Doctoral Dissertations

Date of Award

12-1971

Degree Type

Dissertation

Degree Name

Doctor of Philosophy

Major

Agricultural Economics

Major Professor

Joe A. Martin

Committee Members

Charles L. Cleland, Hans E. Jensen, Charles B. Sappington

Abstract

The purpose of this study was to investigate the time dimension of the impact of public investment in natural resources upon the economy of urban centered areas. The specific objectives were; (1) to evaluate the effectiveness of estimating distributed lag functions as a technique for studying the time lag associated with the economic impact of public investment in water resources; and (2) to estimate the distribution over time of the impact of investment in water resources upon the economy of urban centered areas by estimating a rational distributed lag function.

The procedure followed was to estimate parameters for a model relating income in urban centered areas to agricultural employment, nonagricultural employment, the national employment rate and annual public investment in water resources. Separate estimations were made using two different measures of public investment in water resources. Based upon the results of estimates using this income model a second model was developed. The second model related manufacturing employment in the urban centered areas to the national employment rate and the cumulative value of all past public investment in water resources in the respective areas. The economic units of observation were the urban centered areas around Huntsville, Alabama; Paducah, Kentucky; and Asheville, North Carolina.

The two measures of public investment in water resources in the income model were annual public investment in dams and steam plants in the respective areas and annual public investment in dams across the entire TVA region. The estimates failed to show any statistically significant or consistent relationship between income in the areas and either measure of public investment.

A reasonable distributed lag function was obtained for the Paducah area. The distribution had a mean of 5.3 years and a variance of 31.4 years. It was difficult to interpret the lag distribution since the overall impact of annual investments was so weak. The findings of the income model lead to the rejection of the popular notion that public investment in water resources has significant direct impact on area income as a result of the usual income multiplier effects. An alternative hypothesis was developed that the impact of public investment in water resources resulted in increased social overhead capital and consequent increased flow of services available in the area. To examine this alternative hypothesis the manufacturing employment model was used.

Parameters relating manufacturing employment to the cumulative value of public investment in dams and steam plants were quite small. For Huntsville an addition of one million dollars to the cumulative value of public investment in water resources was associated with eight additional jobs in manufacturing; for Paducah, two additional jobs in manufacturing; and for Asheville, one less job in manufacturing. The estimated parameters were statistically significant for Huntsville and Paducah but not for Asheville.

Reasonable distributed lag functions were obtained for the Huntsville and Paducah areas in the manufacturing employment model. The lagged impact for Huntsville was slower and more dispersed than for Paducah. The mean lag for the Huntsville area was 8.6 years and the variance of the lag distribution was 78 years. For the Paducah area the mean lag was only 5.2 years and the variance was 32.9 years.

The analysis provides the basis for several tentative conclusions which are especially helpful in pointing directions in which further research might be most fruitful.

These conclusions are;

(1) The impact of public investment in water resources is apparently the result of increased social overhead capital and its consequent increased flow of services rather than regional income multiplier effects of the public expenditure.

(2) The complex matrix of factors causing economic advance of urban centered areas is so different for differ-- ent areas that public investment in water resources has different degrees of impact upon the different areas. Also, the time dimensions of the impact for different areas vary rather widely.

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