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Port impact studies : comparison and evaluation of existing methods Kaufmann, Gabriele 1979

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PORT IMPACT STUDIES: COMPARISON AND EVALUATION OF EXISTING METHODS by Gabriele Kaufmann Diplom-Volkswirt, Universitaet Hamburg, 1 9 7 7 THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE i n THE FACULTY OF GRADUATE STUDIES (School of Community and Regional Planning) We accept t h i s thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA July 1 9 7 9 (c) Gabriele Kaufmann 1 9 7 9 I n p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l m e n t o f t h e r e q u i r e m e n t s f o r an a d v a n c e d d e g r e e a t t h e U n i v e r s i t y o f B r i t i s h C o l u m b i a , I a g r e e t h a t t h e L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e a n d s t u d y . I f u r t h e r a g r e e t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g o f t h i s t h e s i s f o r s c h o l a r l y p u r p o s e s may be g r a n t e d by t h e Head o f my D e p a r t m e n t o r by h i s r e p r e s e n t a t i v e s . I t i s u n d e r s t o o d t h a t c o p y i n g o r p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h a l l n o t be a l l o w e d w i t h o u t my w r i t t e n p e r m i s s i o n . D e p a r t m e n t o f C o m m u n i t y a n d R e g i o n a l P l a n n i n g The U n i v e r s i t y o f B r i t i s h C o l u m b i a 2075 W e s b r o o k P l a c e V a n c o u v e r , C a n a d a V6T 1W5 D a t e 27 U J i J u l y . 1979 i i Port Impact Studies: Comparison and Evaluation of Existing Methods Abstract Since the early 1960's, a great number of port impact studies have been conducted. L i t t l e assessment has been done of the methodologies used to conduct the port impact studies. This thesis compares and evaluates the main aspects of the methodology of port impact studies using two c r i t e r i a : 1) the informational value of the r e s u l t s obtained with d i f f e r e n t methods; 2) comparison of r e l a t i v e costs for the implementation of the d i f f e r e n t methods. The thesis reviews twenty port impact studies to determine the main methodological approaches to port impact analysis. The thesis then discusses four main aspects of the methodology used in the i n d i v i d u a l port impact studies. The f i r s t of these aspects i s the determination of the s i z e and regional and personal incidence of transportation cost savings occurring i n the regional economy (due to the u t i l i z a t i o n of low cost water-transportation services) . An assessment follows of the measures used i n the i n d i v i d u a l port impact studies to measure primary and secondary port impacts. The study then discusses the determination of the primary impact. The l a s t aspect of the methodology discussed i s the determination of the m u l t i p l i e r e f f e c t i n i t i a t e d by the primary port impact a c t i v i t i e s ( i . e . secondary port impact). The i i i conclusion of t h i s thesis evaluates the use of information obtained in a port impact study for the establishment of a port policy-The studies reviewed were conducted between 1 9 6 1 and 1 9 7 6 . Eighteen of the twenty port impact studies were carried out i n the United States, one i n Canada, and one i n West Germany. Nineteen of the port impact studies had s i m i l a r methodologies, while one of them d i f f e r e d s i g n i f i c a n t l y . This thesis i s o l a t e s both theoretical and p r a c t i c a l problems i n the conduct of a port impact study. The thesis i d e n t i f i e s two prime areas of research to improve the informational value of port impact studies. They are: 1) opportunity cost; and 2) external economies. i v Table of contents 1 I n t r o d u c t i o n 1 1 . 1 Purpose of t h i s Study 1 1 . 2 Economic Impact S t u d i e s and Port Economic Impact S t u d i e s 2 1 . 3 Gross or Net Impact 4 1 . 4 The Primary and Secondary Impact o f a Port 6 1 . 5 Outlook of t h i s Study 1 0 2 Survey o f e x i s t i n g port impact s t u d i e s 1 3 2 . 1 I n t r o d u c t i o n 1 3 2 . 2 Survey of Port Impact Studi e s 1 3 2 . 3 Conclusion 4 4 3 T r a n s p o r t a t i o n Cost Savings 5 7 3 . 1 I n t r o d u c t i o n 5 7 3 i 2 ^ D e t e r m i n a t i o n * o f - t h e S i z e of t h e * T r a n s p o r t a t i o n ' C o s t Savings 5 8 3 . 2 . 1 E v a l u a t i o n o f the Oregon and M i s s i s s i p p i s t u d i e s . 5 9 3 . 3 Incidence of T r a n s p o r t a t i o n Cost Savings ........... 6 2 3 . 4 C o n c l u s i o n • ••• 6 5 4 Measures f o r the Primary and Secondary Impact of a P o r t . 6 6 4 . 1 I n t r o d u c t i o n ..... 6 6 4 . 2 I n d i v i d u a l Measures f o r Port Impacts ............... 6 8 4 . 2 . 1 Employment ,. 6 8 4 . 2 . 2 Gross Revenues 7 0 4 . 2 . 3 Value Added 7 2 4 . 2 . 4 Wages and S a l a r i e s 7 5 V 4.2.5 Tax Payments 77 4.2.6 Purchases of Local Goods and Services ............ 79 4.2.7 Total Expenditures of a Firm 80 4.2.8 Over-Head Costs 81. 4.3 Conclusion 81 5 Primary Impact A c t i v i t i e s 83 5.1 Introduction 83 5.2 A c t i v i t i e s D i r e c t l y Related to the Port Operation .. 84 5.2.1 Categories of A c t i v i t i e s 84 5.2.2 The Importance of Opportunities Foregone ......... 87 5.3 Port-Related A c t i v i t i e s 89 5.3.1 Treatment of Port-Related A c t i v i t i e s 89 5.4 Critique of Methodology ............................ 91 5.4.1 Low Transportation Cost Assumptions .. .. 91 5.4.2 Backward-Forward Linkages 92 5.4.3 Informational Impact .... 93 5.4.4 The Impact of Higher Competition 94 5.5 Conclusion 95 6 Secondary Impact A c t i v i t i e s 96 6.1 Introduction 96 6.2 C h a r a c t e r i s t i c s of Secondary Impact A c t i v i t i e s ..... 97 6.3 Determinants of the Size of a Regional M u l t i p l i e r Effect for a Port 98 6.4 Methods to Determine the Size of the M u l t i p l i e r ....101 6.4.1 Economic Base Analysis 101 6.4.2 Income Expenditure Analysis 107 6.4.3 Input-Output Analysis 111 6.4.4 Application of General Experience or Related v i Studies 115 6.5 Conclusion ......118 7 Conclusion ...................... ....121 7.1 Introduction , .... .121 7.2 Summary of Findings 122 7,-2.1 Some Methodological Findings 122 7.2.2 Some Methodological Recommendations .............. 123 7-3 Uses that Can Be Made of the Information Generated in a Port Impact Study .....124 7.3.1 Public Relations Tools 125 7.3.2 Role i n Policy Formation 126 7.3.3 Academic Research 131 7.4 Conclusion ...... .....132 BIBLIOGRAPHY ,-• 133 v i i A c k n o w l e d g e m e n t I w o u l d l i k e t o a c k n o w l e d g e w i t h g r a t i t u d e t h e c o n t i n u o u s s u p p o r t a n d e n c o u r a g e m e n t o f D r . B r a h m W i e s m a n . My t h a n k s a l s o t o D r . H . C r a i g D a v i s a n d t o P h i l P a u l s o n f o r t h e i r c o n s t r u c t i v e a n d c a r e f u l c r i t i c i s m . F i n a l l y , a n o t e o f t h a n k s t o a v e r y s u p p o r t i v e e d i t o r - M a r g a r e t d e G r a c e - a n d t o a v e r y d e d i c a t e d t y p i s t - D o n a l d F o r b e s . 1 1 Introduction 1.1 Purpose of t h i s Study Since the 1 9 6 0 's many studies have been undertaken to measure the impact of different ports on study areas ranging from an adjacent urban area to the state i n which the port i s situated. For many ports, f o r instance San Francisco, Sacramento, and Seattle, several port impact studies have been prepared. Despite great e f f o r t s and large amounts of c a p i t a l dedicated to the preparation of i n d i v i d u a l port impact studies, l i t t l e e f f o r t has been invested in an inventory of the methods applied to do the studies and i n an assessment of the r e l a t i v e merits of the various methodologies. In l i g h t of the substantial expenditures for the preparation of the studies and the s c a r c i t y of comprehensive l i t e r a t u r e available about the methodologies of these p a r t i c u l a r studies i t i s f e l t that research i n t h i s f i e l d would be useful. The study intends to give analysts conducting a port impact study a survey of the existing methods to measure port impacts. The evaluation of the methods w i l l reveal the strengths and weaknesses of ex i s t i n g methods in the l i g h t of the usefulness of the information they generate and t h e i r data requirements. The study therefore intends to a s s i s t analysts to select the methods most useful for the preparation of th e i r i n d i v i d u a l port impact studies. 2 The study w i l l help those r e v i e w i n g a port impact study to understand b e t t e r what a port impact study measures, what i t does not i n t e n d t o measure, what i t omits, and f o r what purpose the i n f o r m a t i o n about the port may be used. Since port impact s t u d i e s are u s u a l l y conducted t o g i v e i n f o r m a t i o n to a wide range of i n d i v i d u a l s , f i r m s , and i n s t i t u t i o n s , some guidance f o r the p u b l i c t o understand what a p o r t impact study i s , and what i t s p o t e n t i a l use i s , i s e s p e c i a l l y v a l u a b l e . 1.2 Economic Impact S t u d i e s and Port Economic Impact S t u d i e s An economic impact study d e s c r i b e s the e f f e c t s of a p r o j e c t or a p o l i c y on the economic a c t i v i t y i n a c e r t a i n study a r e a . An economic impact a n a l y s i s determines t h e r e f o r e a change i n the economic a c t i v i t y due to the p r o j e c t or the p c l i c y . The change can be measured i n such terms as business volume, income, employment, and e x p e n d i t u r e s . The d e s c r i p t i o n of the impact of a c e r t a i n p r o j e c t or p o l i c y can be used to add t o e x i s t i n g knowledge about p o s s i b l e e f f e c t s of programs or p r o j e c t s . Economic impact a n a l y s i s provides i n f o r m a t i o n about the economic impacts on a c t i v i t i e s which may i n i t i a l l y not be d i r e c t l y r e l a t e d t o the p r o j e c t or a c t i v i t y . Once these i n d i r e c t impacts, however, are known, they may become to a g r e a t e r extent the main concern of decision-makers. An economic impact a n a l y s i s shows the responses of a r e g i o n a l economy to a c e r t a i n p r o j e c t or program. I t s u p p l i e s , 3 therefore, information about negative impacts as well as positive impacts of the project or program. This information can be useful to assess the need to mitigate the negative e f f e c t s of the program or project; e.g. redesign of the project or program or part of i t , or the payment of compensation to groups adversely affected by the program or project. If i t i s , for instance, shown i n a port economic impact study that a c e r t a i n sector in a regional economy producing for regional demand has a very limited development potential due to low transportation costs for imports to the regional market, t h i s e f f e c t can be mitigated by subsidising t h i s sector. Last but not least an economic impact analysis can contribute detailed information (about the economic impact of a project or a policy) to a cost-benefit analysis. Cost-benefit analyses are usually conducted as t o o l s i n the decision making process about the development of a project or the implementation of a policy. A l l port impact studies surveyed i n t h i s study, except the studies for the proposed Texas deepwater p o r t , 1 were ca r r i e d out for ports already i n existence. S p e c i f i c investments i n the port, for instance the construction of a new terminal, reguire impact information before cost-benefit can be applied. i Daniel M. Bragg and James R. Bradley, The Economic Impact of a Deep Water Terminal in Texas (n.p.: Texas A & M University, Texas Engineering Experiment Station, 1972) ; Daniel M. Bragg, A Survey of the Economic and Environmental Aspects of an Onshore Deepwater Port at Galveston, Texasi Part l l P otential Economic E f f e c t s , 2nd ed. (College Station, Texas: Texas A & M University, Center for Marine Resources, 1975).. 4 1.3 Gross or Net Impact An economic impact can be determined as a gross or a net impact. Gross impact c o n s i d e r s the f u t u r e of an economy t o be equal t o the present and measures, t h e r e f o r e , the present s i t u a t i o n a g a i n s t the f u t u r e s i t u a t i o n with the p r o j e c t i n order to determine the impact of the p r o j e c t . A net impact a n a l y s i s t r i e s t o f o r e c a s t the f u t u r e c o n d i t i o n of the economy i n the study area i n order t o determine the impact of the p r o j e c t on the f u t u r e c o n d i t i o n of the economy. The f u t u r e c o n d i t i o n of the economy i s f o r e c a s t e d with the help of trends and dynamics al r e a d y v i s i b l e i n the economy at the time of the f o r e c a s t . In t h i s way o p p o r t u n i t i e s f o r growth, d e c l i n e , or s t r u c t u r a l change i n the economy are taken i n t o account. In case the impact o f the p r o j e c t or p o l i c y i n c l u d e s a change i n the o p p o r t u n i t i e s of an economy the o p p o r t u n i t i e s foregone due to the c o n s t r u c t i o n o f the p r o j e c t or the implementation o f the p o l i c y are taken i n t o account. As very few economies i n the world can be d e s c r i b e d as s t a t i c , t h i s study c o n s i d e r s a net impact a n a l y s i s as more u s e f u l than a gross impact a n a l y s i s t o d e s c r i b e the impact of a p r o j e c t or a p o l i c y . The study acknowledges however t h a t the impact of a p r o j e c t or p o l i c y on the development o p p o r t u n i t i e s of an economy can o f t e n be measured only with d i f f i c u l t y , i f at a l l . For an e v a l u a t i o n of the impact of a p r o j e c t or a p o l i c y i t i s necessary t o know under which f u t u r e circumstances the impact w i l l a f f e c t the study area. The f u t u r e c o n d i t i o n s of a study 5 area are only forecasted in a net impact analysis. I f , f o r instance, a project uses a great quantity of energy, t h i s impact might have been considered to be i n s i g n i f i c a n t during the 1S60's when i t was believed that energy supplies were i n abundance. Since the early 1970*s however the b e l i e f i s wide-spread that energy supply i s scarce and i s becoming even mere scarce. The impact in terms of energy consumption of the project might be s t i l l the same; the s i g n i f i c a n c e of the impact has however changed. This shows that a forecast of the future conditions of the economy which w i l l be impacted i s necessary to evaluate the impact. The statement of the impact in i t s e l f without an evaluation of i t s s i g n i f i c a n c e i s often not very meaningful. For a port economic impact study the concept of net impact analysis i s e s p e c i a l l y useful as ports a l t e r the economic opportunities in the region in which they are located by substantially reducing transportation costs. This opens new business opportunities in the region and reduces others. This impact of a port w i l l be discussed i n greater d e t a i l i n chapter 5 of this study. A l l port impact studies examined in t h i s study except the studies for a proposed deepwater port i n Texas 1 are conducted for ports which already exist and have well established l i n k s with the economy in t h e i r study areas. The studies, therefore, do not have to estimate the s i z e and the character of the economy with the proposed project but rather have to estimate i I b i d . 6 how the c h a r a c t e r and the s i z e of the economy i n the study area would be i f the port d i d not e x i s t . 1 . 4 The Primary and Secondary Impact of a P o r t Economic impact s t u d i e s measure the primary or d i r e c t impact and the secondary or i n d i r e c t impact of an a c t i v i t y . The d i r e c t impact i n c l u d e s , i n the case of a p o r t , a l l a c t i v i t i e s i n the study area which depend d i r e c t l y on the p o r t . These are t h e a c t i v i t i e s necessary f o r the p o r t o p e r a t i o n and a c t i v i t i e s l o c a t e d c l o s e t o the p o r t because they d e r i v e b e n e f i t s from the e x i s t e n c e of the p o r t . The d i r e c t impact of the port i n c l u d e s , as w e l l , t r a n s p o r t a t i o n c o s t savings generated i n the r e g i o n a l economy due t o the o p t i o n of s h i p p e r s and r e c i e v e r s t o t r a n s p o r t t h e i r goods by w a t e r - c a r r i e r s . The t r a n s p o r t a t i o n c o s t s a v i n g s are i n c l u d e d i n the primary impact of the p o r t because o f t h e i r importance i n l o c a t i o n a l d e c i s i o n s by users who depend f o r t h e i r business a c t i v i t i e s p a r t i a l l y or f u l l y on the p o r t . The i n d i r e c t impact of a port i s formed by the a c t i v i t i e s e x i s t i n g i n the study area because of the e x p e n d i t u r e s generated by the a c t i v i t i e s forming the primary impact of the p o r t . These a c t i v i t i e s are i n c l u d e d i n the m u l t i p l i e r e f f e c t generated by the expenditures of the primary impact of the p o r t . 7 P o r t s provide a c c e s s to w a t e r - t r a n s p o r t a t i o n . Water-t r a n s p o r t a t i o n i s i n g e n e r a l the cheapest mode a p a r t from p i p e l i n e s to t r a n s p o r t bulk commodities over long d i s t a n c e s . 1 Easy access t o w a t e r - t r a n s p o r t a t i o n l e a d s , t h e r e f o r e , t o t r a n s p o r t a t i o n c o s t savings f o r companies which s h i p bulk products over long d i s t a n c e s or r e c e i v e them from f a r away p l a c e s . 2 Were they not l o c a t e d c l o s e t o a po r t they would have to s h i p t h e i r f r e i g h t by other c a r r i e r s c h a r g i n g higher r a t e s . t h e y might a l s o bear a d d i t i o n a l l o a d i n g and unloading c o s t s i f they use other c a r r i e r s t o t r a n s p o r t t h e i r goods t o the port f a c i l i t y . The o p e r a t i o n of a po r t r e q u i r e s a multitude o f a c t i v i t i e s . The port impact s t u d i e s examined i n t h i s t h e s i s i d e n t i f i e d a c t i v i t i e s such as the d i r e c t port o p e r a t i o n , s e r v i c e a c t i v i t i e s f o r s h i p p i n g agencies, s e r v i c e s c a t e r i n g f o r the needs of crews, government a c t i v i t i e s i n r e l a t i o n t o the p o r t , and investment a c t i v i t i e s f o r the c o n s t r u c t i o n of the p o r t . These a c t i v i t i e s are e i t h e r c a r r i e d out by the p o r t a u t h o r i t y or by p r i v a t e f i r m s . In e i t h e r case they r e q u i r e l a r g e amounts of l o n g - and s h o r t - l i v e d c a p i t a l goods as w e l l as lab o u r . 1 For a d i s c u s s i o n on a l t e r n a t i v e c a r r i e r t r a n s p o r t a t i o n c o s t s , see: William Alonso, " L o c a t i o n Theory," i n Regiona l P o l i c y : Readings i n Theory and A p p l i c a t i o n , e d i t e d by John Friedmann and Wi l l i a m Alonso (Cambridge, Massachusetts: The Massachusetts I n s t i t u t e of Technology P r e s s , 1975) , p. 42, f i g . 5. 2 The area from which goods are shipped or where goods are r e c e i v e d by the port i s c a l l e d , by geographers, the ' h i n t e r l a n d * of a po r t . The h i n t e r l a n d does not have t o be g e o g r a p h i c a l l y i d e n t i c a l f o r both f u n c t i o n s and f o r d i f f e r e n t products. Often s e v e r a l ports serve the same area so t h a t t h e i r h i n t e r l a n d s o v e r l a p each other. 8 As ports are the only location where ships are e a s i l y accessible, firms repairing ships are usually located in ports. As the companies repairing ships usually b u i l d new ships, the whole industry i s often located i n or close to ports. Due to the scale of t h e i r projects, ship-building companies are usually of substantial size and require great amounts of c a p i t a l ajid labour inputs. Other firms may locate close to the port because they want to benefit from r e l a t i v e l y low transportation costs for bulk commodities close to the port. Other firms may consider the agglomeration of firms supplying goods and services for the d i r e c t operation of the port, repairing or building ships, or low transportation costs for t h e i r f r e i g h t as b e n e f i c i a l for t h e i r a c t i v i t i e s and may therefore locate close to the port. These firms may derive benefits from the agglomeration of firms because they supply goods or services to these firms, buy inputs for t h e i r production from them, or experience external economies generated by them. S t i l l other firms might locate close to the business agglomeration at the port because they want to benefit from the flow of information generated by the pert a c t i v i t i e s and by the business agglomeration. A l l firms located close to the port for other purposes than supplying goods or services to firms located close to the port for what ever reason are included i n the primary impact of the port. The impact of the a c t i v i t i e s included i n the primary impact of the port can be measured in terms of employment, wage 9 income, c a p i t a l income, tax revenues, and purchases from other firms. The business a c t i v i t y necessary for the port operation and the business agglomeration located close to the port do not only generate income, employment, and expenditures due to t h e i r own a c t i v i t i e s but increase the business a c t i v i t i e s of other parts of the l o c a l economy. This e f f e c t on other parts of the regional economy i s c a l l e d a m u l t i p l i e r e f f e c t and constitutes the secondary or i n d i r e c t impact of a port. The m u l t i p l i e r e f f e c t occurs when the employees of the port operation and the port-dependent a c t i v i t i e s spend part of t h e i r income i n the l o c a l economy fo r food, shelter, clothing, transportation etc. Firms supplying these goods and services encounter, therefore, an increase i n t h e i r business a c t i v i t i e s . These firms w i l l employ due to t h e i r increased business volume more employees and increase t h e i r purchases from other firms inside and outside the study area. They may further increase t h e i r tax-payments and p r o f i t d i s t r i b u t i o n s . The a c t i v i t i e s included in the primary impact of the port s t a r t , i n t h i s way, a chain of business volume increases which i s c a l l e d a m u l t i p l i e r e f f e c t . The m u l t i p l i e r e f f e c t can be started by the expenditure of wages, as i n the case shown above, purchases of firms included i n the primary impact of the port frcm other firms, the re-spending of the distributed p r o f i t s by the c a p i t a l owners of the firms generating the primary impact of the port, and the re-spending of the tax-payments paid by the d i r e c t l y port-related a c t i v i t i e s to various l e v e l s of 10 government. The m u l t i p l i e r effect i s f i n i t e as in every spending round part of the additional income earned i s saved or spent on goods and services bought outside the study area. 1.5 Outlook of t h i s Study Chapter 2 w i l l descibe b r i e f l y the study-methodology used i n a sample of twenty port impact studies examined f o r this study. This chapter shows how i n d i v i d u a l port impact studies are conducted. Special emphasis i s given to the description of the data gathering process since t h i s seems to be the most costly and time consuming part of many of the studies. Chapters 3, 4 , 5, and 6 w i l l describe and evaluate certain aspects of the methodology applied in the port impact studies. Chapter 3 reviews and evaluates methods used i n the port impact studies to determine the size of transportation cost savings generated i n the regional economy because of the a v a i l a b i l i t y of water-transportation. The c r i t e r i o n used for the evaluation i s the informational value of the r e s u l t s generated. This chapter shows, further, a method applied i n one port impact study to determine the regional and personal incidence of transportation cost savings. Chapter 4 i s a survey and an evaluation of the measures used i n the studies to measure the impact of the ports. The evaluation of the measures i s based on the informational value of each measure and the a v a i l a b i l t i y of the data needed to apply 11 the analysis to the measure chosen. Appropriate selection of the measure could reduce costs i n the data c o l l e c t i n g process by ensuring that only those data are collected which are able to provide valuable information either for the determination of the secondary impact of the port or i n the primary impact of the port. Chapter 5 describes those a c t i v i t i e s included i n the primary impact of the ports examined i n the studies. The i n c l u s i o n of diferent a c t i v i t i e s i n the primary impact of a port i s evaluated by considering the r o l e of possible opportunities foregone i n the regional economy due to the existence of a port. The chapter t r i e s to determine i f and how a port influences the location of economic a c t i v i t i e s i n a region. The discussion i n th i s chapter i s especially important because of the s p e c i f i c influence ports have pn the l o c a l economy. Chapter 6 describes and evaluates the methods applied i n the port impact studies to determine the m u l t i p l i e r e f f e c t generated in the regional economy by the a c t i v i t i e s d i r e c t l y related to the port. The c r i t e r i a for the evaluation of the methodologies are the accuracy of the r e s u l t s i n showing the size of the impact and the a v a i l a b i l i t y of the data necessary for the application of the d i f f e r e n t methods. In nearly a l l port impact studies analyzing the secondary impact of the port the size of the secondary impact i s at least as large as the s i z e of the primary impact of the port. Chapter 7 considers the purposes the port impact studies are to f u l f i l as stated in the i n d i v i d u a l studies. This chapter 12 w i l l e valuate whether the s t u d i e s can, i n f a c t , f u l f i l t h e i r s t a t e d purposes and d e s c r i b e s i n g r e a t e r d e t a i l the purposes the port impact s t u d i e s can p o t e n t i a l l y f u l f i l . The t o p i c of t h i s chapter i s very important f o r the a p p l i c a t i o n of i n f o r m a t i o n gathered i n a port impact study. The r e l e v a n c e of t h i s d i s c u s s i o n can h a r d l y be o v e r s t a t e d i n the c u r r e n t c o n f u s i o n about the use t h a t can be made from port impact s t u d i e s . 