturing 6, ,207, Truck trailer manufacturing 8, ,825, Dog and cat food manufacturing 4, ,065, Ferrous metal foundries 18, , Travel trailer and camper manufacturing 9, , Sugarcane and sugar beet farming 11, , Cattle ranching and farming 81, ,514, Household refrigerator and home freezer manufacturing 3, ,767, Soybean and other oilseed processing 2, , Automatic environmental control manufacturing 4, ,051, Motorcycle, bicycle, and parts manufacturing 2, , Construction machinery manufacturing 15, ,910, Motor home manufacturing 4, , Storage battery manufacturing 2, ,959,

22 22 Non-metro Midwest shadow economic base? Core Linked NIIO NIIO Label Jobs LQ Jobs LQ 4 Fruit and tree nut farming 5, , Custom roll forming , Tobacco product manufacturing , Fabric coating mills , Fiber, yarn, and thread mills , Gold, silver, and other metal ore mining , Military armored vehicle, tank, and tank component manufacturing , Tobacco farming ,102, Ground or treated mineral and earth manufacturing , Railroad rolling stock manufacturing , Paint and coating manufacturing 1, , Pulp mills , Mattress manufacturing , Mining and oil and gas field machinery manufacturing 1, , Cotton farming , Tortilla manufacturing ,632, Textile and fabric finishing mills , Broadwoven fabric mills , Other pressed and blown glass and glassware manufacturing , Ophthalmic goods manufacturing ,427, Distilleries ,941, Natural gas distribution 3, ,

23 23 Non-metro Midwest clusters? Core Linked NIIO Label Jobs LQ Jobs LQ Grain farming 251, ,067, Animal production, except cattle and poultry and eggs 119, , Motor vehicle parts manufacturing 96, , Oilseed farming 91, ,163, Automotive repair and maintenance, except car washes 90, ,072, Cattle ranching and farming 81, ,514, Animal (except poultry) slaughtering, rendering, and processing 73, ,104, Support activities for agriculture and forestry 56, , Dairy cattle and milk production Relative & absolute 48, ,163, Other plastics product manufacturing size combined, both 40, , Farm machinery and equipment manufacturing core and linked 20, , Poultry processing industries 20, ,115, Death care services 19, , Ferrous metal foundries 18, , Ornamental and architectural metal products manufacturing 18, , Construction machinery manufacturing 15, ,910, All other crop farming 14, ,008, Logging 14, ,062,

24 24 Education-intensity continued US highly education-intensive industries concentrated in the non-metro Midwest, 2008 Location Quotients NIIO NIIO Label Jobs Jobs VA 237 Automatic environmental control manufacturing 4, Computer storage device manufacturing 2, Community food, housing, and other relief services, including rehabilitation services 62, Forest nurseries, forest products, and timber tracts 1, Religious organizations 25, Totalizing fluid meters and counting devices manufacturing Grantmaking, giving, and social advocacy organizations 36, Veterinary services 20, US highly education-intensive industries with linked industries concentrated in the non-metro Midwest, 2008 Core Linked NIIO NIIO Label Jobs LQ Jobs LQ 15 Forest nurseries, forest products, and timber tracts 1, , Junior colleges, colleges, universities, and professional schools 51, ,278, Totalizing fluid meters and counting devices manufacturing ,344, Community food, housing, and other relief services, including rehabilitation services 62, ,118, Electromedical and electrotherapeutic apparatus manufacturing ,166, Veterinary services 20, ,619, Biological product (except diagnostic) manufacturing 1, ,776, Medicinal and botanical manufacturing 1, ,623, Pharmaceutical preparation manufacturing 4, ,509,

25 25 Three messages The increasingly neglected appreciation of industries The importance of a flexible understanding of geography and of interfirm linkages over space The value of understanding the rural shadow economic base

26 26 Separating two cluster concepts Sector 1 Sector n Economic clustering Sectoral interdependence Cluster 1 Cluster m (n >m) Urban Rural Functional Specialization Spatial clustering

27 27 Clusters and sectors in strategy Guides: Target Foods (Cluster) Select few (4-6) Sector Strategy Aquaculture Organic Goods 1-2 per target cluster Build demand: Local market development seed funding (CD) Can be regionally focused at any level Sector Strategy Initiatives Regulation reform to streamline compliance and introduce flexibility (Leg) Targeted training program focused on cleaning and processing of produce (WD,CCs) Focused recruitment (B&I) Tactics, outcomes, and metrics at all levels Hard sunsets, get done and get out (and publicize what you ve achieved), move on to next sector strategy Sub-targets Equipment makers Major producers

28 28 Questions or comments? Edward Feser University of Illinois at Urbana-Champaign