The Economic Impacts of Outdoor Recreation at the Wayne National Forest, Ohio

Warren Kriesel, Assoc. Prof.
Department of Agricultural and Applied Economics
College of Agricultural and Environmental Sciences
The University of Georgia
Athens, GA 30602

September, 1996

This work was funded under contract #40-55N9-6-0042 from the Wayne National Forest, USDA Forest Service.

EXECUTIVE SUMMARY

The purpose of this report is to document the economic impacts of expenditures by visitors to the Wayne National Forest in Southeast Ohio. Visitors are attracted by the recreational opportunities in the National Forest. This study employed the results of the CUSTOMER survey of recreation expenditures at the Monongahela NF and extrapolated them to Wayne NF. Visitation estimates were obtained from Dr. Ted King of the Forest Service at Wayne NF, for the 12-month period ending April, 1996.

Economic impacts were estimated within the IMPLAN regional input-output modeling system. The impact region consisted of the eight southeast Ohio counties that contain the National Forest, and the 15 counties that are adjacent to them, including a few counties in Kentucky and West Virginia. The major findings of the research are as follows:

• During the year, Wayne NF received 689,000 visitors of whom 384,000 were nonlocal visitors who brought "new" dollars into the southeast Ohio impact region.
• The CUSTOMER survey indicated that expenditures averaged $82.84 per visitor, so nonlocal visitors spent approximately S31,810,000 in the impact region.
• After accounting for economic ripple effects, expenditures by nonlocal visitors to Wayne NF boosted the size of the region's economy by $45,768,000.
• In terms of employment, recreation-related spending supported 1,024 jobs and it generated $24,971,000 in annual income to residents of southeast Ohio region.

These economic impacts indicate that the recreation services provided in the forest are a vital component of the economy in southeast Ohio. Without these services there would be a marked decrease in the attractiveness of the region to tourists, recreationists and other visitors.

INTRODUCTION

Studies show that 94.5 percent of people in the United States participate in some form of outdoor recreation. These studies also indicate that demand for outdoor recreational opportunities in the United States is expected to increase into the foreseeable future. Federal land and water resources are a major source of outdoor recreational opportunities throughout the nation. Benefits of providing these opportunities include the enjoyment gained by recreational visitors themselves through participation in outdoor recreation, and the positive economic effects on local area economies of recreation visitor expenditures. In this report, the economic effects on the southeast Ohio region of expenditures by recreational visitors to the Wayne NF are reported and discussed.

BACKGROUND CONCEPTS

Economic Growth Effects
In economics, the term economic growth refers generally to an increase in the overall size of an economy. This increase in size can be measured by a number of economic indicators including total output, total number of jobs, and total employee income. Economic growth is often likened to "increasing the size of the economic pie". This "economic pie" is divided up or distributed to various individuals and groups.

How does economic growth occur in a local economy? The technical answer to this question is found in export base theory. Export base theory states that a local economy grows by exporting goods or services outside of the economy so that "new dollars" can be brought in to the local economy. These "new dollars" are the source of economic growth measured in terms of increased output, jobs, and income. It is difficult for true economic growth to occur without the influx of "new dollars" because in the absence of such an influx, residents of the local economy are simply transferring dollars and income between themselves. This transfer of dollars does not generally affect the size of the "economic pie", rather the pie just keeps getting "cut up" and distributed in different ways.

How can outdoor recreation contribute to economic growth in a local economy? Consider the Wayne National Forest. Visitors who live outside of the local economy surrounding Wayne NF come to the forest to engage in outdoor recreation. While visiting the site and traveling within the local area, these visitors spend money on food, lodging, gasoline, and general supplies. The money spent on these items represents an influx of "new dollars" which, in turn, supports economic growth.

In sum, when nonresidents of a local economy spend money as part of a regional trip, the effects on the economy are similar to exports from a basic industry. Exports from a basic industry such as a manufacturing firm fuel economic growth in a local economy by bringing in "new dollars". In the case of recreation and tourism, the local, economy can be thought of as "exporting" recreational services to nonresidents. The recreation and tourism industry therefore can function as a basic industry or an industry which contributes to economic growth (Bergstrom et al., 1990; Cordell et al, 1992.; English and Bergstrom, 1994).

Direct, Indirect, and Induced Effects
When a local economy experiences an increase in exports, people are benefited by more than just the dollar amount of the goods exported. This is because the exporting businesses will have a ripple effect on other businesses that supply them, and those businesses affect others on down the supply chain. The same thing happens in the case of recreational expenditures in the Wayne NF. Economists call the initial exporting activity, the "direct effect", and the subsequent ripples are the "indirect" and "induced" effects.