1 T h i s d i s c u s s i o n forms the c o n c l u s i o n of t h i s study. 1 See f o r i n s t a n c e : Eobert C. Waters, " P o r t Economic Impact Studies: P r a c t i c e and Assessment," T r a n s p o r t a t i o n J o u r n a l (Spring 1977), pp. 14-18; and Semoon Chang, "In Defence of P o r t Economic Impact S t u d i e s , " T r a n s p o r t a t i o n J o u r n a l (Spring 1978), pp. 79-85. 13 2 Survey of existing port impact studies 2. 1 Introduction This chapter describes b r i e f l y the approaches taken i n twenty studies to measure port impacts. The chapter's aim i s to f a m i l i a r i z e the reader of t h i s study with the study approaches taken in the i n d i v i d u a l impact studies. The description of the studies i s arranged i n alphabetical order by the name of the f i r s t author. The chapter concludes with a table showing the main aspects of the study methodology for each of the studies. This table i s helpful i n comparing the way d i f f e r e n t aspects of the port impacts are analyzed in i n d i v i d u a l studies. I t leads, therefore, to the discussion of the d i f f e r e n t aspects of the port impact methodology i n the following chapters. 2.2 Survey of Port Impact Studies Anderson, Graydon K. The Port of Ensenada: A Report on Economic Development 1 The study determines the primary impact of the port of Ensenada and the m u l t i p l i e r e f f e c t generated. The study area i s 1 Graydon K. Anderson, The Port of Ensenada: A Report on Economic Development (San Diego, C a l i f o r n i a : San Diego State College, 1964). 14 the community of Ensenada. The measures for the primary and secondary impact are employment and wage income. The basis of the estimates i s not mentioned i n the study. The a c t i v i t i e s generating the primary impact of the port are: cargo handling and ship services, port security, management and supervision of construction, land transportation, port trade and marine transportation, port industries, and port construction. The port industries consist of manufacturing of metal food containers, commercial f i s h i n g and f i s h packing, marine construction and repair, sport f i s h i n g enterprises, small boat chandlers, and a yacht club. The study does not mention why these a c t i v i t i e s are included i n the primary port impact. The mult i p l i e r e f f e c t i s calculated with the help of economic base theory. The determination of the basic and non-basic sectors i s ca r r i e d out by condensing an input-output table for the community of Ensenada. The mult i p l i e r derived i s M . S ' . A l l primary port impact a c t i v i t i e s are considered to be economic base a c t i v i t i e s . Armenakis, A. A., Moore, H. J . , Peden, G. T. Inland Port F a c i l i t i e s and Economic Growth* The study seeks to determine the impact of ports i n the counties of Warren, Adams, and Washington i n the state of Mississippi on the economic growth i n these counties. The study 1 A. A. Armenakis, H. J. Moore, and G. T. Peden, Inland Port F a c i l i t i e s and Economic Growth (State College, M i s s i s s i p p i : Mississippi State Dniversity, Bureau of Business and Economic Research, 1970). 15 compares i n i t s f i r s t chapter data for personal income, t o t a l earnings, farm earnings, non-farm earnings, and manufacturing earnings for the above mentioned counties with the respective data for the other counties i n the state of M i s s i s s i p p i . No s i g n i f i c a n t difference i s found between the data for the counties i n M i s s i s s i p p i having ports and the other counties i n the state. In the next chapter the growth of the in-bound and out-bound commodity flow handled by the ports i s analyzed. The outbound commodity flow grew i n a l l ports at a higher rate than the inbound flow. This development i s considered to be a sign of increased s e l f - s u f f i c i e n c y and strengthened export pot e n t i a l i n the region. The ports are considered to be responsible for t h i s positive development. The following chapter seeks to determine the m u l t i p l i e r e f f e c t of the primary impact of the port generated by the business a c t i v i t i e s of the firms using the port to ship or receive goods. A p a r t i a l input-output table i s established f o r each of the three counties i n which a port i s located. , The input-output c o e f f i c i e n t s are taken from a United States government input-output table. It i s not stated i n the study how the size of the primary impact of the port i s determined. The m u l t i p l i e r analysis i s followed by a study of the r e l a t i v e importance of d i f f e r e n t economic sectors using the port for transportation services i n the three counties i n which ports are located. I t was found that the i n d u s t r i a l mix i n the three counties concerning sectors using the port services varies 1 6 greatly. No d i r e c t relationship could therefore be found between the mix of industries using port services located i n the di f f e r e n t counties having a port. The data for t h i s port impact study were gathered by personal and telephone interviews and from government publications. Bragg, Daniel M. , and Bradley, James E. The Economic Impact of a Deep Water Terminal i n Texas 1 This study seeks to determine the impact of a proposed deepwater port i n Texas on the Texas coastal zcne. The impact i s considered to be generated by the d i r e c t port operation and by the growth of the o i l r e f i n i n g industry i n Texas. The impact of the port operation i s measured i n the form of the expenditure generated by each ton of cargo moved through the port. The port i s supposed to handle only crude o i l . The figure for the expenditure per ton of o i l moved through the port i s taken from a study of the port of Philadelphia. The quantity of o i l imported by the proposed port i s forecasted with the help of forecasts for United States o i l imports. The growth of the o i l r e f i n i n g industry i n Texas i s taken from a forecast prepared by the Texas A & M University. The 1 Daniel M. Bragg and James B. Bradley, The Economic Impact of a Deep Water Terminal i n Texas (n.p.: Texas A & M University, Texas Engineering Experiment Station, 1 9 7 2 ) . 17 forecasted value of the refined output i s taken from the same source. The m u l t i p l i e r e f f e c t i s determined only for the impact of the growth of the o i l r e f i n i n g industry with the help of a closed input-output table for Texas. Figures for the t o t a l impact of the re f i n i n g industry are shown i n the form of employment and gross revenues. The study concludes with a tentative cost-benefit analysis. The gross revenue figures as described before are set i n re l a t i o n to estimated investment figures for the construction of the deepwater port. Bragg, Daniel M. A Survey of the Economic and Environmental Aspects of an Onshore Deepwater Port at Galveston, Texas 1 The study i s established as a preliminary study for a proposed offshore deepwater port and i s supposed to be followed by an in-depth study. Galveston has a conventional port, the impact of which i s determined by a port impact study. Bragg assumes that the impact of an offshore deepwater port i s ba s i c a l l y the same as the impact cf an onshore deepwater port. He further considers the methodologies to measure the impact of a port as well developed. He considers the main variable which 1 Daniel M. Bragg, A Survey of the Economic and Environmental Aspects of an Onshore Deepwater Port at Galveston, Texas; Part 1j Potential Economic Effects, 2nd ed. (College Station, Texas: Texas A & M University, Center for Marine Resources, 1975). 18 influences the size of the impact of the proposed port to be the extent to which the port w i l l be u t i l i s e d . He estimates therefore the potential tonnage of l i g u i d and dry bulk cargo most l i k e l y to be handled by the proposed port. For his estimates he uses forecasted import figures for crude o i l to the United States and foreign trade figures for dry bulk cargo for Texas which he estimated together with Bradley i n 1972. In order to determine the possible impact the forecasted cargo movement has on the economy i n h i s study area he uses figures for the impact per ton of cargo for the port of Green Bay, calculated by Schenker i n 1972. He c a l l s t h i s impact a Dollar impact but does not state which economic quantity i s measured by t h i s impact. Bragg estimates further the growth of the o i l r e f i n i n g industry induced by the proposed deepwater pert. He estimates that the growth of t h i s i n d u s t r i a l sector i n Texas w i l l be of such a siz e that the region w i l l keep i t s share of the national production. He further estimates that a deepwater onshore port would generate lower transportation costs than an offshore deepwater port. The difference i n the size of the impact generated by an onshore versus an offshore deepwater port i s stated again i n terms of an unspecified Dollar impact. 19 Carew, John, P. PoE*. of Stockton: Phase 2j_ Economic Impact of the Port of Stockton on the Stockton Economy 1973-19741 This port impact study measures the direct and i n d i r e c t impact of port related a c t i v i t i e s . The impacts are measured i n terms of wage payments and over-head costs of the firms generating the impacts. The firms generating the direct impact are the port authority and the port tenants. Figures for the wage payments and the overhead costs of the port authority are readi l y available. For the port tenants the number of their employees i s estimated and multiplied with the average personal income i n the community as stated i n a study prepared by the c i t y of Stockton. In the next step i t i s estimated that the average wage payments constitute 60% of the expenditures of the port tenants while the other 40% are overhead costs. With these assumptions the t o t a l primary impact of the port consisting of wage payments and overhead costs of the port authority and the port tenants could ea s i l y be calculated. The size of the m u l t i p l i e r e f f e c t of the primary impact i s estimated to be '3*. This estimation i s based on general experience with port impact studies and with an estimate for another impact on another C a l i f o r n i a n metropolitan region. 1 John P. Carew, Port of Stockton: Phase 2: Economic Impact of the Port of Stockton on the Stockton on the Stockton Economy 1973-1974 (Stockton, C a l i f o r n i a : n.p., 1975). 2 0 Conn, Robert L. ; Flewellen, W. C ; Peden, Guy T. An Assessment of Major Benefits to M i s s i s s i p p i from Water borne Commerce1 This study measures the impact of over-sea and inland water transportation on the state of M i s s i s s i p p i - The a c t i v i t i e s generating the primary impact of the ports are firms located i n the state because they want to benefit from the port and water transportation firms which are necessary for the operation of the ports. To estimate the size of the primary impact of the ports generated by firms that benefit from the port f a c i l i t i e s the study surveyed by questionnaire part of the regional economy located close to ports i n the study area from 1954 to 1965. The size of the primary impact was estimated i n terms of employment, wage payments, and tax payments, while the employment figures were d i r e c t l y estimated based on the information gathered by the questionnaire survey. The employment figures were multiplied by estimated wage figures i n order to obtain the primary wage impact. State revenues generated by the port dependent firms were estimated to be 4.7 cents for every Dollar earned in the form of wages i n these firms. The primary impact of the port included further the a c t i v i t i e s of the water transportation sector i n the state. For t h i s sector employment and pay r o l l data were readily available r— 1 Robert Lawrence Conn, W. C. Flewellen, and Guy T. Peden, An Assessment of Major Benefits to M i s s i s s i p p i from Waterborne Commerce (State College, M i s s i s s i p p i : M i s s i s s i p p i State University, Bureau of Business and Economic Research, 1966). 21 and could be used. The authors of the study estimated therefore only the state revenues generated by t h i s sector. They were estimated to be 4.7% of the t o t a l wage earnings i n t h i s sector. The mu l t i p l i e r f o r the d i r e c t impact of the ports i s estimated to have a siz e of '2'. The estimate i s based on experience from other port impact studies carried out for other ports. This port impact study contains further an estimation of the transportation costs saved by shippers i n the state due to the presence of the port services. The transportation cost savings are only calculated for goods transported on inland waterways. They are calculated as the difference between the rates for barge transportation and the rates f o r railway transportation f o r the quantities per distance transportated now i n the state on waterways. The study further estimates the effects of lower transportation costs on the r e a l income in the state. I t i s estimated that the state receives 30% to 56% of the transportation cost savings for imports or for transportation inside the state as an increase i n r e a l income. 2 2 Dunphy, Loretta M., and Chang, Semoon Economic Analysis of the Port of Mobile 1 The study i d e n t i f i e d eight groups of a c t i v i t i e s to interview by questionnaire in order to i d e n t i f y the primary impact of the port. These a c t i v i t i e s are: the a c t i v i t i e s of the Port of Mobile Authority, a i r , barge, r a i l and truck transportation, banks, goverment organisations and l o c a l chamber of commerce, other businesses involved i n marine transportation services, tidewater industries, grain dealers, manufacturers involved in imports and exports. These a c t i v i t i e s are located i n the entire state of Alabama. Their t o t a l number was 7 4 7 , of which 744 were interviewed by questionnaire. The questionnaire asked mainly for information about the dependency of the firm on the port, i t s number of employees and i t s wage and tax payments. In order to establish the direct impact of the port the categories interviewed were reduced to s i x and the farming sector was added. The a c t i v i t i e s generating the d i r e c t impact of the port are: marine transportation, a u x i l i a r y marine services, inland transportation, governmental and c i v i c organisations, tidewater industries, manufacturing i n d u s t r i e s , and the farm sector. The data about the farm sector were estimated with the help of information from the grain dealers and port s t a t i s t i c s . The study does not state i f the whole a c t i v i t y of a port-dependent enterprise i s included i n the measure f o r the primary 1 Loretta M. Dunphy and Semoon Chang, Economic Analysis of the Port of Mobile with Special Reference to Its Economic Impact upon the Alabama Economy, i n J £ 7 3 (Mobile, Alabama: University of South Alabama, Department of Economics, 1 9 7 4 ) . 23 impact of the port or only that part of the enterprise that actually depends on the port. The primary impact of the port was measured in terms of employment, wages, and taxes paid to the federal, state, and l o c a l government. Where figures were not available from the questionnaire survey they were estimated with the help of extrapolations from the known data. The m u l t i p l i e r of the primary impact was determined through ecomomic base theory. The state economy was divided into a base sector and a non-basic sector through a combination of ad hoc assumption ( a r b i t r a r i l y assigning sectors to the basic or export category) and the location quotient method. A l l a c t i v i t i e s included i n the primary impact of the port were considered to be economic base a c t i v i t i e s , the only exception being the farming sector. In the farming sector, the exports from the U- S., measured i n terms of the employment they create, were subtracted from figures for employment i n the grain producing sector in Alabama. These figures were estimated with the help of average employment figures f o r t h i s sector i n the U.S.A. The state economic base mul t i p l i e r has under these assumptions a value of •3'. I t i s assumed further that a l l port-dependent a c t i v i t i e s are economic base a c t i v i t i e s . Therefore the m u l t i p l i e r of * 3' i s applied to the primary impact of the port i n order to derive the i n d i r e c t impact. There i s no d i s t i n c t i o n between the size of the wage and employment m u l t i p l i e r . The m u l t i p l i e r i s however not applied to the tax revenue figures. The study shows further figures measuring the expenditure generated by cargo handling, steamship agency port expenses, 2 4 s t a t e dock f e e s , custom house brokerage, and forwarding expenses f o r three groups of cargo, g e n e r a l cargo, bulk h a n d l i n g , and g r a i n e l e v a t o r s , and f o r cargo handled by s p e c i a l p i e r s -25 Erbguth, Horst Per Beitraq eines Hafens zur Wertschoerjfunq seiner Hafenstadt darqestellt am Be i s p i e l der Haefen Hamm und Neuss 1 This port impact study assumes that the whole primary impact of the ports i s basic i n the sense of economic base theory. The a c t i v i t i e s generating the primary impact of the ports are determined by a combination of location quotient approach and by survey. The location quotient approach was applied f i r s t . In the second step those firms which showed employment figures above the national average were surveyed to determine t h e i r dependency on port a c t i v i t i e s . The following two c r i t e r i a were used for t h i s evaluation; 1. Do these enterprises use the transportation services of the port to a substantial amount ? 2. Did these firms locate in town because of the existence of water-transportation ? Only i n those cases where both questions were answered p o s i t i v e l y , i s the formerly i d e n t i f i e d economic base a c t i v i t y considered to be port-oriented. The economic a c t i v i t y of the port-dependent firms i s measured i n t h e i r value added. The value added figures for the single enterprises were readily available 1 Horst Erbguth, "Der Beitrag eines Hafens zur Wertschoepfung seiner Hafenstadt d a r g e s t e l l t am Beispeil der Haefen Hamm und Neuss," i n Der Einfluss eines Hafens auf die Wirtschaftsstruktur und die Wirtschaftskraft seiner Hafenstadt, edited by Dietmar K r a f f t (Goettingen, W. Germany: Vandenhoeck^S Eupprecht, 1966) . 26 from the central s t a t i s t i c a l bureau. The m u l t i p l i e r e f f e c t of the primary impact of the ports on the towns was determined with the help of expenditure figures from value added in the study areas. These expenditures were estimated to be 50% for Hamm and 49% for Neuss, 1 as Hamm provides, according to Erbguth, more services than Neuss. 2 These expenditure r a t i o s determine the size of the f i r s t round of the m u l t i p l i e r e f f e c t . In order to determine the size of the mult i p l i e r e f f e c t i n the subsequent rounds the r a t i o for expenditure from value added in the study area was multiplied with a figure measuring the re-spending of the income i n t o the study area i n the subsequent rounds. As the re-spending r a t i o i s lower in Neuss than i n Hamm these figures were estimated to be •0.81' for Neuss and '0.91' for Hamm. Using Erbguth's method (local expenditure x re-spending r a t i o ) , the value for the mult i p l i e r was calculated to be *1.75' for Hamm and '1.66' for Neuss. 1 Ibid., p. 247. 2 For an elaboration of Erbguth's assumptions, see chapter 4 of thi s study. 27 Gruen, Gruen, and Associates An Analysis of the Relationship between the Port of San Francisco and the Economy of the City_ and the Bay, Region 1 The authors of t h i s study used the employment per ton generated by cargo moved through the port of S e a t t l e 2 and adjusted these figures upward as San Francisco provides, according to the study team, more services than Seattle for water-transportation a c t i v i t i e s . These adjusted employment figures were multiplied by the average wage income i n the water transportation sector i n San Francisco. The t o t a l wage earnings in the related a c t i v i t i e s constituted the primary impact of the port. For the secondary impact the m u l t i p l i e r for the Seattle port impact was used but adjusted upward. The value of this m u l t i p l i e r was determined through input-output analysis. The m u l t i p l i e r was divided i n half as only 50% of the port employees l i v e i n San Francisco. The value of the t o t a l m u l t i p l i e r , which was later divided i n h a l f , was estimated to have a minimum of approximately M.9' and i s most probably not higher than approximately '2.4'- This study considered a l l a c t i v i t i e s not d i r e c t l y associated with the movement of cargo i n the port, but yet port related, to be included i n the m u l t i p l i e r e f f e c t . It 1 Gruen, Gruen, and Associates, An Analysis of the Relationship between the Port of San Francisco and the Economy of the City, and Bay_ Region (San Francisco: by the authors, 1972) . 2 The study of the port of Seattle used i n t h i s study i s referred to only as the Seattle port impact study of 1969. 2 8 i s , however, not mentioned in the study which a c t i v i t i e s generate the primary impact. Nor i s i t mentioned i f the mult i p l i e r e f f e c t i s generated only by the re-spending of wages earned in the primary port a c t i v i t i e s or as well by other expenditures occurring as a re s u l t of primary pert a c t i v i t i e s . The former i s l i k e l y since the rationale for d i v i d i n g the mult i p l i e r i n half was determined on the argument that only 50% of the employees l i v e i n the study area. H i l l e , Stanley J . , and Suelflow, James E. The Economic Impact of the Port of Baltimore on Maryland 1s Economy1 This port impact study analyzes only the primary impact of the port of Baltimore on the economy of the state of Maryland. The study determines the expenditures of vessels using the port of Baltimore with the help of questionnaires sent to the steam-ship l i n e s and shipping agents l i s t e d i n the port authority directory. Crew expenditures are estimated with the average size of a crew on a ship and estimated i n terms of expenditures for foreign ships, American ships, and ships moving coastwise. The value of transportation services to and from the port i s estimated with the help of executives of the railway 1 Stanley J. H i l l e and James E. Suelflow, "The Economic Impact of the Port of Baltimore on Maryland's Economy," i n Papers - Eleventh Annual Meeting, J 9 7 0 , edited by Transportation Research Forum (Oxford, Indiana: The Richard B. Cross Company, 1 9 7 0 ) , pp. 3 0 7 - 3 2 5 . 29 companies. The amount of services generated by the trucking industry i s estimated by subtracting the amounts ca r r i e d by the railways from the t o t a l volume of cargo a r r i v i n g at the piers. The amount attributed to the trucking industry i s multiplied by the prices the regulated c a r r i e r s are allowed to charge. In the sector of insurance and i n t e r n a t i o n a l banking the size of the business i s estimated with the help of executives of the firms i n question. Port services consist of services generated at the p i e r s . For these services the value added i s calculated by subtracting the payments made by the port authority to i t s c l i e n t s from the gross revenues of the port authority. For port-related manufacturing, employment and value added figures are shown i n the study. The value added generated by one employee i s multiplied with the number of the employees i n order to arrive at the t o t a l value added for these firms. The value added for one employee i s taken from a 1963 census of manufacturing. For a few firms the value added was d i r e c t l y arrived at by questioning the firms. There i s no i n d i c a t i o n i n the study as to what determines the port dependency of a firm. Ship-building firms are included with a Dollar value i n the studies. It i s not c l e a r what t h i s Dollar value measures. The study further shows an estimate of taxes paid by manufacturing and ship-building companies to goverment agencies. It i s not mentioned i f l o c a l , ' state, or federal governments receive these taxes. The study shows further figures f o r government expenditures i n connection with the port. Although i t 30 i s mentioned which part of these expenditures derive from the ci t y of Baltimore and the state government, no accurate ca l c u l a t i o n i s made as to how much of these funds ac t u a l l y flow into the economy of the state from outside the state. This port impact study does not determine the mu l t i p l i e r e f f e c t of the primary impact of the port. Knapp, John L.; Hammond, James D.; Haroz, Donald P. The Impact of V i r g i n i a 1 s Ports on the Economy of the Commonwealth 1 The study determines the primary and secondary impact of the ports of Hampton Roads on the Commonwealth of V i r g i n i a (state of V i r g i n i a ) . The primary impact i s measured i n terms of wage payments, employment, and tax payments. The primary impact i s generated by port-dependent, port-related, and harbour-related a c t i v i t i e s . Port-dependent a c t i v i t i e s are a c t i v i t i e s which f a c i l i t a t e the handling and movement of cargo shipped or received through the port. Port-related a c t i v i t i e s , those which involve transporting, producing, processing or fab r i c a t i n g the cargo which passes through the ports, include manufacturing, mining, agriculture, and surface transportation as well as a c t i v i t i e s i n various government agencies. Harbour-related a c t i v i t y i s that which though not related to port a c t i v i t y , exists because of the natural harbours at Hampton Roads. 