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^^A^ PACIFIC INSTITUTE 



FOR STUDIES IN DEVELOPMENT, ENVIRONMENT, AND SECURITY 



October 15,1993 



Representative Charlie Rose, Chairman 

 Subcommittee on Specialty Crops and Natural Resources 

 Committee on A3 r I culture 

 U.S. House of Representatives 



Dear Chairman Rose, 



During the questions after my testimony on October 13,1993 concerning the 

 Headwaters Forest Act, Repesentative Doolittle raised a number of important questions 

 concerning the diffa-ences in the estimates concerning the role of income from the timber 

 industry in the economic stimulus of Humboldt County. The key point is that the difference 

 between the estimates is an accounting issue since the economic models are very similar. The 

 figure below illustrates how three different accounting frameworks wiU give different estimates 

 of the relative importance of timber related income as a driving force for the local economy. 

 Since all personal income is accounted for in the U.S. Government's most sophisticated 

 regional economic model - RIMS 11 of the Bureau of Economic Analysis - it seems to me that 

 any realistic model must also account for all major sources of local income. 



The different estimates depend on how much of local income is included in the 

 calculation and for what year the estimate is made. The figure below illustrates different 

 estimates for the percent of economic stimulus that can be ascribed to the timber industry. 

 While it is possible to get the 70% numbo- mentioned by Mr. Doolittle, it requires using a base 

 year in the 1970s and disregarding all interest, dividend, social security, medicare and other 

 govanment entitlemoit payments. Using the latest federal data and accounting for all personal 

 income , I believe my estimate of one in nine dollars coming from the timb«" industry is a fair 

 one. Technical details that explain the method follow the figure. 



Comparison of Three Methods of Calculating Economic 

 Stimulus of Timber Income in Humboldt County 1972-1989 



I I I I I I I I I I I I I I II 

 72 74 76 78 80 82 84 86 88 



Year 



-Wages Only 

 Basis 



■IMPLAN 

 Basis 



"Total Income 

 Basis 



Data Source: Local Area Po-sonal Income: California . US DepartmCTt of Commerce 



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