To be more precise, "direct effects" are the amount of the increased purchase of inputs used to manufacture or produce the final goods and services purchased by recreationists. "Indirect effect" refers to the value of the inputs used by firms which are called upon to produce additional goods and services for those firms first impacted directly by recreational spending. "Induced effects" result from the direct and indirect effects of recreation spending. Induced effects are related to persons and businesses that receive added income as a result of local spending by employees and managers of the firms and plants which are impacted by the direct and indirect effects of recreational spending. This added income results in increased demand for goods and services and, in turn, increased production and sales of inputs. This increased production and sales of inputs represents the induced effect of recreational spending. The total economic effect of expenditures related to recreational visits is the sum of direct, indirect, and induced effects (Walsh et al. 1987). Typically, the total effects are between Vi to 2 times more than the amount which the recreationists originally spent in the local economy. The direct, indirect and induced effects are estimated by input-output analysis, explained below.

Input-Output Analysis
Input-output analysis is one of the most widely applied methods in regional economic analysis (Miller and Blair, 1985). Input-output models basically consist of a system of linear equations which describe the linkages among production sectors in a given economy. The 1-0 component of our model is the IMPLAN model. Through IMPLAN, one can construct a tailor- made 1-0 model for any group of counties or states (Alward et al. 1985). IMPLAN has 528 industrial sector categories that can account for a variety of recreation purchase patterns (Alward and Lofting 1985). Software modules calculate the direct, indirect and induced effects of recreational spending or other final demand vectors. Interindustry linkages in the local economy determine the total output, value added, personal income, and employment impacts. The advantages and disadvantages of IMPLAN are discussed elsewhere (Alward and Lofting 1985; Alward. et al. 1985; Propst 1985; Hotvedt, et al. 1988).

ECONOMIC IMPACT ANALYSIS AND RESULTS

Expenditures per recreational visit were estimated from expenditure survey data collected as part of the nationwide, multi-agency CUSTOMER*** survey effort. It was designed to collect comprehensive and up-to-date data on recreational uses of public land and water resources. Detailed descriptions of the surveys conducted and each site are provided in several reports.

Since Wayne NF was not included in the CUSTOMER survey, a research task was to determine which of the 39 CUSTOMER locations across the US would closely match the characteristics of Wayne NF. The three closest locations were the Daniel Boone NF in Kentucky, the Seneca Rocks site and the Sherwood Lake site, both in the Monongahela NF in West Virginia. Because all of the sites are in middle Appalachia, the socioeconomic characteristics of visitors at these three sites probably resemble those at the Wayne NF. Next, each of these three CUSTOMER sites were compared to Wayne NF in terms of how closely the availability of activities at each site matched. This is important because different sets of activities imply much different patterns of expenditures.

At Wayne NF, the five most popular activities reported were: hunting (37% of all visitors), camping (14%), off-road vehicles (11%), hiking (7%) and fishing (6%). At Daniel Boone NF, all CUSTOMER interviews were conducted at lake sites and the reported activities mainly involved boating, so this data is not a good substitute for Wayne NF. According to the CUSTOMER data for Seneca Rocks, the five most popular activities were: sightseeing (42%), camping (25%), rock climbing (12%) fishing (10%) and hiking (2%). At Lake Sherwood, the five most popular activities were: camping (58%), fishing (10%), swimming (9%), sunbathing (7%) and picnicking (4%). The Seneca Rocks data base contains 148 usable observations, while the Sherwood Lake set contains only 60. Therefore, it was decided that the Seneca Rock site was the most desirable substitute for Wayne NF.

In passing, it should be noted that using the Seneca Rock expenditures will probably result in an underestimate of Wayne's true expenditures. This is because Wayne is more heavily dominated by off-road vehicle users, and this activity is typically more expensive than the main activities at Seneca Rocks. Therefore, this impact analysis will produce results that are a conservative, lower bound of the true impacts.
According to the CUSTOMER results for Seneca Rocks, the average nonlocal visitor spent $82.74 per visit to the area. This breaks down as follows: $39.84 was spent on food, $31.80 on lodging, $5.15 on transportation, $2.18 on recreational activities and $3.76 was spent on miscellaneous items.