2 Samples of firms i n each category except in the a g r i c u l t u r a l 1 John C. Knapp, James D. Hammond, and Donald P. Haroz, The Impact of Virginians Ports on the Economy, of the Commonwealth (n.p.: University of V i r g i n i a , Tayloe~Murphy I n s t i t u t e , 1976). 2 Ibid., pp. 35-36. 31 sector are interviewed by questionnaire. Which part of the firm belongs to one of the categories i s determined with the help of information from the questionaires and i n a few cases with data from an e a r l i e r port impact study for the port i n question. The value of the export of the a g r i c u l t u r a l sector out of the state of V i r g i n i a i s obtained from the U.S. Department of Agriculture. With t h i s information the employment and wage impact of the export-oriented part of the a g r i c u l t u r a l sector i s determined. Wages and employment figures f o r firms i n a l l other sectors are determined with the help of information from the questionnaires. Estimates of taxes paid by the d i f f e r e n t firms and by their employees are either obtained d i r e c t l y from the questionnaires or by information from the Department of Taxation. The study further shows revenues per ton of cargo moved through the ports of Hampton Roads. The figures for these revenues are taken from a study of the port of Baltimore prepared i n 1 9 7 5 with data from 1 9 7 3 . The figures are adjusted for 1 9 7 5 by using a U.S. national i n f l a t i o n factor. The size of the m u l t i p l i e r for the primary impact i s taken from a study of employment growth i n the state of V i r g i n i a . This m u l t i p l i e r i s given a value of ' 2 . 1 1 ' , using economic base analysis. M u l t i p l i e r s for di f f e r e n t sub-regions for the state of V i r g i n i a are taken from the D i v i s i o n of State Planning and Community A f f a i r s . These mult i p l i e r s are not established especially for port impacts. They are economic base m u l t i p l i e r s . 32 Oregon, Department of Transportation, Port Division Survey of Oregon Ports:. Economic Impact Section 1 This study i s an economic base study which i s o l a t e s base a c t i v i t i e s using the minimum requirements technique. Categories of port-dependent employment were grouped by the f o u r - d i g i t standard Industrial Code. The study does not explain how i t determined "port-dependent". Employment and pa y r o l l data were gathered from the Oregon Employment Division. These data were then divided i n t o port d i s t r i c t counties. The primary impact of the port of Portland was derived from an impact study of that port published e a r l i e r . The data were modified by eliminating the categories of t i d e water industry, whole sale and r e t a i l trade, and finance, insurance and rea l estate from the a c t i v i t i e s generating the primary impact. The m u l t i p l i e r e f f e c t for the primary impact was calculated through economic base analysis. The basic and non-basic sectors were i d e n t i f i e d through the minimum requirement approach. M u l t i p l i e r s were calculated for each port d i s t r i c t and for the whole state of Oregon. Transportation cost savings were calculated in t h i s study through a model which assumes that the actual shipments are made at a minimum of the i r transportation costs. The option of water-1 Oregon, Department of Transportation, Port D i v i s i o n , Survey of Oregon Ports: Economic Impact Section (1973). 33 transportation i s subsequently removed and the new minimum transportation costs minus the former minimum transportation costs constitute the transportation cost savings due to the presence of water transport. The study does not state i f the transportation cost savings are calculated only f o r inland water-way transport or as well for overseas water transportation. The study further does not specify i f shippers and/or receivers are included i n the model. Roesti, Robert M., Coe, Robert K. , Tsagris, B. E. Economic Impact of the Sacramento-Yolo Port* This port impact study was published in A p r i l 1964 after the port opened i n July 1963. The impact of the port was measured i n a study area comprising northern C a l i f o r n i a , northern Nevada, and southern Oregon. The primary impact of the port was i d e n t i f i e d as employment by persons d i r e c t l y employed in the port. No s p e c i f i c a t i o n i s given about the nature of their employment. The number of workers d i r e c t l y employed i n the port of Sacramento-Yolo was estimated with the help of a port impact study for the port of Stockton. I t was estimated that both ports w i l l employ, after the new Sacramento-Yolo port has operated for 1 Robert M. Roesti, Robert K. Coe, and B. E. Tsagris, Economic Impact of the Sacramento-Yolo Port (Sacramento, C a l i f o r n i a : Sacramento State College, Real Estate Resource Bureau, 1964) . 34 a while, an equal number of employees. The mu l t i p l i e r e f f e c t of the primary impact was also taken from the study of the port of Stockton. The employment multiplier was estimated to be '2.07'. The study included a transportation cost saving estimation for the shippers and receivers of goods i n the study area. Estimates were made for savings for d i f f e r e n t kinds of cargo. No in d i c a t i o n i s given as to how those estimates were derived. The aggregated savings were set i n r e l a t i o n to the construction costs of the port spread over 100 years with an assumed i n t e r e s t rate of 4%. The benefit cost r a t i o i s about *2.5*. Eudy, L e s l i e M. A Study of the Economic Impact of Maritime Commerce upon the Port of Seattle D i s t r i c t 1 The author of t h i s study showed four categories of d i r e c t l y port-dependent a c t i v i t i e s . They were: c a r r i e r and dir e c t operational and supply service a c t i v i t i e s ; port-dependent i n d u s t r i a l and commercial a c t i v i t i e s ; other related a c t i v i t i e s and labour organisations, consulates, and associations; federal, state and l o c a l government a c t i v i t i e s . These studies and the firms included i n them were determined by a very extensive 1 L e s l i e M. Eudy, A Study of the Economic impact of Maritime Commerce upon the Port of Seattle D i s t r i c t (Seattle, Washington: by the author, 1961). 35 survey of the Seattle economy. Only those port-dependent firms which would exist in the economy i n the absence of the port were included in the analysis. The economic impact of the a c t i v i t i e s was measured i n terms of employment, pa y r o l l , gross value of business, and taxes paid to the state government and to l o c a l governments. Figures for the f i r s t three measures were arrived at by interviewing firms and by estimations made by the author of the study. Tax revenues were estimated by taxation o f f i c i a l s . There i s no m u l t i p l i e r e f f e c t determined for the primary impact of the port, but a "usual expenditure" pattern i s presented. The study further estimated an indicator f o r the p r o f i t a b i l i t y of the port investments. For t h i s purpose the t o t a l investment during the forty-eight years of the port operation i s set i n r e l a t i o n to the payroll and the gross volume of business of the primary impact of the port i n 1958. I t was estimated that f o r every Dollar invested i n the port f a c i l i t i e s , $3.94 were earned i n payroll and $14.37 were generated i n gross volume of business in 1958. 36 Ryan, Robert H., and Adams, Charles W. Corpus C h r i s t i : Economic Impact of the Port 1 This study measured the d i r e c t and i n d i r e c t impact of the port of Corpus C h r i s t i on the community of Corpus C h r i s t i i n terms of employment and wages. The primary impact of the port i n terms of employment was estimated with the help of a mail survey and personal interviews with employers and persons familiar with the l o c a l economy. The sectors surveyed were transportation, services, and manufacturing firms. The c r i t e r i o n to determine i f a firm i s d i r e c t l y port related was not mentioned i n the study. To determine the wages earned i n a c t i v i t i e s d i r e c t l y related to the port, the number of employees i n the a c t i v i t i e s was divided into s p e c i f i c sectors. The number of employees was then multiplied by the average wages earned i n these sectors. The wage earnings for each sector were adjusted figures of the Bureau of Economic Analysis f o r Corpus C h r i s t i . In order to measure the m u l t i p l i e r e f f e c t of the primary impact i t was assumed that a l l port-related a c t i v i t y i s export-oriented. Forty-one per cent of a l l non-farm income i s attributable to the port and therefore basic. The study determined basic employment i n the non-farming sector. The data source i s not c i t e d . Multiplying the basic employment by the 1 Robert H. Ryan and Charles Pf. Adams, Corpus C h r i s t i : Economic Impact of the Port (Austin, Texas: The University of Texas at Austin, Bureau of Business Research, 1975). 37 average income f o r each sector the workers are employed i n generated the figure for the t o t a l basic wage income i n the community. This income was 43.44% of a l l income i n the community. Osing a simple base r a t i o , the income multiplier was found to have a value of about '2.23'. Community regional employment m u l t i p l i e r s can be derived from the basic employment isola t e d by the study. For every basic employee, '2.27' non-basic workers are employed i n the community. The income and employment mu l t i p l i e r s for the community are not of egual size as i n many other studies but account for wage differences between the basic and non-basic sector. Schenker, Eric The Impact of the Port of Green Bay, QU the Economy, of the Community1 Eric Schenker determined the primary and the secondary impact of the port of Green Bay on the community of Green Bay. In order to calculate the primary impact he estimated the revenues generated i n the community for each ton of cargo moved through the port by d i f f e r e n t categories of cargo. His estimates were based on information from executives of the port authority. In order to estimate the t o t a l primary impact the revenue 1 E r i c Schenker, The Impact of the Port of Green Bay on the Economy of the Community (Milwaukee, Wisconsin: University of Wisconsin, Sea-3rant Program, Technical Report No. 16, 1972). 38 figures were applied to the tonnage of cargo moved through the port for each category of cargo- The revenues are generated by vessel disbursement, port and terminal income, inland transportation, vessel crew expenditure, and port services. In order to determine the m u l t i p l i e r e f f e c t of the primary impact, Schenker applied a m u l t i p l i e r for southeastern Wisconsin (published by the South Eastern Wisconsin Regional Planning Commission) to the primary impact of the port. The si z e of that m u l t i p l i e r i s '2.44'. Schenker showed further a figure of $1-million per annum for port investments, and applied an estimated m u l t i p l i e r of '2.55' on the investment expenditures. The o r i g i n of the funds i s not stated. Although t h i s study showed figures for export from the region, no indication was given of the extent to which exports depend on the port. The primary port impact consists only of a c t i v i t i e s d i r e c t l y associated with the operation of the port. 39 Stevenson S Kellogg, Ltd Port of Vancouver: Economic Impact Study,1 In t h i s study the s i z e of the primary impact of the port was determined with the help of information gathered by questionnaires- The questionnaires were sent to four categories of firms which are d i r e c t l y port-related: i . e . manufacturers and wholesalers, and other public and private organisations. The d i r e c t l y port-related firms are, for instance, a c t i v i t i e s i n the f i s h i n g and f i s h processing sector, firms engaged i n transportation services i n connection with the port, shipbuilding and repair, and cargo handling. This category was completely surveyed. From the other categories a sample of approximately 30% was taken. The questionnaires asked that the firm account for i t s d i r e c t l y port-related a c t i v i t i e s . The primary impact of the port included, therefore, not the entire company but only that segment that was considered by the firm to be port-dependent. The questionnaire asked for employment, p a y r o l l , and sales fi g u r e s . The primary impact was measured in these units. The secondary impact was estimated by using an input-output 1 Stevenson 5 Kellogg, Ltd., Port of Vancouver: Economic Impact Study (Vancouver: bu the authors,~1975). ~ 2 H. Craig Davis, An Interindustry Study of the Metropolitan Vancouver Economy (Vancouver: The University "of B r i t i s h Columbia, Faculty of Commerce, Urban and Land Economics Report No. 6, 1974). 40 table for the Greater Vancouver Eegional D i s t r i c t . 2 The m u l t i p l i e r included the spending cycles generated by consumption and inter-industry purchases. The aggregated impact of the Vancouver port was divided into s p e c i f i c impacts generated by d i f f e r e n t kinds of cargo, dif f e r e n t vessel types, and d i f f e r e n t f a c i l i t i e s . The Port of Portland Economic Impact of the Port of Portland, Oregon 1 This study i s an up-date of a port impact study of the port of Portland in 1965. It was assumed that the study could be updated by adjusting the data since i) there was no major change in the type of cargo handled; i i ) new cargo handling methods , especially containerisation, had no important impact on the port a c t i v i t i e s and, i i i ) the nature of the Portland economy did not change s i g n i f i c a n t l y . The study showed figures f o r employment and p a y r o l l i n maritime a c t i v i t i e s and port dependent a c t i v i t i e s such as contract construction, manufacturing, transportation, wholesale and r e t a i l trade, finance, insurance, and r e a l estate, services, and government. I t was not stated i n the study why these a c t i v i t i e s are considered to be port-related, nor were data sources c i t e d . 1 The Port of Portland, Economic Impact of the Port of Portland, Oregon (Portland, Oregon: by the authors, no date). 41 The study showed further employment figures for employees i n import and export firms and employment and p a y r o l l data for a c t i v i t i e s located i n two i n d u s t r i a l areas. The study did not indicate what determines the port dependency of these a c t i v i t i e s nor where the figures measuring the size of these a c t i v i t i e s were derived from. The study did not include a m u l t i p l i e r analysis but estimated the income expenditure pattern. Revenues derived from the economic a c t i v i t i e s related to the port of Portland f o r each type of cargo were also shown. The maritime revenue impact on selected economic sectors in Oregon in 1970 was then demonstrated. No i n d i c a t i o n was given as to how these estimates were determined. Whitaker-Mohn, Andrea Economic Impact of the Port of Sacramento: Its Sources and Results 1 The a c t i v i t i e s generating the di r e c t economic impact of the port were, according to t h i s study: the di r e c t port operation, port servicing firms, firms providing transportation to and from the port, and export firms. In the case of the firms providing transportation services to and from the port and i n the case of 1 Andrea Whitaker-Mohn, Economic Impact of the Port of Sacramento: I t s Sources and Results (Sacramento, C a l i f o r n i a : C a l i f o r n i a State Univerity, 1974). 4 2 the export firms only that part of the firms i s considered for the generation of the primary impact whose business i s considered to be port-dependent. To determine the d i r e c t port impact, employment i n the port-related firms was multiplied by the wage earnings considered by the study to be most l i k e l y earned in that employment. In order to arrive at the direct monetary impact the expenditures of s a i l o r s i n the study area and the expenditure of the port operation other than t h e i r wage payments were added to the wages earned i n the d i r e c t l y port-related a c t i v i t i e s . The data for the determination of the primary impact was gathered by personal interviews with o f f i c i a l s of the port authority and private firms. The i n d i r e c t employment and monetary figures f o r the port impact were estimated with the help of an estimate by the Stanford Research I n s t i t u t e for the impact pf the port of Stockton. This m u l t i p l i e r has a value of '3'. It was applied to the direct employment as well as to the d i r e c t monetary impacts of the Sacramento port. The author of the study considered transportation costs savings for the exporters of bulk commodities i n the study area to be substantial. The transportation cost savings for the shipper of general cargo were considered to be n e g l i g i b l e . No analysis was provided f o r the size of the transportation cost savings for the economy i n the study area. 43 Williams-Kuebelbeck and Associates, Inc. Economic Impact of Waterborne Commerce through the Ports of Los Angeles and Long Beach 1 This study determined the primary impact of the ports through data gathered in questionnaires sent to a random sample. The sample size was over 850 out of 4600 firms i d e n t i f i e d as p o t e n t i a l l y port related i n the study area. These firms belonged to the following groups: tenants of the port d i s t r i c t and the port authority, ship owners and steamship agents, maritime service firms with f i f t y or more permanent employees, maritime service firms with less than f i f t y permanent employees, importers and exporters. The primary impact was measured i n terms of employment, gross revenues, wages and s a l a r i e s , purchases of l o c a l goods and services, and d i r e c t tax payments. Estimates were made about the si z e of these quantities based on the information obtained from the questionnaires. The m u l t i p l i e r e f f e c t was calculated through the average propensity to spend l o c a l l y . The r a t i o of the wages, s a l a r i e s , purchases out of the gross revenues of the firms was determined from information arrived at by the questionnaire survey. The average propensity to consume was taken from data of the Bureau of Labour S t a t i s t i c s f o r selected metropolitan areas i n the 1 Williams-Kuebelbeck and Associates, Inc., Economic Impact of Waterborne Commerce through the Ports of Los Angeles and Long Beach (Marina del Rey, C a l i f o r n i a : by~the authors, 1976)."" 4U D.S.A. The mu l t i p l i e r arrived at with t h i s method was a market area m u l t i p l i e r . As not a l l employees l i v e i n the market area, the m u l t i p l i e r was reduced to a mu l t i p l i e r f o r the study area. 2.3 Conclusion A l l port impact studies with the exception of the study •Inland Port F a c i l i t i e s and Economic Growth" by Armenakis concentrate on the determination of the primary and the secondary impact of ports as they are defined i n the introduction of t h i s study. The following chapters of t h i s study w i l l therefore concentrate on the methodologies used to determine these impacts. Armenakis's study determined the primary and secondary impact of the ports on the M i s s i s s i p p i counties i n which they are located. Emphasis, however, i s on two other guestions; i) do counties with inland water transportation show di f f e r e n t income and employment figures than counties without inland port f a c i l i t i e s ? (This analysis was supposed to give information about the impact of inland port f a c i l i t i e s on income and employment); and i i ) i s the mix of economic a c t i v i t i e s using the port f a c i l i t i e s the same in the three counties he analyzed? (This question was supposed to lead to information about the type of a c t i v i t i e s attracted by port f a c i l i t i e s to a regional economy) . Armenakis was unable to determine any s i g n i f i c a n t difference between the income and employment figures i n the 4 5 counties i n M i s s i s s i p p i having inland port f a c i l i t i e s and those without such f a c i l i t i e s . Even i f the study could have shown such a difference i t could not have drawn the conclusion from t h i s that the differences can be attributed to the existence of port f a c i l i t i e s i n the counties rather than to some other difference between counties (for example, differences i n the size of population centre or i n s p e c i a l i z a t i o n of production). For t h i s reason t h i s study approach i s not further analyzed. B a s i c a l l y the same argument applies to the question about the i n d u s t r i a l mix that port f a c i l i t i e s a t t r a c t to a county. Even i f the study could have shown that the firms using the port services i n the d i f f e r e n t counties belonged to the same economic sectors, no conclusion could be drawn, based on t h i s observation, about the reason of the firms to use port services. This analysis does not provide information about the importance of d i f f e r e n t sectors i n the economy of the counties having port f a c i l i t i e s . Even i f t h i s information had been provided, no conclusion could be drawn under the assumption that these firms are attracted to the regional economies due to the existence of the ports and not, rather, for other reasons (for example, a v a i l a b i l i t y of natural resources). Reasons for firms to locate in c e r t a i n regions are very diverse as i s shown i n chapter 4 . A general r e l a t i o n between the existence of inland port f a c i l i t i e s and a certain mix of economic a c t i v i t i e s i n a county i s therefore unachievable. For the reasons stated above, t h i s study does not analyze further the approaches taken by Armenakis. The following 46 chapters w i l l , rather, concentrate on the impacts of ports described i n the introduction as the primary and secondary impact of a port. 47 Table I Characteristics of Individual Port Economic Impact Studies Author and T i t l e of Economic Port Impact Study Measures of Primary and Secondary Impact A c t i v i t i e s Constituting Primary Port Impact Method to Determine the Size of the Secondary Impact Method to Measure Transportation Cost Savings Anderson, Graydon K. 1964 The Port of Ensenada Employment, Wages Cargo-handling and Ship Services, Port Security, Management and Supervision of Construction; Land Transportation, Port Trade and Marine Transportation, Port Industries, Port Construction Economic Base Theory Determination of Economic Base by Condensing Input-Output Table None Armenakis, A. A. 1970 Inland Port F a c i l i t i e s and Economic Growth Gross Revenues Firms Receiving or Shipping Goods Input-Output Analysis Table Established with Input-Output C o e f f i c i e n t s from D.S. Table None 48 Table I continued Characteristics of Individual Port Economic Impact Studies Author and T i t l e of Economic Port Impact Study Bragg, Daniel M.; Bradley, James R. 1 9 7 2 The Economic Impact of a Deep Water Terminal i n Texas. Bragg, Daniel R. 1 9 7 4 A Survey of the Economic and Environmental Impacts of an Onshore Deep Water Port at Galveston, Texas Measures Of Primary and Secondary Impact Gross Revenues Employment Dollar - Impact A c t i v i t i e s Constituting Primary Impact Port Operation, O i l Refining Sector Port Operation, O i l Refining Sector Method to Determine the Size of the Secondary Impact Input-Output Analysis Closed Model M u l t i p l i e r Determined only For O i l Refining Sector None Method to Measure Transportation Cost Savings None N one 49 Table I continued Charact e r i s t i c s of Individual Port Economic Impact Studies Author and T i t l e of Economic Port Impact Study Measures Of Primary and Secondary Impact Carew, John P., 1975 Port of Stockton: Phase 2: Economic Impact Of the Port of Stockton on the Stockton Economy 1973 - 1974 Employment, Payroll , Overhead Costs Conn, Robert Lawrence Et Al. 1966 An Assessment of Major Benefits to Mi s s i s s i p p i frcm Waterborne Commerce Wages and Salaries, Tax-Payments A c t i v i t i e s Constituting Primary Impact Port Authority, Port Tenants Water Transportation Industry, Newly Located Firms Which Consider Themselves to be Port Related Method to Determine the Size of the Secondary Impact Method to Measure Transportation Cost Savings Estimation Based on General Experience and on a Study f o r the Same Region None Estimation Based on General Experience Difference between Rates f o r Railways and Barges Times Quantity per Unit Distance now Transported by Water Transportation 5 0 Table I continued Cha r a c t e r i s t i c s of Individual Port Economic Impact Studies Author and T i t l e of Economic Port Impact Study Measures Of Primary and Secondary Impact A c t i v i t i e s Constituting Primary Impact Method to Determine the Size of the Secondary Impact Method to Measure Transportation Cost Savings Dunphy, Loretta M. ; Chang, Semoon 1974 Economic Analysis of the Port of Mobile with Special Reference to i t s Economic Impact upon the Alabama Economy in 1973 Employment Wage Payments Tax Payments Marine Transportation Auxiliary Marine Services Inland Transportation Government and C i v i c Organisations Tide Water Industry Manufacturing Industry Farming Economic Base Theory Determination of Economic Base by ad hoc Assumption and Location Quotient Method None Erbguth, Horst 1966, Der Beitrag eines Hafens zur Wertschoepfung seiner Hafenstadt dargestellt am B e i s p i e l der Haefen Hamm und Neuss Value Added