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.