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Linkages Between Forest Dependency and Economic Structure

Table 12.3 shows the correlation analysis of the degree of concentration in forest related sectors and other economic sectors. Increasing concentration of the pulp and paper industry was positively correlated with the agricultural sector. This is not surprising, as many of the pine forests in the South are found where agricultural fields were abandoned.

Increasing concentration in the pulp and paper industry was negatively correlated with a number of economic sectors including manufacturing; wholesale; retail; and finance, insurance and real estate. The generally rural location of the pulp and paper sector probably explains the relative scarcity of the wholesale and retail sectors. The relative scarcity of the finance, insurance, and real estate sector also probably reflects the lower level of economic development in areas where the pulp and paper sector was concentrated.

Two factors that are sought in locating pulp and paper plants are an available water supply (used in processing) and good access to transportation networks so that wood fiber can be procured efficiently and products can be readily shipped to market. Because the manufacturing sector also relies on good market access, it is perhaps surprising that a negative correlation was found between the pulp and paper sector and the manufacturing sector. However, this result may reflect a situation where, in locations that are close to a suitable supply of wood fiber, the pulp and paper industry is more competitive in the labor market than are other manufacturing sectors. Average income per job in the pulp and paper sector was considerably higher than average income for the typical job in areas where that sector was located (table 12.4). This is due to the large amount of industrial capital invested in the pulp and paper sector that in turn increases labor productivity.

The results in table 12.3 show that the degree of industrial concentration in the primary wood products sector was positively correlated with concentration in the agricultural sector. Again, this probably reflects the historical conversion of old fields to pine forests. The negative correlation with wholesale and retail sectors probably reflects the rural location of this sector. The negative correlation with the finance, insurance, and real estate sector and with the construction sector reflects the relatively low level of economic development in areas where the primary wood products sector was found. Because the primary wood products sector supplies inputs to the pulp and paper sector, it was not surprising to observe a positive correlation between the two industries.

Similar to the pulp and paper sector, the negative correlation of the primary wood products sector with the manufacturing sector may indicate that this sector was more competitive in the market for labor. However, as shown in table 12.4, average income per job in the primary processing sector was only slightly higher than average income for the typical job in areas where the primary processing sector was located. However, many of the firms that constitute this industry are relatively small, such as logging contractors and sawmills. The relative independence and way of life afforded by working in this sector may be particularly appealing to members of the workforce in these rural areas.

It is important to note that the negative correlation between the pulp and paper and primary wood products sectors and the manufacturing sector suggests that the forest products industry contributes an increased share to the economic base of those areas. In the South as a whole, manufacturing constitutes the largest sector in the economic base. The substitution of forest products sectors for manufacturing suggests that in areas with concentrated employment in those forest products industries, local economies are relatively more dependent on the income and employment generated by the harvest and processing of timber and timber products.

Industrial concentration in the secondary wood products sector was negatively correlated with the wholesale and retail sectors reflecting the relatively low population density in those areas. Relatively low levels of economic development in areas of concentrated employment in the secondary wood products sector was reflected in the negative correlations with the finance, insurance, and real estate sector and with the construction sector. Because the secondary wood products sector uses inputs supplied by the primary wood products sector, it was not surprising to find a positive correlation between these two sectors.

The fact that the forest related recreation and tourism industry was positively correlated with upland hardwood forests that were older and under relatively less harvest pressure suggests that a negative correlation between this sector and the primary wood products sector would exist. This is what was found. Likewise, the concentration of the forest related recreation and tourism industry in these types of forests suggests a negative correlation with agriculture, which was also found. The higher level of economic development associated with this industry was reflected in the positive correlations with the finance, insurance, and real estate sector and the construction sector. Further, the outputs of this industry are consumed directly by consumers. The positive correlation with the retail and wholesale sectors reflects complementary consumption within those sectors and the forest related recreation and tourism sector.

Income per job in the forest related recreation and tourism sector was quite a bit less than income per typical job in the areas where that sector was found (table 12.4). This may reflect the seasonality or part-time nature of some jobs in this sector. Also, we note that some people are willing to accept lower monetary compensation to work in an industry that is located in an area where the natural amenities supply other forms of compensation contributing to real income.