Enterprises Using Transportation Services of the Port and Located i n the Study-Area because of the Port Estimate Based on Study for Mu l t i p l i e r Effects of Communities of Similar Size None 51 Table I continued Characte ris ti c s of Individual Port Economic Impact Studies Author and T i t l e of Economic Port Impact Study Measures Of Primary and Secondary Impact A c t i v i t i e s Constituting Primary Impact Method to Determine the Size of the Secondary Impact Method to Measure Transportation Cost Savings Gruen, Gruen 1972 An Analysis of the Relationship between the Port of San Francisco and the Economy of the City and Bay Region Employment, Wages No Specification Adjusted Input-Output M u l t i p l i e r from another Port Impact Study None H i l l e , Stanley J . , Suelflow, James E. 1970 The Economic Impact of the Port of Baltimore on Maryland's Economy Gross Revenues, Value Added f o r Port Services, Wages for Port Dependent Firms, Tax Payments Vessel Expenditure, Crew Expenditure, Truck and Railway Transportation to and from the Port, Insurance and In d u s t r i a l Banking, Port Services, Port Dependent Firms, Ship Building Companies, Government Expenditure None None 52 Table I continued C h a r a c t e r i s t i c s of I n d i v i d u a l Port Economic Impact S t u d i e s Author and T i t l e of Economic Port Impact Study Measures Of Primary and Secondary Impact A c t i v i t i e s C o n s t i t u t i n g Primary Impact Knapp, John L.; Hammond, James D. ; Haroz, Donald P. 1976 The Impact of V i r g i n i a ' s P o r t s the Economy of the Commonwealth Employment, Wages, Tax-Payments Port-dependent A c t i v i t i e s , P o r t - r e l a t e d A c t i v i t i e s , Harbour Releted A c t i v i t i e s Oregon, Department of T r a n s p o r t a t i o n 1973 Survey of Oregon P o r t s on Economic Impact S e c t i o n Employment, P a y - E o l l No S p e c i f i c a t i o n Method to Determine the S i z e of the Secondary Impact Method to Measure T r a n s p o r t a t i o n Cost Savings E s t i m a t i o n Based on a Study of Employment Growth f o r the Same Area None Economic Base Theory Determination Of Economic Base with Minimum Requirement Approach Minimum T r a n s p o r t a t i o n Costs f o r A l l Q u a n t i t i e s Moved i n State Minus Minimum T r a n s p o r t a t i o n Costs without Option of Water T r a n s p o r t a t i o n 5 3 Table I continued Characteristics of Individual Port Economic Impact Studies Author and T i t l e of Economic Port Impact Study Measures Of Primary and Secondary Impact A c t i v i t i e s Constituting Primary Impact Method to Determine the Size of the Secondary Impact Method to Measure Transportation Cost Savings Roesti, Robert M-; Coe, Robert K.; Tsagris, B. E. 1 9 6 4 Economic Impact of the Sacramento-yolo Port Employment Employees D i r e c t l y Employed i n the Port Estimate Based on Another Port Impact Study Estimated Savings per Unit of Commodities Shipped Rudy, L e s l i e M. 1961 A Study of the Economic Impact of Maritime Commerce upon the Port of Seattle D i s t r i c t Employment, Pay-Roil, Gross Revenues, Tax-Payments Carrier and Direct Operational and Supply Service A c t i v i t i e s , Port-depen dent I n d u s t r i a l and Commercial A c t i v i t i e s , Other Related Business A c t i v i t i e s and Labour Organisations, Consulates, Associations, Federal, State, and Local Government A c t i v i t i e s None None 54 Table I continued Characteristics of Individual Port Economic Impact Studies Author and T i t l e of Economic Port Impact Study Ryan, Robert H.; Adams, Charles W. 1975 Corpus C h r i s t i : Economic Impact of the Port Schenker, Er i c 1972 The Impact of the Port of Green Bay on the Economy of the Community Measures Of Primary and Secondary Impact A c t i v i t i e s Constituting Primary Impact Employment, Wages Transportation, Services, Manufacturing Gross Revenues Vessel Disbursement, Port and Terminal Income, Inland Transportation, Vessel Crew Expenditure, Port Services Method to Determine the Size of the Secondary Impact Method to Measure Transportation Cost Savings Economic Base Theory No Statement How the Economic Base Sector Is Determined None Estimate Based on Study for Region Nearby None 55 Table I continued Characteristics of Individual Port Economic Impact Studies Author and T i t l e of Economic Port Impact Study Measures Of Primary and Secondary Impact Stevenson & Kellogg Ltd 1975 Port of Vancouver Economic Impact Study Employment, Wages, Gross Revenues The Port of Portland, no date Economic Impact of the Port of Portland, Oregon Employment, Pay-Rcll, Tax-Revenues A c t i v i t i e s Constituting Primary Impact Firms Di r e c t l y Related to Port, Manufacturers and Wholesalers, Other Public and Private Organisations Maritime A c t i v i t i e s , Port-dependent A c t i v i t i e s Method to Determine the Size of the Secondary Impact Input-output Analysi s Consumption Part Inter-Industry Matrix of None Method to Measure Transportation Cost Savings None None 56 Table I continued Characteristics of Individual Port Economic Impact Studies Author and T i t l e of Economic Port Impact Study Measures Of Primary and Secondary Impact A c t i v i t i e s Constituting Primary Impact Method to Determine the Size of the Secondary Impact Method to Measure Transportation Cost Savings Williams-Kuebelbeck and Associates 1976 Economic Impact of Waterborne Commerce through the Ports of Los Angeles and Long Beach Employment, Gross Revenues, Wages and Sal a r i e s , Purchases of Local Goods and Services, Direct Tax-Payments Tenants of the Port D i s t r i c t and Port Authority, Ship Owners and Steamship Agents, Maritime Service Firms with 50 or More Permanent Employees, Maritime Service Firms with Less than 50 Permanent Employees, Importers and Exporters Income Expenditure Approach None Whitaker-mohn, Andrea 1974 Economic Impact of the Port of Sacramento: Its Sources and Results Employment, Wages, Total Expenditures Direct Port Operation, Port Servicing Firms, Firms Providing Transportation to and from the Port, Export Firms Estimate Based on Study for another Port None 5 7 3 T r a n s p o r t a t i o n Cost S a v i n g s 3. 1 I n t r o d u c t i o n As water c a r r i e r s a r e a b l e t o t r a n s p o r t c e r t a i n goods cheaper t h a n o t h e r c a r r i e r s , a r e g i o n h a v i n g a p o r t and t h e r e f o r e easy a c c e s s t o w a t e r - t r a n s p o r t a t i o n e x p e r i e n c e s l o w e r c o s t s f o r t h e t r a n s p o r t of the goods c a r r i e d by waterway c a r r i e r s than o t h e r r e g i o n s which do not have easy a c c e s s t o w a t e r - t r a n s p o r t a t i o n . The d i f f e r e n c e between t h e c o s t s o f t r a n s p o r t i n the r e g i o n i f t h e p o r t e x i s t s and i n the absence of t h e p o r t c o n s t i t u t e s the t r a n s p o r t a t i o n c o s t s a v i n g s t o s h i p p e r s and r e c e i v e r s of goods. T h i s c h a p t e r a n a l y z e s the methods a p p l i e d i n t h e p o r t i m p a c t s t u d i e s t o d e t e r m i n e t h e s i z e o f t h e t r a n s p o r t a t i o n c o s t s a v i n g s g e n e rated i n the st u d y a r e a . T h i s a n a l y s i s i s f o l l o w e d by a d i s c u s s i o n o f a method t o determine t h e r e g i o n a l i n c i d e n c e o f t h e t r a n s p o r t a t i o n c o s t s a v i n g s . 58 3.2 Determination of the Size of the Transportation Cost Savings Three of the port impact studies under review measure the transportation cost savings for the l o c a l economy due to the p o s s i b i l i t y of shipping goods by water. 1 1. Oregon - t h i s study assumes that the actual mode of transportation i s the one of minimum costs. I t c a l c u l a t e s the t o t a l transportation costs i n the state for a l l f r e i g h t moved in the state considering the option of water transportation. The p o s s i b i l i t y of transportation by water i s then removed and the t o t a l transportation costs i n the state economy, should ports not e x i s t , are calculated. The amount of f r e i g h t transported per unit distance i s multiplied by the rates charged by the c a r r i e r s who offer the lowest price services to calculate the transportation costs. The difference between the two costs (with the port f a c i l i t y and without the port f a c i l i t y ) i s the amount of transportation costs saved by the presence of port f a c i l i t i e s . The study does not state whether the transportation cost savings are calculated for either inland or over-sea water transportation. The study further does not specify whether either shippers or receivers are included in the model. 2. Missi s s i p p i - t h i s study uses the actual guantities moved by water-carriers on inland waterways. The transportation cost savings are only calculated for shippers of f r e i g h t but not 1 Oregon, Survey, of Oregon Ports; Conn, Major Benefits to M i s s i s s i p p i ; Eoesti, Economic Impact of the Sacramento-Yolo Port. 59 f o r the r e c e i v e r s of f r e i g h t . The author assumes t h a t r a i l w a y t r a n s p o r t a t i o n i s the next cheapest mode of t r a n s p o r t f o r goods now shipped on waterways. The d i f f e r e n c e between the r a t e s f o r water and r a i l w a y t r a n s p o r t m u l t i p l i e d by the g u a n t i t i e s per u n i t d i s t a n c e moved on i n l a n d waterways are the c a l c u l a t e d t r a n s p o r t a t i o n c o s t s a v i n g s . 3. Sacramento-Yolo - t h i s study shows a t a b l e with estimated annual s a v i n g s f o r c e r t a i n kinds cf f r e i g h t i n the r e g i o n a l economy. The methodology used to d e r i v e the e s t i m a t e i s not s t a t e d . 3.2.1 E v a l u a t i o n of t h e Oregon and M i s s i s s i p p i Studies Both the study of Oregon and the study of M i s s i s s i p p i make two fundamental assumptions: 1. The f i r s t assumption i s t h a t the goods shipped t o and from the study area are the same i n q u a n t i t y and kind with or without the e x i s t e n c e of the p o r t s . T h i s assumption suggests that the e x i s t e n c e of the port does not have any i n f l u e n c e on the s t r u c t u r e and s i z e of the economy i n the r e g i o n s . This assumption does not hold because both s t u d i e s a l s o s t a t e t h a t a s u b s t a n t i a l number o f f i r m s l o c a t e d i n these r e g i o n s because they would d e r i v e b e n e f i t s from the presence o f water t r a n s p o r t a t i o n f a c i l i t i e s . T r a n s p o r t a t i o n c o s t savings should only be c a l c u l a t e d f o r those s h i p p e r s who would be p a r t of the r e g i o n a l economies as w e l l i n the absence of the p o r t s . 60 The other firms experience transportation cost savings as well but would not be located i n the regional economy without ports and would therefore not experience the higher transportation costs i f the port did not e x i s t . 2. The second assumption i s that alternative c a r r i e r s would charge the same prices with or without the existence of the ports. The study of the M i s s i s s i p p i ports 1 mentions that the railway rates were reduced i n the Tennessee Valley after waterway c a r r i e r s entered the market. 2 In the case of higher competition i n the regional economy due to the existence of water-transportation services, a l l regional shippers and receivers of goods (regardless of the mode of transportation they use) experience transportation cost savings due to the existence of the port services. These savings are very hard to measure but t h e i r size should be estimated or t h e i r existence should at l e a s t be mentioned i n a port impact study. Two other assumptions should be mentioned. The study of the Oregon ports assumes that firms are shipping t h e i r goods by the c a r r i e r which offers the lowest rates. Both studies consider the 1 Conn, Major Benefits to M i s s i s s i p p i , p. 11. 2 As another example of a reduction i n railway rates due to higher competition, the Canadian Railway Act introduced i n 1938 special rates for highly competitive regions. These f r e i g h t rates are c a l l e d 'competitive rates* and are far lower than the usual rates i n order for the railways to be competitive i n regions where they face high competition. See H. L. Purdy, Transport Competition and Public Policy i n Canada (Vancouver: University of B r i t i s h Columbia Press, 1972), p. 103-104. 61 r a t e s f o r the t r a n s p o r t a t i o n s e r v i c e s t o be egual t o the c o s t s of t h e s e r v i c e s t o the customer. D i f f e r e n t c a r r i e r s however provide d i f f e r e n t k i n d s of s e r v i c e s . The d i f f e r e n c e s are i n the speed of the t r a n s p o r t a t i o n , the damage freguency, and i n s e r v i c e s provided by the customer h i m s e l f such as the t r a n s p o r t to and from the f a c i l i t i e s of the c a r r i e r . The d i f f e r e n c e i n the s e r v i c e s of d i f f e r e n t c a r r i e r s c o n s t i t u t e s d i f f e r e n t c o s t s f o r the s h i p p e r . Therefore the d i f f e r e n c e i n the r a t e s o f the c a r r i e r s does not r e f l e c t n e c e s s a r i l y the d i f f e r e n c e s i n the c o s t s to the sh i p p e r . I t can be concluded t h a t : i) a c a l c u l a t i o n of the t r a n s p o r t a t i o n c o s t savings due to the e x i s t e n c e o f a port should c o n t a i n e s t i m a t e s about the s t r u c t u r e of the economy with and without the port; and i i ) the port impact s t u d i e s s h o u l d f u r t h e r i n c l u d e i n f o r m a t i o n about the s t r u c t u r e and p r i c i n g behaviour of the t r a n s p o r t a t i o n s e c t o r . T h i s i n f o r m a t i o n should be used t o a d j u s t the t r a n s p o r t a t i o n cost s a v i n g s c a l c u l a t e d i n the port impact study. I f t h i s i n f o r m a t i o n cannot be o b t a i n e d , the e f f e c t of the p r o v i s i o n of t r a n s p o r t a t i o n s e r v i c e s by the port on the co m p e t i t i o n i n the r e g i o n a l t r a n s p o r t a t i o n s e c t o r and i t s impact on a l l t r a n s p o r t a t i o n p r i c e s i n the r e g i o n a l economy should at l e a s t be mentioned. A port impact study should not assume t h a t s h i p p e r s use the cheapest mode of t r a n s p o r t a t i o n as i s done i n the study of the impact of the Oregon p o r t s , but should r a t h e r use the a c t u a l shipments made to c a l c u l a t e the t r a n s p o r t a t i o n c o s t s a v i n g s as the study of the impact of the p o r t s of M i s s i s s i p p i does. 62 Transportation cost saving studies should further include estimates of the costs other than the d i r e c t charges that occur to the shipper. 3.3 Incidence of Transportation Cost Savings The incidence of transportation cost savings determines who benefits from the low transportation costs i n the regional economy by an increased real income. The following discussion determines whether those who benefit frcm an increased r e a l income due to the lower transportation costs are consumers located in the regional economy. Since a regional port impact study determines the impact of a port on a certain region i t should stress the t o t a l amount of transportation cost savings generated i n the study area and also how much of the regional transportation costs savings are actually experienced by the regional residents i n the form of an increased r e a l income. The d i f f e r e n t i a t i o n between the residents who benefit from low transportation costs and the companies transporting goods benefitting from them can be considered as an indicator for the incidence on groups i n the society having d i f f e r e n t l e v e l s of income as the owners of the firms are generally considered to have a higher income than the average resident. The regional and personal incidence of the transportation cost savings i s analyzed i n the following section of t h i s chapter. The study of the impact of water-transportation i n the state of M i s s i s s i p p i determines the regional and personal 63 i n c i d e n c e of the t r a n s p o r t a t i o n c o s t s a v i n g s i n the form of higher r e a l income f o r consumers:. The i n c i d e n c e of t r a n s p o r t a t i o n c o s t savings depends b a s i c a l l y upon the c o m p e t i t i v e s t r u c t u r e of the i n d u s t r y i n c u r r i n g the s a v i n g s . There are t h r e e p o s s i b l e i n d u s t r i a l s t r u c t u r e s which might i n f l u e n c e the u l t i m a t e e f f e c t of t r a n s p o r t a t i o n s a v i n g s — t h e h i g h l y competetive i n d u s t r y , the monopolistic i n d u s t r y , and the o l i g o p o l i s t i c i n d u s t r y . T r a n s p o r t a t i o n savings i n c u r r e d i n each of these d i f f e r e n t s t r u c t u r a l i n d u s t r i e s would be d i s t r i b u t e d i n v a r y i n g ways. The two p o s s i b l e b e n e f i c i a r i e s from t r a n s p o r t a t i o n savings, or any production c o s t s a v i n g s , .could be e i t h e r the u l t i m a t e consumer or the s h i p p e r , depending upon the c o m p e t i t i v e s t r u c t u r e of the i n d u s t r y i n which the s h i p p e r i s p a r t . The f o l l o w i n g d i s c u s s i o n i n v o l v e s the i n c i d e n c e o f t r a n s p o r t a t i o n c o s t savings i n a h i g h l y c o m p e t i t i v e , m o n o p o l i s t i c , and o l i g o p o l i s t i c i n d u s t r i e s . In a h i g h l y c o m p e t i t i v e i n d u s t r y , c h a r a c t e r i z e d by many producers, the e f f e c t one producer can have on the market p r i c e of the homogeneous product i s n e g l i g i b l e . T h i s means t h a t no producer i s a b l e , i n the l o n g run, to maintain a p r i c e higher or lower than the market p r i c e . Therefore, any c o s t savings i n the h i g h l y c o m p e t i t i v e i n d u s t r y w i l l u l t i m a t e l y be passed on to the consumer. T h i s might r e s u l t i n some market expansion f o r the producers e x p e r i e n c i n g the c o s t savings , but almost a l l the t r a n s p o r t a t i o n savings would be passed on to the consumer through a lower p r i c e f o r the goods produced. Imperfections of the market, however, l i m i t the p r a c t i c a l i t y of t h i s example. R e l a t i n g to water-commerce, perhaps a g r i c u l t u r e i s the c l o s e s t i n d u s t r y meeting the q u a l i f i c a t i o n s of a h i g h l y competitive i n d u s t r y . In a m o n o p o l i s t i c i n d u s t r y , c h a r a c t e r i z e d by only one producer with a b s o l u t e c o n t r o l on the p r i c e of h i s product, the f u l l e f f e c t of t r a n s p o r t a t i o n c o s t s a v i n g s would probably be r e a l i s e d by the producer, or i n t h i s i n s t a n c e , the s h i p p e r . The l a c k of c o m p e t i t i o n would enable the monopolist to absorb the f u l l b e n e f i t of a r e d u c t i o n i n t r a n s p o r t a t i o n s a v i n g s . There are no pure monopolists t r a n s p o r t i n g t h e i r goods by the s t a t e ' s water-ways, so the concern here i s not with them. A more r e a l i s t i c c o m p e t i t i v e s t r u c t u r e i s o l i g o p o l y , c h a r a c t e r i z e d by producers of v a r i o u s s i z e s but always with one or more producers who are a b l e to exert s i g n i f i c a n t i n f l u e n c e upon the market p r i c e . A c o s t saving t o a s h i p p e r i n an o l i g o p o l y i n d u s t y would probably r e s u l t i n the saving being absorbed by both the consumer and the producer. The c o m p e t i t i v e f o r c e s would not be s t r o n g enough t o lower the 64 market price to the l e v e l of the highly competitive industry, but the producer would not receive the f u l l benefit through greater p r o f i t s as i n a monopoly. Thus, the savings would be distributed between both the consumer i n the form of lower prices and the producer i n the form of increased p r o f i t s . Probably the three primary industries influenced by oligopoly which transport goods on the state-waterways are the petroleum, s t e e l , and chemical industries. In summary i t i s s u f f i c i e n t to say that the incidence, or f i n a l benefit, of transportation cost savings depends mainly upon the primary market st r u c t u r e . 1 Conn shows the following eguation f o r the determination for the savings occurring in the state of M i s s i s s i p p i : S = s (Im+Em) , N where S = t o t a l savings re a l i s e d by consumers i n the state through lower prices Im = Inbound commodities consumed in the state Em = Outbound commodities consumed i n the state N = the predominant market structure such as competition, monopoly, or oligopoly s = savings per ton. Thus the t o t a l savings received by the state consumers depend upon several variables: (1) savings per ton, (2) commodities consumed i n state subject to the savings {i.e. Im+Em), and (3) the degree of competition. 2 Conn estimates that 100% of the inbound freight and 2% of the outbound f r e i g h t i s destined for the state. He solves his equation once, under the assumption that the t o t a l transportation cost savings for the freight destined for the state are received by the consumers in that state, and then 1 Conn, Major Benefits to M i s s i s s i p p i , pp. 12-14. 2 Ibid. , p. 20." 65 under the assumption that 50% of the savings i s received by the consumers i n the state. In the former case 56% of the transportation cost savings i s received by the consumers in the state, while i n the l a t t e r case 30% i s received. The personal and regional incidences of the benefits derived from port f a c i l i t i e s are a prime concern of regional impact studies. Therefore Conn's work i s quite s i g n i f i c a n t . This i s the only study among the port impact studies reviewed which analyzes the incidence of the transportation cost savings. A greater emphasis on the determination of the incidence of transportation cost savings would be useful i n an impact study. 3.4 Conclusion The determination of transportation cost savings i n the regional economy as well as the determination of the incidence of the savings are only carried out i n a minority of the port impact studies under review. The methodologies used to analyze the guestions are not highly developed and should be improved. An improvement i n the methodology i s worthwhile both because the r e s u l t s generated by the e x i s t i n g methods may not be very accurate and because the . determination of the size and incidence of the transportation cost savings can be used to determine the size of that part of the regional economy located in the study area because i t derives benefits from the port operation. 6 6 4 M e a s u r e s f o r t h e P r i m a r y a n d S e c o n d a r y I m p a c t o f a P o r t 4.1 I n t r o d u c t i o n E c o n o m i c a c t i v i t y c a n b e d e s c r i b e d by m e a s u r i n g c e r t a i n a s p e c t s o f t h a t a c t i v i t y . E m p l o y m e n t , b u s i n e s s v o l u m e , a n d i n c o m e a r e t h e m o s t common m e a s u r e s f o r e c o n o m i c a c t i v i t y . E m p l o y m e n t , f o r e x a m p l e , may be m e a s u r e d i n n u m b e r o f e m p l o y e e s p e r u n i t t i m e . B u s i n e s s v o l u m e ' a n d i n c o m e may b e m e a s u r e d i n m o n e t a r y t e r m s . B u s i n e s s v o l u m e c a n , a s w e l l , be m e a s u r e d i n t h e a m o u n t o f p h y s i c a l i n p u t s n e e d e d f o r t h e p r o d u c t i o n p r o c e s s o r t h e a m o u n t o f p h y s i c a l o u t p u t p r o d u c e d . I n c c m e c a n be m e a s u r e d a s m o n e t a r y i n c o m e , a n d a l s o a s i n c o m e i n k i n d ( i . e . a g r i c u l t u r a l i n c o m e w h i c h i s n o t d i s t r i b u t e d b y m a r k e t s ) . I n c o m e c a n be i n t h e f o r m o f wage i n c o m e , c a p i t a l i n c o m e , t r a n s f e r p a y m e n t s , a n d t a x r e v e n u e s . O t h e r m e a s u r e s a r e a l s o u s e d f o r some m o r e s p e c i a l a s p e c t s o f e c o n o m i c a c t i v i t y , s u c h a s t h e u s e o f l a n d , t h e u s e o f e n e r g y , o r t h e g e n e r a t i o n o f p o l l u t i o n . A l l m e a s u r e s d e s c r i b i n g e c o n o m i c a c t i v i t y g i v e u s e f u l i n f o r m a t i o n a b o u t s p e c i f i c a s p e c t s o f t h a t a c t i v i t y . I t i s t h e s t u d y q u e s t i o n s w h i c h d e t e r m i n e t h e u s e f u l n e s s o f d i f f e r e n t m e a s u r e s . Common a r e a s o f i n t e r e s t i n p o r t i m p a c t s t u d i e s f r o m a r e g i o n a l p e r s p e c t i v e a r e i n c o m e a n d e m p l o y m e n t . T a x r e v e n u e d a t a p r o v i d e more s p e c i a l i z e d i n f o r m a t i o n , b o t h f r o m a r e g i o n a l p e r s p e c t i v e ( l e a k a g e s ) a n d f r o m t h e w i d e r p e r s p e c t i v e o f c e n t r a l g o v e r n m e n t ( t o d e t e r m i n e t h e c o n t r i b u t i o n a c e r t a i n s e c t o r o r 67 firm makes to th e i r t o t a l tax revenues) . In the analysis of a port impact, not only the general informational value of a certain measure i s of importance but also the role t h i s measure can play i n the determination of the secondary impact of the port. For t h i s purpose, as w i l l be explained in greater d e t a i l in chapter 5 , wage income, employment, and gross revenue data as well as data about the purchases of firms included i n the primary impact of the ports can be of importance. The selection of a measure to describe economic a c t i v i t y depends, therefore, on the information the port impact study i s expected to provide and on the data requirements f o r the determination of the secondary impact of the ports. In l i g h t of the high costs of gathering data for port impact studies a ca r e f u l selection of the measure of the primary and secondary impact of the ports i s very important. The purpose of t h i s chapter i s to focus on the most useful data i n terms of informational value and cost i n port impact studies. The following provides a b r i e f description of the relationship between the different measures of economic a c t i v i t y used i n the studies reviewed in chapter two. Next the i n d i v i d u a l measures w i l l be discussed. The studies under review measure the primary and secondary impact of port dependent firms i n terms of employment, wages and s a l a r i e s , gross revenues, value added, tax payments, purchases of l o c a l goods and services, t o t a l expenditures, and over head costs. 