Minnesota’s C.L.I.O. Project: Pilot Study: Estimating Rural-Urban Interdependencies
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The document describes Minnesota's C.L.I.O. Project, which uses regional cluster analysis and input-output analysis to estimate rural-urban economic interdependencies. The analysis identifies industry clusters and tracks the flow of goods and services between regional economies. A pilot study found that a $1 billion increase in rural manufacturing or agribusiness output would lead to thousands of new jobs and hundreds of millions in additional revenue for Twin Cities businesses. The results imply that rural and urban areas are economically dependent on each other.
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Minnesota’s C.L.I.O. Project: Pilot Study: Estimating Rural-Urban Interdependencies
- 1. Minnesota’s C.L.I.O. ProjectPilot Study: Estimating Rural-Urban Interdependencies Minnesota Rural Partners, Inc. Jane Leonard Kate Searls June 1, 2011 katesearls@msn.com
- 2. C.L.I.O. is Minnesota’s Innovative approach for: Estimating rural-urban economic interdependencies and Identifying development targets for maximum rural-urban job gains. “C.L.I.O” stands for: * Regional CLuster Analysis * Input-Output Analysis katesearls@msn.com
- 3. Regional Cluster Analysis identifies Business Density or Concentrations for particular industry sectors Harvard’s Cluster Mapping Project Input Output Analysis estimates trading connections, tracking the flow of goods and services between regional economies. IMPLAN katesearls@msn.com
- 4. Regional Cluster Studies Identify Areas of Industry Concentrations katesearls@msn.com Minnesota’s Computer & Electronic Product Manufacturing Clusters
- 5. IO Tracks Ripple Effects from Rural to Urban Markets katesearls@msn.com Local Rural Economy Connected Urban Economy Target Cluster Output Increase Additional Business – to-Consumer Spending – Consumer Additional Business-to-Business Spending: Supply Chain
- 6. Urban & Rural Minnesota katesearls@msn.com
- 7. Pilot Study Findings - Baseline katesearls@msn.com
- 8. Manufacturing: Ripple Effects Due to $1B Increase Rural Output katesearls@msn.com
- 9. Agribusiness: Ripple Effects Due to $1B Increase RuralOutput katesearls@msn.com
- 10. Implications The reverse is also true! A $1 B decrease in manufacturing output in rural Minnesota results in 1,043 jobs lost and a loss of $208 M revenue among Twin Cities area businesses. Economic dependence of Urban MN on Rural MN is real, measurable and significant Wealth Creation takes place through trading networks that span urban and rural markets. Encourage policy and investments approach that accurately values how prosperous cities depend on robust rural areas and vice versa. katesearls@msn.com
- 11. Project Partners Minnesota Rural Partners, Inc. U.S.D.A Rural Development Blandin Foundation University of Minnesota Humphrey School – State & Local Policy Program Ag School - Applied Economics Extension- Community Economics State of Minnesota, Department of Employment & Economic Development katesearls@msn.com
Editor's Notes
- We started out trying to answer a question of “What would happen to urban Minnesota is rural just disappeared?”We ended up with a hybrid approach that brings value to Economic Development efforts by 1) shedding light on current opportunities and 2) communicating shared risks and benefits with urban stakeholders.Motivating Question:Which economic development investments are most likely to benefit BOTH rural and urban communities?
- Began by using (web-based) Cluster Analysis tools from Purdue’s Center for Regional Affairs Innovations in American Regions project – This gave us estimates of rural urban job distributions for a number of target clusters.We then selected the Manufacturing cluster and built an IO analysis to show trade linkages and economic interdependencies between rural and urban areasWe then ran a similar analysis for the Agribusiness cluster and compared Manufacturing and Agribusiness in terms of their trade networks and the types of ripple effects resulting from a 1Billion dollar increase in rural output.
- Regional Cluster Analysis – Did use Innovation in American Regions online tools. In the future, will use Harvard/Michael Porter’s ApproachIO analysis – Use IMPLANInput Output Analysis hypothesizes an increase in a company’s sales and then looks at the implications for the company’s hiring and sourcing activities. In this way, IO is a “Spend Side” analytic tool.
- According to the data from the Innovations in American Regions project, 40% of MN total employment in 17 targeted industry clusters takes place in rural MN.
- IO also brings non-traded (consumer) sectors of the economy back into the equation, which cluster studies exclude for a variety of reasons. 30% of Minnesota’s total rural output is excluded under cluster framework.36% of Minnesota’s total urban output is excluded under cluster frameworkIO captures economy-wide impacts rather than simply B2B spending. This seems particularly valuable in rural areas where people travel significant distances for health care and other household transactions.IO sequence would be to 1.Get a Rural Urban Baseline2. Insert the Billion Dollar Stone - “Direct Effect” – Increase in output = increase in Business Spending – Hypothesized outcome due to economic development investment/ more and better trained workers3. Then track the Rural Urban Ripple Effects Effects are measured in Output (increased or Decreased) and Jobs (Gained or Lost)B2B – AKA “Indirect Effect”B2C – AKA “Induced Effect”
- Example – Target two clusters important to MinnesotaManufacturing & AgribusinessNotice that their footprints are quite different, not only in size (Agribusiness is a third larger than manufacturing in terms of total sales), but also in their rural-urban distribution.
- These figures are additional to the hypothesized 1B growth in output62% $ and 52% of jobs is B2BOF that 44%$ and 32% of jobs are Urban38% of $ and 48% of jobs are ConsumerOf that 30% of the $ and 14% of the jobs are UrbanThe reverse is also true… a billion dollar decrease in rural output = the urban area loses 1,043 jobs and $207,822,848 in revenue
- These figures are additional to the jobs and output directly associated with the hypothesized 1B growth in rural agribusinessoutput76% $ and 65% of jobs ==== B2BOF that 22%$ and 19% of jobs are Urban24% of $ and 35% of jobs ===Business 2 ConsumerOf that 28% of the $ and 22% of the jobs are UrbanNOTE that the Urban Benefits of Consumer spending are relatively stable between Manufacturing and Agribusiness.Even though the 1 Billion dollar change in output is only a 3% change for agribusiness, it results in 12% more subsequent dollars of spending captured in MN and 13% more new jobs for Minnesotans than does the same dollar value shift in output for manufacturing.More than ¾ of agribusiness’s ripple effect comes in the form of B2B sales and more than ¾ of that stays in rural MN..Almost 2/3 of Manufacturing's ripple effect comes in the form of B2B sales and almost Half of that goes to urban suppliers.
- About the methodBy combining the two approaches:We learn how rural and urban economies depend on each other. We identify High ROI investment opportunities of mutual benefit to rural and urban communities.