There's green in green

What is Economic Impact of R.I.’s ‘Green’ Industry?

By Thomas W. Sproul and Brandon Elsner/special to eco.org RI News

Rhode Island is a unique place. It’s the smallest state, but among the most diverse in terms of agricultural production and green-related industries. Estimating the economic impact of these sectors has proved difficult, as evidenced by local industry claims that published federal government estimates are too low.

The Ocean State’s geographic pattern of sizes and types of green-related businesses is a likely cause of estimation error. In order to obtain the most accurate estimates possible, we took a novel approach by counting individual businesses from the bottom-up, an approach made possible by Rhode Island’s small size.

Most people hear the term “green-related industry” and immediately assume it refers to recycling, sus­tainability or restoration. We took green literally. We defined green-related industry to be natural resource or plant-based industries, including agriculture, landscape contractors and designers, retail farm and garden supply, golf courses, and other related and supporting industries.

However, due to limitations on available data, this study doesn’t include any estimates for forestry, wood products, fisheries, aquaculture or marine-resources industries. These sectors are substantial and are likely to be included in future work. A recent study produced by the University of Connecti­cut estimated the economic impacts from Rhode Island’s commercial fishing and related processing alone at $274 million annually and 2,900 jobs.

Our study is unique among economic impact studies because every business for which economic value is estimated has been physically counted; we used no random sampling and businesses not uniquely identified by name and address are ignored in our estimates, despite the risk of substantial undercounting. Data were collected with a survey of local green-related businesses, and combined with records from Reference USA, a frequently updated, industry-standard database of 14 million U.S. firms.

For known businesses where individual economic data were unavailable, conservative estimates were derived from state-level profiles, including the 2007 USDA/NASS Agricultural Census, contractor and business listings from the secretary of state’s office, and licensing information from the state Department of Environ­mental Management (DEM).

We estimate gross revenues — the direct economic impact — of the state’s green-related businesses at $1.03 billion annually, and we esti­mate employment at about 8,700 jobs. In addition, using conservative adjustments, we estimate indirect contributions to other sectors of $755 million annually and 3,660 additional jobs. The total impact of $1.78 billion represents more than 3.5 percent of Rhode Island’s gross state product (GSP).

These numbers are surprising for two reasons: they represent a vibrant component of the state’s economy despite being highly conservative; and they are more than twice as large as the private estimates of local industry groups.

We counted more than 1,000 businesses engaged in landscap­ing services, contracting and design, and almost 500 retail businesses, including farm and garden supply, outdoor power equipment dealers and florists. Our estimates reveal disparities with the 2007 Economic Census for key business groups, including florists and landscaping services, where we observed 60 percent more firms and more than twice as many jobs. We also found golf-course revenues to be underreported by more than 20 percent and golf-course jobs by about 40 percent. The disparities can be explained by sampling error in the national-level estimates, by dramatic growth in these sectors since 2007 or by some combination of the two.

The landscape, retail and golf sectors are closely linked to Rhode Island agriculture. While a common perception is that agriculture exists primarily to produce food, fiber and fuel, the 2007 Agricultural Census found that Rhode Island agriculture generated 61.8 percent of gross sales from nursery, greenhouse, floriculture and sod production, and our own data were roughly consistent with this percentage. However, the Agricultural Census doesn’t fully count direct marketing activities, including farmers markets for produce, direct sales of horticultural varieties, and service activities performed by farmers, including equipment repair and turfgrass installation.

Our conservative estimate of $170.6 million in annual agricultural revenues is more than 2.5 times the USDA’s 2007 estimate of $65.9 million, implying that Rhode Island farmers may pro­duce 60 percent of their economic impact via direct interaction with consumers.

Taken together, our results show that the economic impact of green-related businesses is substantially larger than the official figures imply. Landscaping, retail garden centers and golf courses are key sectors, and landscape-related agricul­ture is also a substantial driver. The study provides a current snapshot of these industries, which appear to be substantially more robust than the 2007 figures from both the Agricultural Census and the Economic Census. We can’t say conclu­sively whether these changes are due to undercounting in the official figures or due to substantial economic growth in the past five years, though it is likely that undercounting does play a substantial role.

Our study uncovers the previously hidden economic value of green-related industry throughout Rhode Island. By taking advantage of the unique nature of the state, we were able to reveal a significant source of unobserved economic activity and to provide a more accurate picture going forward.

Thomas W. Sproul is assistant professor and Brandon Elsner is a graduate student, both in the Department of Environmental & Natural Resource Economics at the University of Rhode Island. This article originally was published in the Winter 2012 Narragansett Bay Journal.