68 4.2 Individual Measures for Port Impacts 4.2.1 Employment The majority of the port impact studies discussed i n chapter 2 show figures for employment i n firms generating the primary impact of the port. Where a m u l t i p l i e r analysis i s undertaken these studies measure the secondary impact of the port as well i n terms of employment.1 The generation of employment figures seems to be r e l a t i v e l y inexpensive for port impact studies. Employment figures can be obtained i n some cases from government information. In the majority of the studies they were estimated based on information gathered by questionnaire surveys. Firms seem to be able and w i l l i n g to release information about the number cf th e i r emloyees more readi l y than any other kind of information about t h e i r business a c t i v i t y . Many studies as described i n chapter 2 1 The studies showing employment figures are: Anderson, The Port of Ensenada; Bragg and Bradley, The Economic Impact of a Deep Water Terminal i n Texas; Carew, Port of Stockton; Dunphy and Chang, Economic Analysis of the Port of Mobile; Gruen et a l . , An Analysis of the Relationship between the Port of San Francisco and the Economy of the City and Bay Region; Knapp et a l . , The Impact of the V i r g i n i a Ports; Oregon, Department of Transportation, Survey of Oregon Ports; Roesti et a l . . Economic Impact of the Sacramento-Yolo Port; Rudy, A Study of the Economic Impact of Maritime Commerce upon the Port of Seattle; Ryan et al7, Corpus C h r i s t i ^ Economic Impact of the Port; Stevenson & Kellogg, Port of Vancouver; The Port of Portland, Economic Impact of the Port of Portland; Whitaker-Mohn, Economic Impact of the Port of Sacramento; Williams-Kuebelbeck, Economic Impact of Waterborne Commerce through the Ports of Los Angeles and Long Beach. 6 9 use employment data therefore to generate wage payment data and other data about the business a c t i v i t y associated with a port. Employment data are also useful to determine the secondary impact of a port. In a l l port impact .studies reviewed i n chapter 2 except the study of the port of San Francisco 1 and the study of the ports of Los Angeles and Long Beach 2 a l l employees of the firms included i n the primary impact of the ports are believed to be l i v i n g i n the study area. I t i s therefore assumed that they spend a high portion of t h e i r income i n the study area. This e f f e c t i s used by economic base theory to determine employment generated by the expenditure of the wages earned i n firms included i n the primary impact of the port on the rest of the regional economy. The study of the ports of Los Angeles and Long Beach uses the income expenditure approach to determine the m u l t i p l i e r e f f e c t generated by the primary impact of the ports. The study uses employment data to generate wage earning data which are used to determine expenditures i n the regional economy due to the primary impact of the ports. Employment data are useful to determine the m u l t i p l i e r effect through economic base analysis and through income expenditure analysis and play, therefore, an important role in the determination of the multipier e f f e c t 1 Gruen, Gruen, and Associates, An Analysis of the Relationship between the Port of San Francisco and the Economy of the City and ~Bay Region (San Francisco: by the authors, 1 9 7 2 F -2 Williams-Kuebelbeck and Associates, Inc., Economic Impact of Waterborne Commerce through the Ports of Los Angeles and Long Beach (Marina del Rey, C a l i f o r n i : by the authors, 1976). 70 generated by the primary impact of a port. This thesis concludes that the employment data provide useful information i n the analysis of a port impact study. They are also important i n the determination of other measures for port impacts such as wage earnings and tax revenues. They are further useful i n determining the m u l t i p l i e r effect generated by firms included i n the primary impact of a port. Their importance for the generation of other measures for the pprt impact i s at lea s t p a r t i a l l y based on the r e l a t i v e ease with which employment data can be generated. 4 . 2 . 2 Gross Revenues The primary and secondary impact of the port i s measured i n terms of gross revenues. 1 As explained i n chapter 2 , gross revenues are estimated either as the expenditures per ton of cargo handled by the port, as in the study of the port of Green Bay, or i n the form of revenues of firms which are considered to be port related. In the l a t t e r case the revenues of the firms are estimated based on information gathered by a questionnaire 1 Gross revenues are used as a measure i n the following studies: Bragg and Bradley, The Economic Impact of a Deepwater terminal in Texas; H i l l e et a l . , "The Economic Impact of the Port of Baltimore," i n Papers, edited by Transportation Research Forum; Rudy, A Study of the Economic Impact of Maritime commerce upon the Port of Seattle D i s t r i c t ; Schenker, The Impact of the Port of Green Bay; Stevenson & Kellogg, Port of Vancouver; Williams-Kuebelbeck, Economic Impact of Waterborne Commerce through the Ports of Los Angeles and Long Beach. 71 survey. In the former case, the expenditures generated per ton of cargo are estimated with the help of o f f i c i a l s of the port authority (Green Bay) or shipping agencies (Baltimore). Gross revenues measure a l l the c a p i t a l that flows in t o a firm through i t s normal business a c t i v i t y . They are not intended to measure the income earned by the business a c t i v i t y of a firm nor are wages discernable. Because wages cannot be discerned from gross revenues, t h i s measure i s not useful to analyze the income a region gains from the business a c t i v i t y of the port. 1 Gross revenues of a firm are used to meet a l l the f i n a n c i a l obligations of the firm. These f i n a n c i a l obligations, however, are never only to firms, i n s t i t u t i o n s , and indiv i d u a l s i n a study area. Very few firms buy a l l their goods and services i n a study area and a l l firms have to pay taxes to governments outside the study area. A l l c a p i t a l that flows out of the study area i s l o s t to the study area. I f the primary impact of a port i s measured i n gross revenues of the firms generating the primary impact, the secondary impact of the port may vary i n siz e depending on the size and the character of the study area and the s i z e and character of the expenditures of the firms 1 Gross revenues in a certain sector of a regional economy might, however, be used as an in d i c a t o r for the share a region has i n the national production of that sector. It can further be used to measure the importance of a sector i n the production of the regional economy i t s e l f . The share i n the t o t a l business a c t i v i t y i n the region or nation-wide can indicate the power of a region or a sector in the bargaining process for the al l o c a t i o n of rescources among regions and sectors. The resources to a l l o c a t e can be, for instance, in the form of tax-preferences, direct subsidies, public investments, or import regulations. 72 whose business a c t i v i t y i s measured. Input-output tables are established based on a fixed r e l a t i o n between the gross revenues of economic sectors and t h e i r purchases from other firms d i f f e r e n t i a t e d between firms located inside or outside the study area. The r e l a t i o n between gross revenues and wage payments i s fixed as well. In cases where studies determine the size of the regional m u l t i p l i e r of the primary port impact with an input output table gross revenue figures are a necessary requirement. 4.2.3 Value Added Two of the studies reviewed measure the primary impact of a port i n terms of the value added generated i n the business a c t i v i t i e s constituting the primary impact of the port. 1 The study of the port of Baltimore measures only the a c t i v i t y of the port authority i n terms of the value added generated by this a c t i v i t y , and does not determine the secondary impact of the port. The study of the ports of Hamm and Neuss measures as well the secondary impact of the port i n terms of the value added generated in the a c t i v i t i e s forming the secondary impact. The value added of a firm consists of wage-paymentSr tax-1 Value added as a measure f o r port impact a c t i v i t y i s used by: Erbguth, "Der Beitrag eines Hafens zur Wertschoepfung seiner Hafenstadt," i n Per E i n f l u s s eines Hafens, edited by K r a f f t ; and H i l l e et a l . , "The Economic Impact of the Port cf Baltimore," i n Papers, edited by Transportation Research Forum. 73 payments, p r o f i t s , and depreciation. Apart from depreciation i t measures income earned due to the a c t i v i t y of the enterprise. This income can be earned by private persons or i n s t i t u t i o n s inside or outside the study area. As the majority of the studies assume that the entire labour-force l i v e s in the study area i t i s assumed that in many cases a substantial amount of the value added of the port dependent firms leads to income for persons or i n s t i t u t i o n s i n the study area. I t i s necessary to distinguish between income of a region and income of the residents of a region. Both types of income are often measured. A region can be a high income region while the residents of the region do not experience high incomes (e.g. i f wages are low but the companies i n the region make high p r o f i t s which they transfer to t h e i r mother companies or to individuals outside the study area). Regions can, on the other hand, have a r e l a t i v e l y modest income while t h e i r residents have r e l a t i v e l y high incomes (e.g. i f the firms have few or no p r o f i t s while wage payments are r e l a t i v e l y high. The same eff e c t can occur i f many residents of a region work i n another region). Both measures of regional income are useful, depending on the intent of the study. Unfortunately i t seems to be d i f f i c u l t to generate value added figures for port dependent a c t i v i t i e s . The studies under review were able to obtain or estimate wage and salary as well as tax-payment figures. P r o f i t s , however, were not stated i n any of the studies. Firms are seldom ready to release t h i s information, although the German study had access to the reports 7 4 of the port dependent firms to the cen t r a l s t a t i s t i c a l bureau and did, therefore, not face any data d i f f i c u l t i e s . P r o f i t s made by p u b l i c l y owned i n s t i t u t i o n s are often released to the public. The study of the port of Baltimore states value added figures only for the operation of the port authority, since t h i s i n s t i t u t i o n was w i l l i n g to release data. The study of the ports of Hamm and Neuss used value added figures to determine the size of the secondary impact of the ports. This approach was based on the fac t that the largest part of the value added was formed by wages for which a regional m u l t i p l i e r was known.1 The m u l t i p l i e r was determined i n t h i s study by the income-expenditure approach. It can be concluded that value added data form an excellent indicator to measure income earned i n a regional economy. The greatest part of t h i s income can be assumed to be earned by residents of the study area ( a l l the studies except two assume that a l l the employees of the firms included i n the primary impact of the port are located in the study area). Wage earnings form usually the largest part of the value added. This measure i s , therefore, very useful to determine the secondary impact of a port using the income expenditure method. Unfortunately value added figures (including profits) are very d i f f i c u l t to obtain. 1 G. Isenberg, Existenzqrundlaqen der Stadt (Tuebingen, W. Germany: Sonderdruck. der Schriftenreihe der Deutschen Akademie fuer Staedtebau und Landesplanung, n.d.). Band 1 4 . 75 4 . 2 . 4 Wages and Salaries The impact of the port i s measured, i n nearly a l l studies, in terms of wages and s a l a r i e s generated by a c t i v i t i e s depending d i r e c t l y or i n d i r e c t l y on the port. 1 Payroll data are obtained by a questionnaire survey, by estimates based on data from such a survey or by published average wage income data. In nearly a l l studies the entire labour force i s believed to l i v e i n the study area. Wage earnings are therefore a good indicator of the income earned i n the regional economy by the residents of the region. The high value of information about income earned i n the region and by the residents of the region makes t h i s indicator for the impact of a port on a study area very useful. 1 The studies not measuring the impact of the port i n terms of wages and s a l a r i e s are: Armenakis, Inland Port F a c i l i t i e s and Economic Growth; Bragg and Bradley, The Economic Impact of a Deepwater Terminal in Texas; Bragg, A Survey of the Economic and Environmental Aspects of an Onshore Deep Water Port at Galveston; Erbguth, "Der Beitrag eines Hafens zur Wertschoepfung seiner Hafenstadt," i n Per Ei n f l u s s eines Hafens, edited by Kraf f t ; Roesti et a l . , Economic Impact of the Sacramento-Yolo Port; Schenker, The Impact of the Port of Green Bay. 7 6 As wage earnings are spent'to a substantial amount i n the location of the- wage earner, a regional m u l t i p l i e r can be calculated based oh t h i s information. This i s done using the income-expenditure approach in the study of the ports of Los Angeles and Long Beach. 1 The other study using the income-expenditure approach i s the study of the ports of Hamm and Neuss. Wage and salary income data are also used to determine base income mu l t i p l i e r s . Wage earning data can be obtained with r e l a t i v e ease as income l e v e l s for many occupations are publicly known and firms often do not hesitate to release information about their pay-r o l l . It can be concluded that wage earnings are a good indicator for income earned in the region and by the residents of the region f o r a port impact study. Wage earnings have an important value to determine the mult i p l i e r e f f e c t by the income expenditure approach for the a c t i v i t i e s included i n the primary impact of a port. The importance of t h i s measure i s even strengthened by the f a c t that the data can be generated with r e l a t i v e ease. 1 Williams-Kuebelbeck, Economic Impact of Water borne Commerce through the Ports of Los Angeles and Long Beach. 77 4-2.5 Tax Payments Tax payments generated by firms whose business a c t i v i t i e s constitute the primary impact of a port are estimated i n some of the studies reviewed. 1 The tax payments are estimated with the help of data from questionnaire surveys and with the help of taxation o f f i c i a l s . Unfortunately i n many studies, as mentioned in chapter 2, i t i s not stated whether the taxes are paid to governments inside or outside the study area. Only the payments to governments inside the study area increase the regional income. P r o f i t s generated by the port authority and the taxes paid by other port dependent a c t i v i t i e s are considered to have an important function i n determining the benefits derived from the presence of the p o r t ; 2 I f there are government agencies outside the study area supporting a port f i n a n c i a l l y the flow of tax revenues back to that agency may be important for the evaluation 1 The studies measuring port-related tax payments are: Conn, An Assessment of Major Benefits t c Mi s s i s s i p p i from Waterborne Commerce; Dunphy et a l . , Economic Impact of the Port of Mobile; H i l l e et a l . , "The Economic Impact of the Port of Baltimore," i n Papers, edited by Transportation Research Forum; Knapp et a l . . The Impact of V i r q i n i a 1 s Ports; Rudy, A Study of the Economic Impact of Maritime Commerce upon the Port of Seattle D i s t r i c t : The Port of Portland, Economic Impact of the Port of Portland; and Williams-Kuebelbeck, Economic Impact of Waterborne Commerce through the Ports of Los Angeles and. Long Beach . 2 I t i s , however, very doubtful that t h i s i s a useful approach to. evaluate the a l l o c a t i o n of public funds. Chapter 7 w i l l discuss the s u i t a b i l i t y of port impact studies for public decision making i n greater d e t a i l . 78 of the port impact even though th i s increase i n tax revenues may or may not increase the regional income. A c l a r i f i c a t i o n as to which l e v e l of government receives the taxes paid by the port dependent a c t i v i t i e s would be helpful i n assessing the •regional' impact of the port as well as i n assessing the impact on government agencies outside the study area. Due to the inaccuracy of the data, no analysis of the secondary impact of the tax-payments generated by the firms included in the primary impact of the ports i s undertaken i n any of the studies. Tax payments are however included in gross revenue, value added, over-head cost, and t o t a l expenditure cost data. Studies using these measures for the secondary impact of a port i m p l i c i t l y include, therefore, a regional m u l t i p l i e r for tax-payments. Tax-payments data should receive more attention i n a port impact study. The t o t a l tax payments of the firms generating the primary impact of a port should be accurately determined. Tax payment data should further be d i f f e r e n t i a t e d between payments to governments i n the study area and payments to governments outside the study area. 79 4.2.6 Purchases of L o c a l Goods and S e r v i c e s The study of the p o r t s of Los Angeles and Long Beach 1 i s o l a t e s (based on i n f o r m a t i o n d e r i v e d frcm a q u e s t i o n n a i r e survey) purchases of f i r m s from other f i r m s i n the study area. T h i s measure does not d i r e c t l y i n d i c a t e the income a r e g i o n or i t s r e s i d e n t s gain from the region's economic a c t i v i t y but i s u s e f u l i n e s t i m a t i n g the m u l t i p l i e r e f f e c t of the primary impact of the port i n the study area. Williams-Kuebelbeck used t h i s measure to determine the s i z e of the m u l t i p l i e r e f f e c t u s i n g the income expenditure method. U n f o r t u n a t e l y t h i s measure i s very d i f f c u l t t o determine because i t can be obtained only from the f i r m s themselves. The f i r m s are, moreover, o f t e n not a b l e to d i f f e r e n t i a t e t h e i r purchases between purchases i n s i d e and o u t s i d e the study area. I t i s a l s o c o s t l y t o o b t a i n and consequently has l i m i t e d a p p l i c a b i l i t y . 1 Williams-Kuebelbeck, Economic Impact of Water borne Commerce through the P o r t s o f Los Angeles and Long Beach. ~ 8 0 4.2.7 Total Expenditures of a Firm The study of the port of Sacramento 1 i s o l a t e s the t o t a l expenditures of firms generating the primary impact of the port. These data include wage payments as well as payments for goods and services and tax payments. The measure does hot, however, d i f f e r e n t i a t e between expenditures flowing into the regional economy and out of the regional economy; as such, i t has l i t t l e use for a determination of the size of the regional m u l t i p l i e r e f f e c t . In f a c t , the Sacramento study does not attempt to determine the size of the regional m u l t i p l i e r . The t o t a l expenditures of a firm d i f f e r from gross revenue data only by the fact that the l a t t e r include depreciation and savings which are not di s t r i b u t e d to the c a p i t a l owners. The limited informational value of gross revenue data applies therefore as well to t o t a l expenditure data. The value, therefore, of t o t a l expenditure data i s extremely li m i t e d i n regional impact analysis. 1 Whitaker-Mohn, Economic Impact of the Port of Sacramento. 81 4.2.8 Over-Head Costs The study of the impact of the port of Stockton 1 states over-head costs for a c t i v i t i e s generating the primary impact of the port. This figure includes a l l payments of the firms other than for wages. I t does not d i f f e r e n t i a t e between payments flowing into the study area or out of the study area. The measure i s therefore not useful i n determining the size of the regional m u l t i p l i e r . This data does not provide information about income earned by a region or the residents of a region and therefore has an extremely li m i t e d value i n regional impact analysis. 4.3 Conclusion Measures f o r d i r e c t economic a c t i v i t y of the port can either provide information d i r e c t l y about the impact of the port or be used to determine the secondary impact of a port. Employment figures can be generated with r e l a t i v e ease. Wage earning data can either be generated d i r e c t l y or estimated with the help of employment data. They too are r e l a t i v e l y easy to c o l l e c t although not as easy as employment data. Wage earning data are a good indicator for the income earned i n a region. They are a good indicator for the income 1 Carew, Port of Stockton. 82 earned by the residents of the region employed by the port or by port related firms. Value added data include a l l the income earned i n a region. They are however d i f f i c u l t to obtain. Tax payment data are only useful for regional economic analysis i f they are d i f f e r e n t i a t e d between tax-payments to governments i n the region and outside the region. For port impact studies the s p e c i f i c l e v e l of government impacted i s also useful information. Gross revenue figures have a use i n determining the share a certain sector has i n the production of a certain good or service. They are r e l a t i v e l y easy to determine but only of use for more s p e c i f i c questions. As a rule of thumb i t can be said that port impact studies should contain employment and wage data. They are r e l a t i v e l y easy to generate and have a high informational value. Tax payment and gross revenue figures are useful for more s p e c i f i c questions concerning ports. Eegional m u l t i p l i e r s are determined i n the studies by the economic base approach, the income expenditure approach, and the input-output approach. Economic base analysis i s most often carried out with employment or wage income data. For the income expenditure approach wage payment data are important as wages may flow back into a regional economy. Local purchases are of importance, but are very c o s t l y to obtain. Gross revenue data are necessary i n input-output analysis to determine the size of the regional mul t i p l i e r . 83 5 Primary Impact A c t i v i t i e s 5 . 1 Introduction The purpose of t h i s chapter i s to discuss which a c t i v i t i e s should be included in the primary net impact of a port. The primary net impact i s the business a c t i v i t y in the regional economy d i r e c t l y attributable to the port less the economic a c t i v i t y foregone due to the existence of the pert, i . e . l e s s the direct displacement e f f e c t s of the port. The port impact studies reviewed i n t h i s thesis mention two categories of a c t i v i t i e s d i r e c t l y attributable to ports: i) a c t i v i t i e s necessary for the operation of the port; and i i ) a c t i v i t i e s of firms located i n the study area because they derive benefits from the existence of the port. These a c t i v i t i e s reinforce each other (i.e. the port operation i s necessary or b e n e f i c i a l for certain firms located i n the study area and the port can operate only i f there i s a demand in the regional economy for i t s transportation s e r v i c e s ) . However, i n the case of i) , i t i s to be considered that other c a r r i e r s could have increased t h e i r business a c t i v i t y i n the absence of a port. The business a c t i v i t y necessary for the port operation less the potential generation of business a c t i v i t y necessary f o r the operation of other possible c a r r i e r s i s the net impact of the port i n terms of business volume generation for the operation of the port. 84 Firms locate in the study area because they derive benefits from the existence of the port, such as low transportation costs, external economies, and information. Where the low transportation costs a t t r a c t some firms, however, they may also displace others. The a c t i v i t i e s forming the primary port impact u t i l i z e c a p i t a l , land, and labour. This increases the demand for these factors in the regional economy and raises t h e i r price, which increases the income derived from the ownership of the productive factors. At the same time, however, t h i s leads to opportunity costs i n the form of a displacement of regional economic a c t i v i t y , which depends on the a v a i l a b i l i t y of low cost productive factors. 5.2 A c t i v i t i e s D i r e c t l y Related to the Port Operation 5.2 .1 Categories of A c t i v i t i e s Six main categories are used to measure the d i r e c t impact of a port on the study area. They are: 85 1- Direct port operation - t h i s category includes the loading and unloading of goods, t h e i r storage and s i m i l a r a c t i v i t i e s . This category i s included in a l l of the studies reviewed with the exception of two,1 2. Services provided for the shipping agencies - t h i s category includes shipbuilding and repairs as well as sales of other necessities for the operation of ships, such as f u e l and foodstuffs. Services provided for the shipping agencies are included in a l l studies with the exception of f o u r . 