Estimates of visitation at Wayne NF were provided by Dr. Ted King. During the 12 months ending in April 1996, Wayne NF attracted 689,000 visitors. 384,000, or 55.7 percent of these originated from outside the impact area. Applying this estimate to the average expenditure estimate yields annual recreational expenditures of approximately $31,772,000.

The impact area is composed of the eight southeast Ohio counties that contain the National Forest, and the 15 counties that are adjacent to them, including counties in Kentucky and West Virginia. Including the adjacent counties is standard practice because it accounts for nonlocal workers who commute to work from the surrounding area. As illustrated in Table I, the impact region is large: it has 924.000 residents contained in 9,659 square miles.

The IMPLAN input-output model was constructed with data from these 23 counties. The model indicates that this region is economically quite diverse: of the 528 industrial sectors that are in IMPLAN, 312 are present in this region. This is a surprisingly high proportion of active sectors for a region that is largely rural, and therefore the multipliers from this model will be higher than if the region were less diverse, because more inputs can be supplied locally.

Table1. Counties in and around the Wayne NF that were used in the economic impact area.

Expenditure items included in the CUSTOMER questionnaire were developed specifically to provide visitor expenditure data that are compatible with the economic sectors in the IMPLAN model. Expenditures are reported for purchase of specific recreation related commodities, i.e., goods and services. However, these commodities often affect multiple industrial sectors, and must be allocated as such. Thus, expenditures reported by visitors are often allocated to a larger number of economic sectors. The process of allocating expenditures to various sectors requires a series of transformations that establish the relationship between visitor expenditures and the sectors of the economy modeled by IMPLAN. The allocations are based on information from the Bureau of Economic Analysis on commodity and service production costs and the relationship between national average purchase prices, production costs, transportation costs, and retail and wholesale margins. The allocations used in this report can be found in English, etal. (1995).

The mean expenditure per person per sector has been multiplied by the estimate of total visitation, and this is entered as a vector for impact analysis in IMPLAN. The IMPLAN software calculates the direct, indirect and induced effects of recreation expenditures on the impact area economy. Economic effects are reported as total output, value added, total income and employment, and these are listed in Table 2.

Table 2: Estimates of the Economic Effects Resulting from Visitor Expenditures to the Wayne National Forest

* Figures are in millions of 1996 dollars.
** Figures are number of jobs.

Results indicate that the direct impact on total output is $17,458,000, where total output is defined as the value of all goods and services produced in an economy. This figure is roughly equal to the dollar value of visitor expenditures, minus the value of items that have to be imported into the region. This $17.4 million direct impact rippled through the Monroe county economy to generate a $3,010,000 indirect impact and a 3)25,298,000 induced impact. The total impact on output is the sum of these three effects, or $45,768,000. In other words, after accounting for economic ripple effects, expenditures by nonlocal visitors to Wayne NF boosted the size of the region's economy by $45,768,000.

The next impact measure on Table 2, value added, is total output minus the value of inputs to a sector's production. As such, value added is the net benefit to an economy, and it contains the sum of employee compensation, indirect business taxes, and property income. Total income is similar to value added but without the business taxes, so it is the sum of property income and employee compensation. Employment measures the number of full-time job equivalents required to produce the output of each sector. Table 2 indicates that the total impact on the region's value added is $28,360,000, income is increased by $24,971,000 and 1,024 jobs owe their existence to recreational expenditures in the Wayne National Forest.

From the information in Table 2 it is possible to calculate economic impact multipliers associated with visitors' expenditures. As an example of how a multiplier is calculated, consider the results for total output. Expenditure impacts yielded an increase of $17,458,000 in final demand in the impact region after accounting for purchased items that have to be imported. This increased final demand led to a $45,768,000 total economic impact. The multiplier for total economic output associated with visitor spending is calculated by dividing the total impact by the direct impact, for a 2.62 multiplier. This multiplier means that each dollar of output directly generated by visitor spending will result in $2.62 total economic output. The same process is used to calculate impacts for the other economic indicators, and similar interpretations also apply to them. The multiplier for income was 2.51, for value added it was 2.47, and the employment multiplier was 1.94. The later multiplier indicates that each job directly supported by visitor spending results in itself and 0.94 of another job generated throughout the economy.

Table 3 contains estimates of total impacts on the four economic indicators, for the nine major industrial sectors as defined by the Standard Industrial Classification system. In the typical tourism impact study, the services and retail trade sectors are the most heavily impacted, and this study is no exception. Equally unsurprising is the fact that the mining and the government sectors are the least impacted.

Table 3: Total Economic