2 3, Crew expenditures - t h i s category includes expenditures for hotel services, restaurant services, novelties, and other consumer expenditures derived while the crew i s on-shore. This expenditure i s included in four s t u d i e s . 3 1 Armenakis et a l . , Inland Port F a c i l i t i e s and Economic Growth and Erbguth, "Der Beitrag eines Hafens zur Wertschoepfung seiner Hafenstadt," i n Per Einfluss eines Hafens, edited by Kraf f t . 2 Armenakis et a l . . Inland Port F a c i l i t i e s and Economic Growth; Erbguth, "Der Beitrag eines Hafens zur Wertschoepfung seiner Hafenstadt," i n Per Einfluss eines Hafenes, edited by Krafft; Carew, Port of Stockton; and Ryan et a l . . Corpus C h r i s t i i Economic Impact of the Port . 3 Schenker, The Impact of the Port of Green Bay.; Whitaker-Mohn, Economic Impact of the Port of Sacramento; Bragg, A Survey of the Economic and Environmental Aspects of an Onshore Peep Water Port at Galveston; and H i l l e et a l . , "The Economic Impact of the Port of Baltimore," i n Papers, edited by Transportation Research Forum. 86 4. Transportation services to and from the port - t h i s category i s included in ten of the studies reviewed, 1 5. Government expenditure for services i n connection with the port - t h i s category includes services for the shipping industry, such as navigation aids, customs services, m i l i t a r y expenditures (when applicable). Four of the studies reviewed included t h i s category. 2 6. Investment expenditure for the construction of the port - t h i s category was included in one study only. 3 1 Ryan et a l . . Corpus C h r i s t i : Economic Impact of the Port;. Whitaker-Mohn, Economic Impact of the Port of Sacramento; Bragg, A Survey of the Economic and Environmental Aspects of an Onshore Deep Hater Port at Galveston; Dunphy et a l . , Economic Analysis of the Port of Mobile; Schenker, The Impact of t i e Port of Green Bay; Gruen et a l . , An Analysis of the Relationship between the Port of San Francisco and the Economy of the C i t y and Bay Region; H i l l e et a l . , "The Economic Impact of the Port of Baltimore," i n Papers, edited by Transportation Research Forum; Anderson, The Port of Ensenada; Rudy, A Study of the Economic Impact of Maritime Commerce upon the Port of Seattle D i s t r i c t ; and Knapp et a l . , The Impact of V i r g i n i a ' s Ports. 2 Dunphy et a l . , Economic Analysis of the Port of Mobile; Ryan et a l . , Corpus C h r i s t i : Economic Impact of the Port; H i l l e et a l . , "The Economic Impact of the Port of Baltimore j " i n Papers, edited by Transportation Research Forum; and Rudy, A Study of the Economic Impact of Maritime Commerce upon the Port of Seattle D i s t r i c t . 3 Anderson, The Port of Ensenada. 8 7 5.2-2 The Importance of Opportunities Foregone Only the difference between the impact of the port and other impacts which would have occurred in the regional economy without the existence of the port can be attributed to the net impact of the port. In general, i t i s s a i d that the existence of water transportation services i n the regional economy prevents other possible modes of transportation i n the region from growing to the size they would have achieved without the presence of the port. This i s especially (in fact, almost exclusively) true of inland ports but i t i s not necessarily true of over-sea port f a c i l i t i e s . Study areas without an over-sea port w i l l , i n nearly a l l cases, not develop a port on their own but w i l l import over-sea transportation services from existing ports. The import of transportation services from outside the study area constitutes a leakage i n terms of employment, income, and gross revenues to the regional economy. This leakage i s a negative stimulus to the business a c t i v i t y i n the regional economy. Due to the scale of t h e i r business, over-sea ports usually do not serve only the demand for transportation services i n t h e i r immediate v i c i n i t y , but have a hinterland of substantial s i z e . That i s to say, the hinterland of a port i s often larger than the study area so that the study area i s exporting transportation services to other regions. The export of transportation services from the region constitutes a positive 88 stimulus to the regional economy. This positive stimulus generates additional employment, income, and business a c t i v i t y in the regional economy. The prevention of leakages r e s u l t i n g from the import of transportation services and the export of transportation services from the region both constitute a positive impact of the port on the economy of the region, and should be included i n any study of the primary impact of a port f a c i l i t y . In the case of the inland port, then, the existence of water transportation has opportunity costs i n terms of income, employment, and/or business volume which may have been generated by other transportation modes.1 These opportunity costs should be subtracted from the estimated impact of the port. If they cannot be estimated, i t should be stated i n the port impact study that they do e x i s t . Each of the a c t i v i t y categories i d e n t i f i e d i n (5.2.1) would be applicable to alternate transportation modes. 1 For a discussion on competitive transportation modes, see Purdy, Transport i n Canada. 89 5.3 Port-Related A c t i v i t i e s 5.3.1 Treatment of Port-Related A c t i v i t i e s Port impact studies consider a firm's business a c t i v i t y to be wholly or p a r t i a l l y port-related i f : i) the firm receives or ships goods by the port; i i ) the firm considers i t s e l f tc be port-related; or i i i ) the firm i s located i n the port d i s t r i c t . Some studies consider a firm which receives or ships goods by the port to be wholly p o r t - r e l a t e d . 1 The study of the port of Sacramento 2 considers only export firms to be port related. The study of the ports of Hamm and Neuss 3 ccmbines the above c r i t e r i o n with the judgement of the regional analyst. The impact study of the port of Mobile* and the study of the V i r g i n i a p o r ts 5 include those firms shipping t h e i r poduction through the port as port related i n the primary impact of the port. In some studies the firm i t s e l f judges whether i t i s port-1 Studies using t h i s c r i t e r i o n are: Dunphy et a l . , Economic Analysis of the Port of Mobile; Anderson, The Port of Ensenada; Williams-Kuebelbeck, Economic Impact of Waterborne Commerce through the Ports of Los Angeles and Long Beach; Bragg, A Survey of the Economic and Environmental Aspects of an Onshore Deep Water Port at Galveston; Conn, An Assessment of Major Benefits to M i s s i s s i p p i from Waterborne Commerce; Knapp et a l . . The Impact of V i r g i n i a ' s Ports; and Armenakis at a l . , Inland Port F a c i l i t i e s and Economic Growth. 2 WhitaJser-Mohn, Economic Impact of the Pert of Sacramento. 3 Erbguth, "Der Beitrag eines Hafens zur Wertschoepfung seiner Hafenstadt," i n Der E i n f l u s s eines Hafens, edited by K r a f f t . 4 Dunphy et a l . , Economic Analysis of the Port of Mobile. 5 Knapp et a l . , The Impact of V i r g i n i a ' s Ports. 90 r e l a t e d and which p a r t of i t i s port^-reiated. T h i s approach i s taken i n s t u d i e s where f i r m s were in t e r v i e w e d by q u e s t i o n n a i r e s . 1 Firms l o c a t e d on l a n d l e a s e d from the port a u t h o r i t y are c o n s i d e r e d to be port r e l a t e d i n the s t u d i e s of the port of M o b i l e 2 and of S t o c k t o n . 3 1 S t u d i e s using t h i s approach are, f o r i n s t a n c e , the s t u d i e s of the p o r t s of Vancouver by Stevenson S K e l l o g g , Port of Vancouver, and of S e a t t l e by Rudy, A Study of the Economic Impact o f Maritime Commerce upon the Port of S e a t t l e D i s t r i c t . These s t u d i e s i n c l u d e as port r e l a t e d only t h a t p a r t of the f i r m t h a t i s estimated as such by the f i r m i t s e l f . Another example of the use of t h i s c r i t e r i o n i s the study of the p o r t s of M i s s i s s i p p i by Conn et a l . , An Assessment of Major B e n e f i t s to M i s s i s s i p p i from Waterborne Commerce. In t h i s study, only those f i r m s l o c a t e d newly i n the study area were i n t e r v i e w e d and asked f o r an estimate of t h e i r port dependency. The study of the p o r t s of Los Angeles and Long Beach by Williams-Kuebelbeck, Economic Impact of Waterborne Commerce through the P o r t s of Los Angeles and Long Beach, a l s o f a l l s i n t h i s category. 2 Dunphy e t a l . , Economic A n a l y s i s of the Port of Mobile. 3 Carew, P o r t of Stockton. 91 5.4 Critique of Methodology 5.4.1 Low Transportation Cost Assumptions Seven of the studies consider firms shipping or receiving goods by the port to be located i n the study area because of the existence of the port. 1 In the case of a firm for which transportation costs constitute an important part of i t s costs, t h i s i s probably a v a l i d assumption. Alonso 2 shows that the v i c i n i t y of ports i s a possible location of low transportation costs for firms receiving or shipping goods by the port. 1 Studies using t h i s c r i t e r i o n are: Dunphy et a l . , Economic Analysis of the Port of Mobile; Anderson, The Port of Ensenada; Williams-*Kuebelbeck, Economic Impact of Waterborne Commerce through the Ports of Los Angeles and Long Beach; Bragg, A Survey of the Econcmic and Environmental Aspects of an Onshore Deep Water Port at Galveston ; Conn, An Assessment of Major Benefits to M i s s i s s i p p i from Waterborne Commerce; Knapp et a l . . The Impact of V i r g i n i a ' s Ports; and Armenakis et a l . . Inland Port F a c i l i t i e s and Economic Growth. 2 William Alonso, "Location Theory," i n Regional Policy: Readings in Theory and Application, edited by John Friedmann and William AlOnso (Cambridge, Massachusetts: The Massachusetts Insti t u t e of Technology Press, 19750), pp. 35-63. 92 5.4-2 Backward-Forward Linkages The di r e c t operation of a port, of shipbuilding companies, and of firms located close to the port because they want to benefit from low transportation costs i n the v i c i n i t y of the port, form an economic agglomeration of substantial s i z e i n the case of many ports. 1 This agglomeration can possibly of f e r many l i n k s i n the form of forward and backward l i n k s to firms located close to the agglomeration. Newly located firms may further derive additional benefits from the fact that they can hire trained labour from a common pool. For the purpose of a mu l t i p l i e r analysis as i t i s carr i e d out i n most port impact studies, i t i s necessary to di f f e r e n t i a t e between the primary and the secondary ef f e c t of the port. Firms having forward linkages to other firms located close to the port {because they operate the port, b u i l d ships, or require transportation cost savings) should not be included in the primary impact of the port. They are included i n the secondary impact of the port because they supply goods and services to the d i r e c t l y port-related firms. Only those firms having backward linkages to the named a c t i v i t i e s or deriving external economies from them are included in the primary impact of the port. 1 For an elaboration of the r o l e of backward-forward linkages, see: Albert 0. Hirschman, The Strategy of Economic Development (New Haven: Yale University Press, 1958). 93 5.4.3 Informational Impact None of the port impact studies reviewed i n t h i s thesis mention the function of a port for the generation of information. None of the studies, therefore, included firms attracted to the regional economy due to the high l e v e l of information generated by the port. Nevertheless, the agglomeration of firms due to the benefits from low transportation costs close to the port can be expected to create a substantial amount of information i n the regional economy. The import and export firms located close to the port because of low transportation costs are able to generate s p e c i f i c information about overseas markets. This i s the case for importers of raw materials and finished products as well as for exporters of any kind of goods. The business a c t i v i t i e s located close to a port, therefore, generate information not only due to the i r general business a c t i v i t i e s (as do a l l firms) but also due to the s p e c i a l import/export nature of t h e i r operation. The import and export a c t i v i t i e s are located close to the port because of transportation cost savings. The port may have, therefore, an important impact on the business community i n the generation of information. 1 1 For a discussion of t h i s informational value, see: Toshio Sanuki, "The C i t y i n Informational Society," i n Regional Policy: Readings i n Theory and Application, edited by John Friedmann and William Alsonso (Cambridge, Massachusetts: The Massachusetts In s t i t u t e of Technology Press, 1975), pp. 406-420. 94 5.4.4 The Impact of Higher Competition Ports can, however, also reduce the potential development of firms i n their v i c i n i t y . This impact of a port i s based on the fact that the port provides low cost transportation services which reduce the barr i e r of transportation costs that products produced outside the region have to overcome i n order to enter the market in the region. Certain products produced outside the region might be produced at lower costs than si m i l a r products i n the studyarea. As they have to be transported to the market i n the study area, t h e i r price i s increased by the transportation costs f o r the transport from the place of production to the market. In the case of r e l a t i v e l y high transportation costs, the transportation costs may increase the price of the goods so much that they cannot compete with l o c a l l y produced goods. Because a port provides low cost transportation services, the transportation costs for the goods are lower. This may reduce th e i r price in the study area. I f the advantage i n the production costs f o r the goods produced outside the study area i s now higher than their transportation costs to the market in the study area, these goods which were formerly not competitive with goods produced in the region are now competitive with them or have even a price advantage over them. In t h i s case, firms located i n the study area have to reduce t h e i r prices. This may either reduce t h e i r p r o f i t s or drive them out of business. New firms producing the same goods w i l l not develop i n the study area unless they have a cost 95 structure different from that of the established firms. While the impact of higher competition i n the study area due to low transportation costs i s d i f f i c u l t to measure, an i n d i c a t i o n should be given as to the possible volume of business l o s t to the region. 5.5 Conclusion The impact of the a c t i v i t i e s associated with water-transportation i s discussed i n t h i s chapter for an inland port and for an over-sea port. In the case of an inland port, i t i s found that the opportunity costs for the port operation i n terms of a reduction of the growth potential of possible other c a r r i e r s are substantial. These opportunity costs should, i f possible, be subtracted from the impact of an inland port or at le a s t be mentioned i n a port impact study. This i s not the case with over-sea ports. The impact of an over-sea port i n terms of business a c t i v i t i e s associated with the port operation therefore does not have to be reduced by the potential impact of business volume generated by the direct operation of other c a r r i e r s i n order to determine the net impact of a port. F i n a l l y , i t i s argued that an impact study must consider such issues as impacts which occur as a re s u l t of low transportation costs, impacts which occur because s p e c i f i c information i s generated, and impacts which occur because of higher competition. 96 6 Secondary Impact A c t i v i t i e s 6.1 Introduction In t h i s chapter methods of determining the secondary impact of a port w i l l be discussed. The secondary impact of a port consists of the mu l t i p l i e r e f f e c t generated in the regional economy by a c t i v i t i e s included in the primary impact of the port. The mu l t i p l i e r e f f e c t may measure how much money i s earned i n the form of wages, sa l a r i e s , p r o f i t s , and tax revenues, or how much business volume or employment i s generated i n an economy by the continuous respending of money i n i t i a l l y generated by primary impact a c t i v i t i e s . The secondary port impact i s considered to be of substantial size i n a l l port impact studies reviewed i n t h i s study. In many studies i t i s considered to be larger than the primary impact. Four dif f e r e n t approaches to measure the s i z e of the secondary port impact have been i d e n t i f i e d i n the studies reviewed i n t h i s thesis: the application of general experience or experience : gained from related studies, input-output analysis, economic base analysis, and income expenditure analysis. This chapter evaluates the di f f e r e n t approaches. Two c r i t e r i a are applied: i) informational value of the res u l t s generated by the di f f e r e n t methods; and i i ) data requirements. The discussion of d i f f e r e n t methods to determine the siz e of the regional m u l t i p l i e r e f f e c t i s useful i n the evaluation of a port impact study. 97 The chapter i s divided into three sections: i) a general description of how a multiplier i s applied; i i ) a discussion of the determinants of the size of a m u l t i p l i e r e f f e c t i n i t i a t e d by primary port impact a c t i v i t i e s ; and i i i ) a discussion of the di f f e r e n t methods to determine the size of the regional mu l t i p l i e r e f f e c t applied in the port impact studies surveyed in chapter 2. The chapter concludes by applying the two c r i t e r i a mentioned above to each method i n order to determine the r e l a t i v e advantages and disadvantages of each method. 6.2 Characteristics of Secondary Impact A c t i v i t i e s A secondary impact i s the m u l t i p l i e r e f f e c t due to successive rounds of respending within the l o c a l economy. The mu l t i p l i e r concept assumes that the introduction of a monetary stimulus i n the l o c a l economy w i l l r e s u l t in an upward s h i f t i n aggregate spending due to an increase i n income and employment. This s h i f t r e s u l t s i n a process of respending which produces a multiple increase in the aggregate income i n the region. In other words, some of the wages earned by employment i n the firms d i r e c t l y related to the port are spent for food, shelter, clothing and other items i n the l o c a l economy. This stimulus to the l o c a l economy may lead to an increase i n p r o f i t d i s t r i b u t i o n s , employment income, and purchasing which stimulates another round of spending i n the l o c a l economy. These secondary s t i m u l i may also lead to addi t i o n a l tax payments. 98 The impact of the a c t i v i t i e s included i n the primary impact of the port becomes smaller in every round as part of the expenditures i n the form of wage payments, purchases, p r o f i t d i s t r i b u t i o n s , and tax payments flow out of the study area and generate income outside the regional economy. Also, part of the additional income of the labour force and the firms i s saved. These funds are withdrawn from the m u l t i p l i e r process and form another leakage reducing the size of the regional m u l t i p l i e r . Therefore with every round following the primary impact of the port, the addit i o n a l business volume, the additional employment, and the additional expenditures become smaller. The mu l t i p l i e r process comes to an end when the additional expenditures approach the size of zero. 6 . 3 Determinants of the Size of a Regional M u l t i p l i e r Effect for a Port The siz e of the multiplier depends upon: i) the expenditures stimulated by the primary impact i n the form of wages, p r o f i t s , purchases of goods and services, and tax payments; and i i ) the types of goods and services available i n the study area. 9 9 A l l studies, except the studies of the port of San Francisco 1 and of the port of Los Angeles and Long Beach 2, assume that i) a l l wage payments are received by employees l i v i n g i n the study area;)i1h2 i i ) the wages paid to employees l i v i n g i n the study area are partly spend i n the study area and partly saved; The percentage of the wages allocated to the purchase of goods i n the study area does not have to be i d e n t i c a l for the employees of port-related a c t i v i t i e s and the employees of other sectors of the economy. The port might a t t r a c t employees with different tastes from employees of other sectors of the regional economy. The d i f f e r e n t tastes might be expressed by the purchase of kinds of goods and services d i f f e r e n t i n t h e i r o r i g i n from those purchased by employees i n other sectors. P r o f i t s can be saved or spent f o r consumption or for investment goods. They may be reinvested i n the study area or outside the study area. This decision depends on the e x i s t i n g investment opportunities ins i d e the study area and outside the study area. The consumption expenditure generated as a r e s u l t of p r o f i t s may be spent inside or outside the study area as well. While the port authority i t s e l f i s usually a government 1 Gruen et a l . . An Analysis of the Relationship between the Port of San Francisco and the Economy of the City and Bay Region. ~ 2 Williams-Kuebelbeck, Economic Impact of Water borne Commerce through the Ports of Los Angeles and Long Beach. 100 agency not expected to generate s i g n i f i c a n t p r o f i t s , the i n d u s t r i a l agglomeration close to the port consists, to a great extent, of private enterprises which may generate substantial p r o f i t s . The persons or i n s t i t u t i o n s receiving these p r o f i t s and their spending patterns determine, for the most part, the size of the regional m u l t i p l i e r . The structure and size of the l o c a l economy determines the percentage of goods and services supplied by the l o c a l business community. A l l ports studied i n the review are located i n urban areas. Some of the studies were carried out for port i n the largest c i t i e s of North America, such as Baltimore, Los Angeles, San Francisco, Seattle, and Vancouver. It can, therefore, be expected that the regional economy i s a substantial s i z e and supplies, therefore, goods and services for a guite specialized demand as well as for every-day needs. The kinds of expenditure that flow into a regional economy from the a c t i v i t i e s forming the primary impact of a port are wages, p r o f i t s , payments for goods and services, and tax payments. The size and character of the expenditure i s determined by the economic a c t i v i t i e s included i n the primary impact of a port. The size of the m u l t i p l i e r e f f e c t i n i t i a t e d by primary port impact a c t i v i t i e s i s determined by the size and c h a r a c t e r i s t i c s of the expenditure and the c h a r a c t e r i s t i c s of the receiving economy. 1 0 1 6 . 4 Methods to Determine the Size of the M u l t i p l i e r In the following, four methods to determine the s i z e of the m u l t i p l i e r applied in the port impact studies reviewed w i l l be discussed. The methods w i l l be evaluated by the informational value of the r e s u l t s they generate and by t h e i r data requirements. 6 . 4 . 1 Economic Base Analysis The economic base approach divides the regional economy into two parts: the base sector and the service sector. The economic base sector produces goods and services for export from the region and earns income fo r the region from outside the region. The demand for the export goods i s determined by economies outside the study area. The service sector produces goods and services for l o c a l consumption. Service sector a c t i v i t i e s depend on the export sector as a portion of the income earned by the export a c t i v i t i e s i s spent f o r production in the service sector. The service sector expands when the base sector expands or when import substitution occurs. 102 The r e l a t i o n in s i z e between the base sector of the economy and the service sector i s used to determine the regional m u l t i p l i e r for basic a c t i v i t i e s . The basic and non-basic sectors are commonly measured i n terms of employment and income. Other measures can be applied as w e l l . 1 The s i z e of the m u l t i p l i e r can be determined as follows: mu l t i p l i e r = t o t a l employment / basic employment. Economic base theory assumes that the r a t i o between the base sector and the non-basic sector i s constant. The constant r e l a t i o n over time between the base sector and the non^basic sector i s guestioned by many analysts. 2 Four of the studies reviewed in t h i s thesis apply economic base theory to determine the size of the regional m u l t i p l i e r . 3 The four studies consider a l l the a c t i v i t i e s forming the primary port impact to be economic base a c t i v i t i e s . The study of the port of Mobile includes firms exporting goods as well as firms importing goods i n the primary port a c t i v i t i e s . The three other studies do not state why they include certain a c t i v i t i e s i n the primary port impact a c t i v i t i e s . 1 Avrom Bendavid, Eegional Economic Analysis for P r a c t i t i o n e r s , rev. Ed. (New York: Praeger Publishers, 1974)7 pp. 106 and 107. 2 See for instance: Richard A. Siegel, "The Economic Base and M u l t i p l i e r Analysis," Urban A f f a i r s Quarterly 2 (Dec. 1966) ,pp. 24-36. Pp. . 24-36. 3 They are the studies of the port of Ensenada by Anderson, The Port of Ensenada; of the port of Mobile by Dunphy et a l . , Economic Impact of the Port of Mobile; of the port of Corpus C h r i s t i by Ryan et a l . , Corpus Christi:. Economic Impact of the Port; and of the ports of Oregon by Oregon, Department of Transportation, Survey of Oregon Ports. 103 The main problem i n terms of p r a c t i c a l application of the economic base approach l i e s i n the determination of the size of the t o t a l economic base sector in the regional economy. The s i z e of the economic base sector has to be determined i n order to generate the multiplier r e l a t i o n s h i p . Four methods are applied in the economic base studies: 1. The Port of Mobile Study: Economic Base and Ad-Hoc Assumption The study of the port of Mobile used a combination of the ad-hoc assumption method and the location quotient method to determine an employment mul t i p l i e r for the primary port impact-In the ad-hoc assumption method, the analyst determines by his general knowledge about the regional economy which sectors of the regional economy are export-oriented and which sectors are oriented towards the production for the regional consumption. The accuracy of the r e s u l t s depends e n t i r e l y upon the experience and knowledge of the analyst. This method should therefore only by used by a very experience analyst. I t has the advantage that i t involves very l i t t l e cost as no primary research has to be carried out to determine the s i z e of the economic base sector. The location quotient approach considers a l l production, 1 Other methods e x i s t , such as the use of survey and econometric techniques. 104 measured i n employment, income, or business volume, i n the regional economy which exceeds the national average of the production i n t h i s sector economy to be export-oriented and therefore basic. This approach assumes that the nation neither exports nor imports goods and that the amount of the consumption of the production of a certain sector i n a l l regions of the nation i s i d e n t i c a l . I f the production of the sector i s measured in employment, the labour productivity i s s i m i l a r l y considered to be egual nation-wide. If the production volume i s measured i n income, an egual value added per unit of output i s assumed nation-wide. If the business volume of the output i s measured i n monetary terms, equal prices f o r the products are assumed nation-wide. The very s t r i c t assumptions of the location quotientapproach make t h i s somewhat questionable. It has, however, the advantage of s i m p l i c i t y in i t s application. National average production data for d i f f e r e n t sectors are usually readily available and based on recent data. The method i s easy to apply and inexpensive as no primary research to determine the export sectors i n a region i s necessary. 1 The ad-hoc assumption method might add to the accuracy of the location quotient method. 1 For further information on the l o c a t i o n quotient method, see: Sieqel, "The Economic Base and M u l t i p l i e r Analysis," Urban A f f a i r s Quarterly 2 (Dec. 1966), pp. 29 and 30. 105 2. The Ports of Oregon: Minimum Requirements The study of the economic impact of the Oregon ports uses the minimum requirement approach to determine the r e l a t i o n between the basic and the non-basic sectors of the economy, measured i n terms of employment. The minimum reguirement approach takes a sample of c i t i e s or towns and selects those c i t i e s or towns with the smallest percentage of employment in a certain sector. This smallest percentage cf employment i n a certain sector i s considered to be the minimum reguirement for the size of the non-basic a c t i v i t i e s of that sector to service a community of a certain size; that means that, for every sector, another community would have the minimum size of that sector. This analysis i s ca r r i e d out for d i f f e r e n t community sizes. A l i n e a r function has been foundbetween the requirements of the size for non-basic functions i n a community and the size of the community. The study of the Oregon ports uses parameters calculated i n 1960 by Ullman and Dacey 1 to calculate the size of the non-basic sector for the di f f e r e n t port communities i n Oregon. The study derives values between '2.21' and M . 1 7 ' for the m u l t i p l i e r for communities of di f f e r e n t sizes i n Oregon. There i s a tendency i n t h i s technique to underestimate the size of the regional m u l t i p l i e r . Studies of di f f e r e n t sectors 1 Edward L. Oilman and Michael F. Dacey, "The Minimum Reguirement Approach to the Urban Economic Base," Papers and Proceedings of the Regional Science Association 6 (19 60), pp. 180-182. 106 for economies of d i f f e r e n t size are not c a r r i e d out every year, so that data for the application of t h i s method i s not current. The variables used i n the study of the impact of the Oregon ports were calculated with data from 1950. Since that time, the importance of the various sectors i n the economy may have changed substantially. 3. The Port of Ensenada: Input-Output The author of the study of the economic impact of the port of Ensenada condenses a l o c a l input-output matrix into the l o c a l sales of goods and services to buyers outside the municipality and to buyers inside the municipality. Although the data for the multiplier are derived from an input-output table f o r the community, the actual m u l t i p l i e r calculated i s an economic base mu l t i p l i e r , because the input-output table i s used merely to separate base and service a c t i v i t i e s . An input-output table gives useful information about the impact of a port on d i f f e r e n t sectors of the economy, as w i l l be explained i n greater d e t a i l i n section 6.4.3 of t h i s chapter. Unfortunately, the Ensenada study used the input-output table merely to derive an aggregate m u l t i p l i e r . The location quotient and the minimum requirement methods for the determination of the economic base are quite crude methods and may not generate accurate r e s u l t s . The ad-hoc assumption method depends f u l l y on the knowledge of the analyst about the regional economy. If an input-output table does not 107 e x i s t , the determination of the base sector using t h i s method i s expensive and time-consuming. Perhaps the most accurate method to determine the economic base i s the survey method. As the name suggests, the analyst surveys the regional economy in order to determine the export dependency of the d i f f e r e n t sectors. As with input-output, the application of t h i s method i s guite expensive and time-consuming. Economic base i s a r e l a t i v e l y cheap and simple t o o l to determine the size of a regional m u l t i p l i e r for a port. Unfortunately the r e s u l t s t h i s method generates are very crude, due to: i) aggregation; i i ) the assumption of a constant relationship between the economic basesector and the non-basic sector of the regional economy.* 6.4.2 Income Expenditure Analysis The discussion of leakages of income out of the regional economy has become of increasing concern in regional m u l t i p l i e r analysis. Much work has been done i n recent years to apply Keynesian income mult i p l i e r s to regional economic analysis i n order to i d e n t i f y and account for those leakages. 2 1 For further information about economic base analysis, see: Theodore Lane, "The Urban Base M u l t i p l i e r , An Evaluation of the State of the Art," Land Economics 42 (1966), pp. 339-347. 2 For an assessment of the state of the income expenditure analysis, see : Mark Brownrigg, "The Regional Income M u l t i p l i e r , An Attempt to Complete the Model," The Scottish Journal of P o l i t i c a l Economy 18 (1971), pp. 281-297;and G. C. Archibald, "Regional M u l t i p l i e r E f f e c t i n the U.K.," Oxford Economic Papers (March 1967), pp. 22-45. 108 Income expenditure analysis i s applied i n only one of the port impact studies reviewed in t h i s t h e s i s . 1 The study of the ports of Los Angeles and Long Beach calculates the mu l t i p l i e r e f f e c t of the spending of wages earned i n port-related a c t i v i t i e s and the m u l t i p l i e r e f f e c t of purchases of port-related a c t i v i t i e s on the economy i n the study area. The equation for the m u l t i p l i e r i s : M = 1/(1-APSL) where: M = M u l t i p l i e r APSL = Average Propensity to Spend Locally The average propensity to spend l o c a l l y consists of: APSL = WS/GR x APC • P/GR where: WS/GR = proportion of Gross Revenues GR paid out in Wages and Salaries WS APC = Average Propensity to Consume (out of wages and salaries) P/GR = proportion of Gross Revenues respent on Purchasesof inputs. The complete equation f o r the m u l t i p l i e r i s , therefore: M = 1/ 1-(WS/GR x APC+P/GR) The wages and salary payments and the purchases of the firms are determined by data gathered i n the study to measure the primary port impact. The average propensity to consume i s 1 This i s the port impact study by Williams-Kuebelbeck, Economic Impact of Waterborne Commerce through the Ports of Los Angeles and Long Beach. 109 taken from the Bureau of Labour S t a t i s t i c s f o r s e l e c t e d m e t r o p o l i t a n areas i n the U.S.A. The value of t h i s market area m u l t i p l i e r i s reduced as only part of the workforce l i v e s i n the study area and only 70% of the purchases of the primary impact f i r m s are l o c a l purchases. Those workers l i v i n g o u t s i d e the study area are c o n s i d e r e d t o spend t h e i r income t o t a l l y o u t s i d e the study a r e a . The s i z e of the m u l t i p l i e r i n c l u d e s not on l y the e f f e c t o f the respending of wages and s a l a r i e s earned i n the r e g i o n a l economy, but a l s o the e f f e c t of the a d d i t i o n a l purchases of the port-dependent a c t i v i t i e s i n the r e g i o n a l economy. The s i z e of the m u l t i p l i e r e f f e c t i n the study area i s • 1.80*. The m u l t i p l i e r does not i n c l u d e the e f f e c t generated by the respending of taxes paid t o governments i n s i d e the study area and the respending of d i s t r i b u t e d p r o f i t s . The Williams-Kuebelbeck study uses the s i m p l e s t form of income m u t l i p l i e r : I = 1/{1-C) or I =1/S where: I = change i n income C = consumption r a t e out of income S = savings r a t e out of income and, t h e r e f o r e , accounts f o r very few leakages. In some i n s t a n c e s data about r e g i o n a l tax payments t o government may be a v a i l a b l e . I f such data i s not a v a i l a b l e , i t i s very c o s t l y to c o l l e c t . I f data f o r other r e g i o n s are used, the accuracy of the a n a l y s i s d e t e r i o r a t e s s u b s t a n t i a l l y as r e g i o n s can d i f f e r 110 substantially in t h e i r import requirements, as shown i n section 5 . 3 . The m u l t i p l i e r analysis can further be expanded by the accelerator process, which measures an expansion i n investment a c t i v i t y , induced by a growth of business volume, as well as the respending of d i s t r i b u t e d p r o f i t s and tax-revenues. The impact of these a c t i v i t i e s on the regional m u l t i p l i e r e f f e c t i s very hard to determine, and experience with these effects on the s i z e of the regional m u l t i p l i e r has received less emphasis i n the l i t e r a t u r e than the respending of wages and s a l a r i e s and regional inter-industry requirements. An attempt to include these e f f e c t s i n a regional m u l t i p l i e r analysis would therefore increase the costs of t h i s analysis substantially. However, construction expenditures may be treated as part of the m u l t i p l i e r . Even i f the regional income-expenditure analysis includes a l l leakages of income out of the regional economy and a l l mult i p l i e r and accelerator processes, such an analysis does not account for the s p e c i f i c character of the primary impact of a port. I t does not, for instance, take into account the s p e c i f i c import requirements of the port-related sector and the tax r a t i o which t h i s s p e c i f i c sector pays to.governments outside the study area. The leakages of the expenditure generated by port-related a c t i v i t i e s can d i f f e r widely from the leakages of the expenditure of other a c t i v i t i e s i n the study area. If the analysis accounts for the s p e c i f i c c h a r a c t e r i s t i c s of the expenditures generated by a primary port impact, i t i s 111 costly to construct and i t would be better to use input-output analysis, as the l e v e l of d e t a i l of such a model i s very useful to the impact analysis. 6.4.3 Input-Output Analysis Another method to determine the regional mu l t i p l i e r i n i t i a t e d by primary port impact a c t i v i t i e s i s input-output a n a l y s i s . 1 This i s o l a t e s purchases of the productive sectors i n an economy from each other and t h e i r sales to f i n a l demand sectors and the outside world. I t further shows the imports and the value added of each sector. The production functions underlying input-output tables are characterized by constant returns to scale and fixed factor-input proportions. This assumes that a l l firms producing a certain product use the same technology i n terms of factor-input proportions and the same quantities of inputs per unit of output. A l l factor-input r e l a t i o n s for the production process are fixed over time. In practice, however, an expansion of economic a c t i v i t y might lead to economies of scale for a l l or several firms or to far higher costs due to the need to expand production f a c i l i t i e s . New technologies might further change the factor-input proportions. The concept of input-output does not consider, for example, the p o s s i b i l i t y of a shortage of supply 1 For an elaboration of the input-output table, see: Harry W. Richardson, Input-Output and Regional Economies (London: Weidenfeld and Nicolson, 1972), pp. .14-26. 112 of a certain input factor. There i s no adjustment possible because the factor-input proportions are fixed as well as the import c o e f f i c i e n t s . Input-output analysis i s demand-oriented only. The constant r e l a t i o n of the sectors i n the regional economy i s used to determine the size of the regional m u l t i p l i e r . The approach i s s i m i l a r to the determination of the mu l t i p l i e r with economic base theory. While i n economic base analysis only two sectors in the economy e x i s t , having a constant r e l a t i o n to each other, i n input-output analysis a multitude of sectors have a constant r e l a t i o n i n size to each other. I f the size of one sector changes, a l l the other sectors change t h e i r s i z e as well, since a l l sectors are either d i r e c t l y or i n d i r e c t l y f u n c t i o n a l l y linked with each other through t h e i r input requirements or t h e i r sales. Input-output tables can be established as open or closed models. An open model i s characterized by the fact that export, consumption, investment, and qovernment expenditure are exogenous factors for the production process. (An increase i n the business a c t i v i t y of the export sector, such as an increase in the export of transportation services, has an e f f e c t on the inter-industry requirements as d i f f e r e n t sectors supply more goods and services to the port or transportation sector and require for t h e i r higher output more goods and services from each other.) The amounts of goods and services allocated to the consumption, investment, and government sectors, however, are f i x e d . 113 Input-output models usually are constructed as closed models. In t h i s case the consumption, investment, and government sectors or only one of them (generally consumption) w i l l form part of the inter-industry matrix. In t h i s case, an increase i n the export sector in the form of an increase i n the export of port services does not lead only to an increase i n the purchases of the i n d u s t r i a l and manufacturing sectors from each other, but the consumption, investment, and government sectors expand also. This expansion i s due to higher earnings, higher investment, and higher tax-revenues generated by a higher business volume. In the case of a closed model, the input-output table functions s i m i l a r l y to an economic base m u l t i p l i e r , although far more information i s obtained about the r o l e of the d i f f e r e n t sectors i n the expansion process. Mu l t i p l i e r s are calculated with the help of input-output tables i n three of the port impact studies under review. 1 The study of the impact of the ports of Adams, Warren, and Washington counties used e x i s t i n g input-output c o e f f i c i e n t s (source not specified) to construct p a r t i a l input-output tables for each of the three counties for the sectors using the port to ship or receive goods. Which economic a c t i v i t i e s are considered to be exogenously or endogenously determined i n the m u l t i p l i e r 1 They are the studies: Armenakis et a l . , Inland Port F a c i l i t i e s and Economic Growth; Stevenson and Kellogg, Port of Vancouver; and Bragg, A Survey of the Economic and Environmental Aspects of an Onshore Deep Water Port at Galveston. 114 analysis i s not s p e c i f i e d . The port impact study for the Vancouver port u t i l i z e d an existing input-output table roughly equivalent to the area of the Greater Vancouver Regional D i s t r i c t . This table comprises 18 endogenous producing sectors and the household sector as an endogenous sector. The investment, government, and export sectors are exogenous sectors. This means that the m u l t i p l i e r and accelerator e f f e c t s which are formed by increased investment a c t i v i t i e s and increased government spending due to an expansion of the regional economy caused by the primary port impact are not taken into account for the determination of the size of the regional m u l t i p l i e r e f f e c t . The study of the proposed deep-water terminal i n Texas determines only the m u l t i p l i e r e f f e c t of an expansion of the petroleum r e f i n i n g industry as a primary impact of the proposed deep-water port on the Texas coastal zone. An established input-output table for the state of Texas was used for t h i s analysis. While the model i s closed, i t i s not stated which sectors are considered to be exogenous or endogenous. Although input-output analysis has severe l i m i t a t i o n s due to the constant production input r e l a t i o n s h i p s , i t gives the most detailed information about the nature of the economy i n the study area and therefore about the impact of the port on the study area. This method provides information not only about the t o t a l impact on the economy but also about the impact on each sector of the economy. I t i s recommended that, where an input-output table e x i s t s , i t be used. Budget constraints may l i m i t 115 the use of t h i s methodology because the cost of construction of the input-output table i s very high. 6.4.4 Application of General Experience or Related Studies Eight port impact studies do not base t h e i r analysis of the size of the regional m u l t i p l i e r on data gathered s p e c i f a c a l l y for the study. 1 In f i v e of these, r e s u l t s from other studies i n the same region or in nearby regions are applied. 2 In three of the studies, r e s u l t s from other port impact studies are applie d . 3 1 These are.the studies: Carew, Port of Stockton; Whitaker-Mohn, Economic Impact of the Port of Sacramento; Schenker, The Impact of the Port of Green BayT Knapp et a l . , The Impact of Virginians Ports; Erbguth, "Der Beitrag eines Hafens zur Wertschoepfung seiner Hafenstadt," i n E i n f l u s s eines Hafens, edited by Kr a f f t ; Conn et a l . , An Assessment of Major Benefits to M i s s i s s i p p i from Waterborne Commerce; Roesti et a l . , Economic Impact of the Sacramento-Yolo Port; and Gruen et a l . . An Analysis of the Relationship between the Port of San Francisco and the Economy of the City and Bay Region. 2 These are: Carew, Port of Stockton; Whitaker-Mohn, Economic Impact ofthe Port of Sacramento; Schenker, The Impact of the Port of Green Bayf Knapp et a l . , The Impact of V i r g i n i a ' s Ports; and Erbguth, "Der Beitrag eines Hafens zur Wertschoepfung seiner Hafenstadt," i n Einf l u s s eines Hafens, edited by K r a f f t . 3 These are: Conn et a l . . An Assessment of Major Benefits to M i s s i s s i p p i from Waterborne Commerce; Roesti et a l . , Economic Impact of the Sacramento-Yolo Port; and Gruen et a l . , An Analysis of the Relationship between the Port of San Francisco and the Economy of the City and Bay Region. 116 1. Application of M u l t i p l i e r s from Nearby or Same Region The port impact study of Hamm and Neuss uses a regional m u l t i p l i e r determined for communities of the si z e of Hamm and Neuss by Isenberg* and applies t h i s m u l t i p l i e r with a few variations to the ports of Hamm and Neuss. The size of the regional multiplier i s determined by Isenberg i n two steps: i) he determines the spending rate out of the primary impact measured i n income into the community; and i i ) he determines the leakages out of the region i n the subseguent rounds of the mult i p l i e r process. Erbguth considers that 50% of the income earned i n the port-dependent a c t i v i t i e s i n Hamm i s spent l o c a l l y and that 49% of the income earned i n Neuss i s spent l o c a l l y . Hamm provides, according to Erbguth, more services for i t s inhabitants than the town of Neuss. Erbguth adjusted the measures for the leakages of the income out of the region i n the subseguent rounds of the mult i p l i e r process, set by Isenberg to *0.89* for communities the size of the towns of Hamm and Neuss, to '0.9 1' and •0.81' respectively (the higher t h i s measure, the lower the leakages of income out of the region). The measure of the regional spending ratiotimes the measure for the leakages out of the region i n the subseguent rounds of the mu l t i p l i e r process determines the size of the regional 1 G. Isenberg, Existenzqundlaqen der Stadt, (Tuebingen, W. Germany: Sonderdruck der Schriftenreihe der Deutschen Akademie fuer Staedtebau und Landesplanung, Band 14, n.d.). 117 m u l t i p l i e r for the impact of the ports of Hamm and Neuss on t h e i r respective communities. If a port impact study applies a m u l t i p l i e r determined f o r the same study area or at least a study area having a port, the accuracy of the r e s u l t s may be reasonable. In the case where the study area for which the port impact was determined had no port,the accuracy of the r e s u l t s may be questionable. 2. Application of M u l t i p l i e r s from Other Studies In the study of the M i s s i s s i p p i ports 1 other port impact studies are surveyed by the author i n order to f i n d the most l i k e l y size of the m u l t i p l i e r for the M i s s i s s i p p i study. The study of the Sacramento-Yolo p o r t 2 applies the s i z e of the mu l t i p l i e r determined for the port of Stockton i n an e a r l i e r study. 3 The study of the port of San Francisco 4 applies a m u l t i p l i e r derived by input-output analysis for the primary impact of the port of S e a t t l e . s The size of the m u l t i p l i e r i s adjusted to San Francisco conditions as the analyst believes that the c i t y of San Francisco supplies more goods and services 1 Conn et a l . . An Assessment of Major Benefits to Mississippi from Waterborne Commerce. 2 Roesti et a l . . Economic Impact of the Sacramento-Yolo Port. 3 The Sacramento Bee, Sacramento Market Data, 196 2 Consumer Analysis (Sacramento: McCletchy Newspapers, 1963). * Gruen et a l . . An Analysis of the Relationship between the Port of San Francisco and the Economy of the City, and Bay Region. 5 The study of the port of Seattle used i n this study i s referred to only as the Seattle port impact study of 1969. 118 to the firms included in the primary impact a c t i v i t i e s than the c i t y of Seattle i s able to do. It i s also reduced because half of the labour force employed i n the primary port a c t i v i t i e s l i v e s outside the c i t y of San Francisco. A l l studies using the results of other studies to determine the size of the secondary port impact, except the study of the port of San Francisco, which surveys the regional economy and uses different employment categories to determine the regional m u l t i p l i e r , apply a m u l t i p l i e r of egual size for income and employment expansion. This approach may not generate accurate res u l t s as i t can be expected that the size of the regional m u l t i p l i e r for income and employment d i f f e r s substantially. 6.5 Conclusion There are three main methods applied i n the port impact studies to determine the si z e of the regional m u l t i p l i e r : economic base analysis, income expenditure analysis, and input-output analysis. Economic base analysis i s the cheapest of these methods because no extensive survey of the regional economy need be undertaken. The results of economic base analysis are, however, very crude due to the d i f f i c u l t y i n determining the size of the economic base and to severe doubts about the constant r e l a t i o n in size of the economic base sector to the non-basic sector over time. Furthermore, t h i s method i s highly aggregated and cannot d i f f e r e n t i a t e m u l t i p l i e r s for d i f f e r e n t kinds of economic base a c t i v i t y . 119 Income expenditure analysis requires an import rate and a consumption rate determined for the regional economy. As regional accounts are generally very poorly developed, both kinds of data are d i f f i c u l t to obtain. Primary research to generate t h i s data i s expensive. This method i s pot e n t i a l l y able to generate different multipliers for income i n the form of wage and salary income and tax-revenues, and a regional investment accelerator i n i t i a t e d by a primary impact. I t i s generally not possible to carry out an income expenditure analysis for diffe r e n t economic a c t i v i t i e s i n i t i a t i n g the mu l t i p l i e r e f f e c t because of lack of data. Input-output analysis can generate a l l information needed (in monetary terms) i n a port impact study. Input-output analysis i s constrained by the assumption that a l l input requirements, as well as import, consumption, investment, and government expenditure r a t i o s , are fixed over time. This assumption can only be v a l i d i n the short run. Input-output analysis has data requirements which are very expensive to c o l l e c t and not available in many regions. Unless the study budget i s very high, i t i s unlikely that such data would be collected in the course of a port impact study. Where a regional port impact study does not ex i s t , t h i s method should probably not be applied. The application of the re s u l t s of other related studies i s a viable alternative. Accuracy of r e s u l t s must i n t h i s case be considered. I f the other study has a s i m i l a r study area and a simi l a r type of port, the study mul t i p l i e r may give a reasonable 120 i n d i c a t i o n of the probable size of the mu l t i p l i e r for the study area in question. Adjustments can be made to make the data better r e f l e c t the conditions of the study area. I f an input-output table for a regional economy e x i s t s , t h i s thesis recommends that t h i s table should be used for the determination of the secondary port impact. 121 7 Conclusion 7.1 Introduction This thesis has inventoried methodologies applied in a large number of port impact studies and has assessed the r e l a t i v e merits of these various methodologies, paying particular attention to how transportation cost savings were measured and how primary and secondary impacts were i d e n t i f i e d and measured. The assessment has focussed on i) accuracy of r e s u l t s and i i ) possible costs of implementation. The t h e s i s was undertaken to add to the rather scarce l i t e r a t u r e available about methodological approaches to port impact studies. The f i n a l chapter of t h i s thesis: i ) summarizes some of the findings of the t h e s i s about the port impact studies assessed; i i ) discusses the different uses that can be made of the information generated i n a.port impact study; and i i i ) concludes with some general recommendations for future impact studies. 122 7.2 Summary of Findings 7.2.1 Some Methodological Findings This thesis discussed i n chapters three to six the main aspects of the methodologies used i n the port impact studies reviewed in chapter two. Chapter three discussed how transportation cost savings and t h e i r incidence were determined. I t was argued that the determination of transportation cost savings should include estimates about the structure of the economy with and without the port, that studies should include information about the structure and pricing behaviour of the transportation sector, and costs (other than the charges by the c a r r i e r s ) . The personal and regional incidences of the . transportation cost savings should receive f a r greater emphasis i n the studies. Chapter four discussed the measures for the primary and secondary port impacts. I t was argued that employment and wage-earning data have a high informational value and are r e l a t i v e l y easy to generate. This makes these measures very useful f o r a port impact study. Chapter f i v e discussed the a c t i v i t i e s forming the primary port impact. It was argued that inland port f a c i l i t i e s reduce the development potential of alternative c a r r i e r s i n the study areas, while over-sea port f a c i l i t i e s do not have that impact. It was further argued that port f a c i l i t i e s attract firms to 123 l o c a t e c l o s e t o them by t h e p r o v i s i o n of low c o s t t r a n s p o r t a t i o n s e r v i c e s , a g g l o m e r a t i o n b e n e f i t s , and i n f o r m a t i o n g e n e r a t e d due to the s p e c i f i c c h a r a c t e r o f t h e p o r t - r e l a t e d a c t i v i t i e s . High b u s i n e s s c o m p e t i t i o n c l o s e t o p o r t s r e d u c e s , however, the development p o t e n t i a l f o r m a r g i n a l l y p r o f i t a b l e f i r m s . Chapter s i x d i s c u s s e d t h e secondary p o r t a c t i v i t i e s . I n t h i s c h a p t e r i t was found t h a t the s i z e and c h a r a c t e r of t h e secondary p o r t impact can be v e r y d i f f e r e n t f r c m o t h e r a c t i v i t i e s i n i t i a t i n g a m u l t i p l i e r e f f e c t i n t h e r e g i o n a l economy. The m u l t i p l i e r e f f e c t i n i t i a t e d by a p r i m a r y p o r t impact can b e s t be determined by i n p u t - o u t p u t a n a l y s i s due t o the d e t a i l e d i n f o r m a t i o n t h a t can be drawn from i n p u t - o u t p u t a n a l y s i s . I f an i n p u t - o u t p u t t a b l e i s not a v a i l a b l e f o r t h e r e g i o n a l economy, i n c o m e - e x p e n d i t u r e a n a l y s i s s h o u l d be used. I f no data n e c e s s a r y f o r i n c o m e - e x p e n d i t u r e a n a l y s i s are a v a i l a b l e , economic base a n a l y s i s s h o u l d be used, 7.2.2 Some M e t h o d o l o g i c a l Recommendations The a u t h o r of t h i s s tudy b e l i e v e s t h a t the r e l a t i o n s h i p between a p o r t and i t s h i n t e r l a n d o r any s t u d y area i m p a c t e d by the p o r t i s v e r y complex. The p o r t impact s t u d i e s r e v i e w e d f o r t h i s t h e s i s are u n a b l e , by f a r , t o d e s c i b e o r measure a l l t h e economic i m p a c t s o f t h e p o r t s . T h i s might never be p o s s i b l e , b u t i t may be p o s s i b l e t o a c h i e v e a more complete d e s c r i p t i o n o f the i n t e r - r e l a t i o n s h i p s . The a p p l i c a t i o n o f i n p u t - o u t p u t a n a l y s i s t o determine the 1 2 4 secondary impact has shown many l i n k s between the port and i t s study area which were formerly unknown. T h i s i s a v a l u a b l e c o n t r i b u t i o n t o a more p r e c i s e determination of port impacts. Port impacts which r e c e i v e d l i m i t e d , i f any, a t t e n t i o n i n the port impact s t u d i e s under review are: i) the impact of po r t s on r e g i o n a l f a c t o r markets, and i i ) the e x t e r n a l economies generated by p o r t s , such as: t r a n s p o r t a t i o n c o s t s a v i n g s , a high flow of i n f o r m a t i o n , and feed-back e f f e c t s on the r e g i o n a l economy. These impacts, i t i s argued i n t h i s t h e s i s , are very important and deserve more a t t e n t i o n . The s i z e and importance i n the r e g i o n a l economy of these impacts i s very hard to determine and would r e g u i r e probably e x t e n s i v e surveys o f the r e g i o n a l economies. I t i s t h e r e f o r e a d v i s a b l e t o determine these impacts only f o r c e r t a i n p o r t s which are co n s i d e r e d t o be r e p r e s e n t a t i v e f o r ether p o r t s . 7.3 Uses That Can Be Made o f the Information Generated i n a Port Impact Study Port impact s t u d i e s have g e n e r a l l y been conducted f o r three reasons: i) to be used as p u b l i c r e l a t i o n s t o o l s f o r the port a u t h o r i t i e s ; i i ) to a s s i s t the po r t a u t h o r i t y and other p a r t i c i p a n t s (e.g. l o c a l , s t a t e , or f e d e r a l governments) t o e s t a b l i s h p o r t development and/or expansion p o l i c i e s ; 125 i i i ) to contribute to academic l i t e r a t u r e i n an attempt to re f i n e , modify, and extend the various methodologies available to study the impact of a port f a c i l i t y on a regional economy. 7 . 3 . 1 Public Relations Tools Several studies mention that the purpose of the study i s to inform the public about the contribution of the port to the regional economy. The study of Sacramento-Yolo 1 , for example, was conducted as a j u s t i f i c a t i o n f o r the newly constructed port. Some studies mention s p e c i f i c public bodies for whom the impact study was carried out. The study of the impact of the port of Mobile 2 was conducted after the state l e g i s l a t u r e had f a i l e d to approve the issue of bonds intended to r a i s e c a p i t a l for the improvement of dock f a c i l i t i e s . It was hoped that the port impact study would show the benefits of the port to the state and would therefore create a better climate for port investments in the public and ultimately i n the funding agency. The study of the impact of Los Angeles and Long Beach 3 and the study of the impact of the port of Sacramento* both state that the economic impact studies were intended as a counter-weight to environmental impact studies carried out f o r the port. The preliminary draft of the study of the impact of the port of 1 Roesti, Economic Impact of the Sacramentg-Yolo Port. 2 Dunphy et a l . , Economic Analysis of the Port of Mobile. 3 WiIliams-Kuebelbeck, Economic Impact of Water borne Commerce through the Ports of Los Angeles and Long Beach. * Whitaker-Mohn, Economic Impact of the Pert of Sacramento. 126 Los Angeles and Long Beach stated more prec i s e l y that the aim of the study was to counter environmental concerns about the future construction of port f a c i l i t i e s . A l l large-scale enterprises depend on a variety of i n s t i t u t i o n s which influence the decision making process of the enterprise. I t i s therefore quite understandable that enterprises influenced by many agencies try to influence these agencies i n favour of t h e i r own enterprise or i n s t i t u t i o n . There i s a tendency, however, to use impact analysis to present, as Waters suggests, 1 a one-sided picture of the impact of the port. Indeed these impacts are often presented as benefits even though other factors such as opportunities foregone have not been included i n the analysis. 7.3.2 Bole i n Policy Formation Ports are usually b u i l t and subsidized by public funds. This makes them very dependent on the p o l i t i c a l body financing them. Poxts influence the natural environment by the scale and character of t h e i r a c t i v i t i e s . This makes them dependent on agencies responsible for the protection of the natural environment. "The impact of the external agencies i s a important for the establishment of port policy as the impact of the port authority i t s e l f . " 2 1 W. G. Waters I I , "Impact Studies and the Evaluation of Public Projects," Annals of Regional Science 10 (March 1976), p. 100. 2 Charles E. Lindblom, "The Science of Muddling Through," Public Administration Review 19 (Spring 1959), pp.85-86. 127 Some of the port impact s t u d i e s mention t h a t t h e i r work provides i n f o r m a t i o n u s e f u l i n the dete r m i n a t i o n of a port p o l i c y . The study of the Vancouver por t , f o r example, s t a t e s t h a t the port impact study should "provide a data base t h a t can be used t o a s s i s t i n f u t u r e p l a n n i n g . " 1 The study of the p o r t of Green Bay s t a t e s t h a t the study should make a c o n t r i b u t i o n t o a good a l l o c a t i o n of s c a r c e r e s o u r c e s . Both s t u d i e s c o n s i d e r t h e i r i n f o r m a t i o n u s e f u l f o r the establishment of a general port p o l i c y . The port impact s t u d i e s f o r the proposed deepwater p o r t i n Galveston, Texas, 2 are intended as i n f o r m a t i o n generated t o a s s i s t i n determining whether or not such a po r t should be c o n s t r u c t e d . A port p o l i c y can i n c l u d e such concerns as the c o n s t r u c t i o n and expansion of port f a c i l i t i e s , p r i c e s f o r po r t s e r v i c e s and p u b l i c s u b s i d i e s f o r the port o p e r a t i o n , as w e l l as governmental r e g u l a t i o n s concerning the use of c e r t a i n p o r t s by c e r t a i n t r a f f i c . A port p o l i c y can, on the other hand, be concerned with s o c i a l and environmental impacts of the p o r t . A l l o f these i s s u e s surrounding a port p o l i c y are concerned with the a l l o c a t i o n of re s o u r c e s . Resource a l l o c a t i o n i s u s u a l l y c a r r i e d out by i d e n t i f y i n g and e v a l u a t i n g a l t e r n a t i v e uses of the resources and by i d e n t i f y i n g t h e op p o r t u n i t y c o s t of one a l l o c a t i o n as opposed t o another. 1 Stevenson and K e l l o g g , Port of Vancouver, p. 1. 2 Bragg e t a l . , The Economic Impact of a Deep Water Terminal i n Texas; and Bragg, A Survey of the Economic and Environmental Aspects of an Onshore Deepwater Port at Galveston. 128 Waters points out that "accurate impact studies w i l l i d e n t i f y the linkages and portray the gross impacts of the project." 1 Indeed, a l l of the port impact studies reviewed i n t h i s thesis were concerned with gross impact. Waters also points out that these impact studies can e a s i l y become one-sided; "...they document the gross consequences of certain expenditures but ... do not necessarily c a l l attention to the opportunities foregone. 1 1 2 This thesis argues for more academic research i n the area of the net impact analysis. A net impact study could consider the impact of the port on alternative uses of the f a c t o r s of production. (The port impact studies reviewed i n t h i s t h e s i s cannot determine alternative uses for the factors of production now u t i l i z e d by the port.) Should net impact analysis be used, the study could suggest the future economic condition of the study area with the port l e s s the future economic condition of the study area without the port, i . e . the net impact of the port f a c i l i t y . In any type of regional economic impact analysis, however, shortcomings e x i s t . The studies are conducted within a certain time period and a l l future predictions must assume that the same conditions prevail i n the future as existed during the period when the study was conducted. In the case study of the impact of 1 W. G. Waters I I , "Impact Studies and the Evaluation of Public Projects," Annals of Regional Science, p. 101. 2 Ibid. 129 the port of Portland 1 a previous impact study was modified to r e f l e c t conditions over a f i v e year time period. Before the study was completed, the study team determined that changes had not occurred of s u f f i c i e n t magnitude to inv a l i d a t e the e a r l i e r study. This thesis suggests that changes i n the study region which might invalidate an e a r l i e r study must be documented before such a study i s used or the data modified to r e f l e c t l a t e r conditions. Also, of course, any regional economic impact analysis does not consider 'other* impacts such as environmental or s o c i a l impacts. I t i s suggested i n t h i s thesis that' environmental and s o c i a l concerns should also be taken into account i n the formulation of any port development and/or expansion policy. In order to derive the maximum benefits from the use of certain resources, complete knowledge about the alternative uses of the resources i n the future i s necessary. This complete knowledge i s never achievable. We do not have complete knowledge of the past, much les s complete knowledge about the future. This leads planners and p o l i t i c i a n s to a decision-making behaviour where they make the best possible guess based on information they can obtain at reasonable costs. This decision-making behaviour i s described by Charles Lindblom as the "Science of Muddling Through." 2 . .. ••! P • ^  • I. I • — 1 The Port of Portland, Economic Impact of the Port of Portland. 2 Charles E..Lindblom, "The Science of Muddling Through," Public Administration Review 19 (Spring 1959), pp.79-88. 1 3 0 As t h e p a s t i s t h e b e s t a p p r o x i m a t i o n a v a i l a b l e t c p r e d i c t t h e f u t u r e , p o r t i m p a c t s t u d i e s g i v i n g i n f o r m a t i o n a b o u t t h e p a s t g i v e a t t h e same t i m e v a l u a b l e i n f o r m a t i o n a b o u t t h e f u t u r e . U n l e s s m a j o r c h a n g e s i n t h e r e g i o n a l e c o n o m y a n d t h e p o r t i t s e l f a r e e x p e c t e d , t h e i m p a c t o f a p o r t c a n b e u s e d t o r e a s o n a b l y e s t i m a t e f u t u r e c o n d i t i o n s a s w e l l . 1 The same i s b a s i c a l l y t r u e f o r a p o r t p o l i c y a b o u t t h e p r i c i n g o f p o r t s e v i c e s a n d t h e r e q u i r e m e n t s b y t h e p o r t f o r p u b l i c s u b s i d i e s . I f t h e p r i c e s f o r p o r t s e r v i c e s a r e o n l y c h a n g e d by t h e c u r r e n t i n f l a t i o n r a t e , t h e y w i l l p r o b a b l y a t t r a c t t h e same k i n d a n d a m o u n t o f t r a f f i c a s t h e y d i d i n t h e p a s t a n d t h e p o r t o p e r a t i o n w i l l r e q u i r e s u b s i d i e s o f a s i m i l a r s i z e a s i t h a s r e q u i r e d i n t h e p a s t . A s t h e i n f o r m a t i o n i n a p o r t i m p a c t s t u d y c a n o n l y b e u s e d a s a n i n d i c a t o r f o r t h e e f f e c t s o f f u t u r e p r o j e c t s a n d p o l i c i e s c o n c e r n i n q t h e p o r t , t h e r e d o e s n o t seem t o b e a n e e d t o e s t a b l i s h f o r e v e r y p o r t an o r i g i n a l p o r t i m p a c t s t u d y , n o r t o r e p e a t p o r t i m p a c t s t u d i e s e v e r y f e w y e a r s , u n l e s s t h e r e i s s u f f i c i e n t r e a s o n t o b e l i e v e t h a t t h e i m p a c t o f t h e p o r t h a s c h a n g e d s u b s t a n t i a l l y , o r t h a t t h e p a r t i c u l a r p o r t i n q u e s t i o n h a s v e r y d i f f e r e n t i m p a c t f r o m o t h e r p o r t s . 1 F o r a more d e t a i l e d d i s c u s s i o n o f t h e p r e d i c t i v e v a l u e o f i m p a c t a n a l y s i s , s e e : Semoon C h a n g , " I n D e f e n c e o f P o r t E c o n o m i c I m p a c t S t u d i e s , " T r a n s p o r t a t i o n J o u r n a l . 131 7.3.3 Academic Research Port impact studies are able to generate previously unknown information about the relationship of a port to i t s hinterland. The study of the port of Ensenada 1 i s a case study i n regional economic development. The study "Inland Ports and Economic Growth" 2 was intended to generate some general information about the role of inland ports in regional economic development. The study of Hamm and Neuss 3 attempted to develop a better methodology to measure port impacts. This study was i n the mid-s i x t i e s a valuable contribution to methodological research on regional economic development under German i n s t i t u t i o n a l conditions. 1 Anderson, The Port of Ensenada. 2 Armenakis et a l . , Inland Port F a c i l i t i e s and Economic Growth. ~ 3 Erbguth, "Der Beitrag eines Hafens zur Wertschoepfung seiner Hafenstadt," i n Der Einflu s s eines Hafens, edited by K r a f f t . 1 3 2 7.4 Conclusion In conclusion, the author of t h i s thesis f e e l s that there i s room for further research in port impact analysis methodologies. The areas of prime concern i d e n t i f i e d by t h i s thesis are: opportunity costs, and external economies. The inclusion of opportunity costs would leave the impact analysis less open to misinterpretation and would a s s i s t better i n policy formulation because a more r e a l i s t i c picture of the impact of the port i s presented. The i n c l u s i o n of external economies i s recommended because the external economies which evolve as a res u l t of the presence of port f a c i l i t i e s are l i k e l y to a l t e r the structure of the regional economy more s i g n i f i c a n t l y than other large scale developments. 1 3 3 Selected Bibliography 1 Port Impact Studies Anderson, Graydon K. The Port of Ensenada:. A Report on Economic Development. San Diego, C a l i f o r n i a : San Diego State College, 1964. Armenakis, A. A.; Moore, H. J. ; and Peden, G. T. Inland Port F a c i l i t i e s and Economic Growth. State College, M i s s i s s i p p i ! Mississippi State University, Bureau of Business and Economic Research, 1970. Bragg, Daniel M. and Bradley, James R. The Economic Impact of a Deep Water Terminal i n Texas. N.p.: Texas A & M U n i v e r s i t y 7 Texas Engineering Experiment Station, 1972. Bragg, Daniel M. A Survey of the Economic and Environmental A s p e c t s of an Onshore Deepwater Port^at Galveston, Texas; Part XL Potential Economic~'Effects. 2nd e d i t i o n . College Station, Texas: Texas A & M^Oniversity, Center f o r Marine Resources, 1975. Carew, John P. Port of Stockton: Phase 2: Economic Impact of the Port of Stockton on the Stockton Economy 1973-19747 Stockton, C a l i f o r n i a : n.p., 1975. Conn, Robert Lawrence; Flewellen, W._G.; and Peden, Guy T. An A s s e s s m e n t of Major Benefits to M i s s i s s i p p i from Water borne Commerce. State College, M i s s i s s i p p i : M i s s i s s i p p i State University, Bureau of Business and Economic Research, 1966. Dunphy, Loretta M. and Chang, Semoon. Economic Analysis of the Port of Mobile with Special Reference to I t s Economic Impact upon the Alabama Economy in*"" 197 3 . Mobile, Alabama: University of South Alabama, Department of Economics, 1974. 134 Erbguth, Horst. "Der Beitrag eines Hafens zur Wertschoe pf ung seiner Hafenstadt dargestellt am B e i s p i e l der Haefen Hamm und Neuss." In Der Einfluss eines Hafens auf die Wirtschaftsstruktur und die Wirtschaftskraft seiner Hafenstadt, pp. 187-266. Edited by Diet mar K r a f f t . Goettingen, W. Germany: Vanderhoeck & Eupprecht, 1966. Gruen, Gruen, and Associates. An Analysis of the Relationship between the Port of San Francisco and the Economy of the §H£ Bay Region. San Francisco, C a l i f o r n i a : by the authors, 1972. H i l l e , Stanley J. and Suelflow, James E. "The Economic Impact of the Port of Baltimore on Maryland's Economy.11 In Papers -Eleventh Annual Meeting, 1970, pp.307-325. Edited by Transportation Research Forum. Oxford, Indiana: The Richard B. Cross Company, 1970. Knapp, John L.; Hammond, James D.; and Haroz, Donald P. The Impact of V i r g i n i a ' s Ports on the Economy of the Commonwealth. N.p.: University of V i r g i n i a , Tayloe Murphy In s t i t u t e , T976. Oregon, Department of Transportation, Port D i v i s i o n . Survey of Oregon Ports: Economic Impact Section. 1973. . Roesti, Robert M.; Coe, Robert K.; and Tsagris, B. E. Economic Impact of the Sacramento-Yolo Port. Sacramento, C a l i f o r n i a : Sacramento State College, Real Estate Research Bureau, 1964. Rudy, Leslie M. A Study of the Economic Impact of Maritime Commerce upon the Port of Seattle D i s t r i c t . Seattle7 Washington: by the author, 1961. Ryan, Robert H. and Adams, Charles W. Corpus C h r i s t i : Economic Impact of the Port. Austin, Texas: The University of Texas at Austin, Bureau of Business Research, 1975. Schenker, E r i c . The Impact of the Port of Green Bay on the Economy of the Community. Milwaukee, Wisconsin: University of Wisconsin, Sea-Grant Program, Technical Report No. 16, 1972. 135 Stevenson & Kellogg, Ltd-. Port of Vancouver: Economic Impact Study. Vancouver, B r i t i s h Columbia: by the authors, 1975. The Port of Portland. Economic Impact of the Port of Portland, Oregon. Portland, Oregon: by the authors, n.d. Whitaker-Mohn, Andrea. Economic Impact of the Port of Sacramento: I t s Sources and Results. Sacramento, C a l i f o r n i a : C a l i f o r n i a State University, 1974. Williams-Kuebelbeck and Associates, Inc. Economic Impact of Waterborne Commerce through the Ports of Los Angeles and Long Beach. Marina del Rey, C a l i f o r n i a : by the authors, 1976. 136 2 Other References Alonso, William.."Location Theory." In Regional Policy: Readings ifi Theory and Application, pp.35-63. Edited by ~ John Friedmann and William Alonso. Cambridge, Massachusetts: The Massachusetts I n s t i t u t e of Technology Press, 1975. Archibald, G. C. "Regional M u l t i p l i e r E f f e c t i n the O.K." Oxford Economic Papers (March 1967), pp. 22-45. Bendavid, Avrom. Regional Economic Analysis for P r a c t i t i o n e r s . New York: Praeger Publishers, 1974. Brownrigg, Mark. "The Regional Income M u l t i p l i e r : An Attempt to Complete the Model." The Scottish Journal of P o l i t i c a l Economy 18 (1971), pp. 281-297. Chang, Semoon. "In Defence of Port Economic Impact Studies." Transportation Journal (Spring 1978) , pp. 79-85. Davis, H. C. An Interindustry Study of the Metropolitan Vancouver Economy. Vancouver:, University of B r i t i s h Columbia, Faculty of Commerce, Urban Land Economics Report No. 6, 1974. Hirschmann, Albert 0. The Strategy of Economic Development. New Haven: Yale University Press, 1958. Isenberg, G. Existenzqrun dlagen der Stadt. Tuebingen, W. Germany: Sonderdruck der S e r i f t e n r e i h e ' der Deutschen Akademie fuer Staedtebau und Landesplanung No. 14, n.d. Lane, Theodore. "The Urban Base M u l t i p l i e r : An Evaluation of the State of the Art." Land Economics 42 (1966), pp. 339-347. Lindblom, Charles E. "The Science of Muddling Through." Public Administration Review 19 (Spring 19 59) No. 2, pp. 79-8 8. 137 Purely, H. L. Transportation Competition and Public Policy i n Canada. 3rd ed. Vancouver: University of B r i t i s h Columbia PressT 1976.. Richardson, Harry W. Input-Output and Regional Economics. London: Weidenfeld and Nicolson, 1972. ~ Sanuki, Toshio. "The City in Informational Society." In Regional Policy: Readings i n Theory and Application, pp. 406-420. Edited by Friedmann, John and Alonso, William. Cambidge, Massachusetts: The Massachusetts Inst i t u t e of Technology Press, 1975. . Siegel, Richard A. "The Economic Base and M u l t i p l i e r Analysis. 1 1 Urban A f f a i r s Quarterly 2 (Dec. 1966), pp. 24-36. Ullman, Edward L. and Dacey, Michael F. "The Minimum Requirements Approach to the Urban Economic Base." Papers and Proceedings of the Regional Science Association 6 (1960), pp7l72-1857 Waters, Robert C. "Port Economic Impact Studies: Practice and Assessment." Transportation Journal (Spring 1978), pp. 79-85. Waters I I , W. G. "Impact Studies and the Evaluation of Public Projects." Annals of Regional Science 10 (March 1976), pp. 98-103. 

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