THE REGIONAL INCOME AND EMPLOYMENT MULTIPLIER EFFECTS OF A PULP MILL AND PAPER MILL*
| DOI | http://doi.org/10.1111/j.1467-9485.1971.tb00972.x |
| Date | 01 February 1971 |
| Published date | 01 February 1971 |
| Author | Michael A. Greig |
THE REGIONAL INCOME AND
EMPLOYMENT MULTIPLIER EFFECTS
OF
A
PULP MILL AND PAPER MILL*
MICHAEL
A.
GREIG
This paper is intended as a contribution to the discussion of regional income
and employment multipliers. Recent research
on
the regional multiplier in
the U.K. has centred
on
various aspects of the standard income multiplier
at planning region level. Archibald (1967) has attempted
to
place
a
minimum
value
on
the multiplier, and Steele (1969) has investigated inter-regional
differences in its value. Both these authors, and also Wilson (1968) and
Allen (1969). have pointed to difficulties involved
in
the measurement and
use of such multipliers.
This
paper has
a
more limited objective, namely
to investigate in greater detail the income and employment multiplier effects
of
a large project
on
a sub-region, in
this
case the Highlands of Scotland.'
The project used as a case study is the €15m. pulp
and
paper
mill
at
Fort
William.
In constructing an analytical framework to estimate the impact
of
the
project,
two
modifications to the measurement of the standard multiplier
have been suggested. It is argued that, in the first round,
it
may
be
more
appropriate to use average propensities instead of marginal. Secondly, certain
interactions of the income and employmeat multipliers are identified and
investigated. Using the standard multiplier formulation, it is obvious that
the first round effects are the dominant influence at regional level. The effect
of
the modifications proposed is to accentuate
this.
Consequently the overall
estimate
of
the regional income multiplier effect of the project studied is
higher for the sub-region than most estimates of the standard multiplier
applicable
to
the larger planning regions of the U.K.
In addition, the case study illustrates some
of
the difEculties of formu-
lating assumptions for the estimation of the first round effects and for
estimating the regional employment multiplier from the income multiplier.
The paper is divided into four parts
:
(1) the analytical framework;
(2) the estimation
of
data;
(3)
the presentation of results;
(4)
conclusions.
Income and employment generation effects are considered in
two
categories,
(a)
direct;
including primary employment
in
the
mill
and
secondary
employ-
*I
am
grateful
to
Scottish Pulp and Paper
Mills
for their cooperation and
to
Professor
A.
D.
Bain,
Mr M.
Brownrigg and
Dr
D.
R.
F.
Simpson
for helpful advice
and comments.
The
Highlands are defined as
the
counties of
Argyll,
Caithness,
Inverness, Perth,
Ross
and
Cromarty,
and Sutherland.
31
32
MICHAEL A.
GREIG
1.
THE
ANALYTICM,
F~AMEWORK
ment in forestry and
transport,
and (b)
indirect;
i.e. that generated by the
multiplier effects of the expenditure
of
direct employees.
(a)
Direct Eflects
mainly of a practical nature, their discussion is postponed until section
2.
Sice the dBiculties
in
calculating direct employment and income are
(b)
Indirect
Eflects
The personal income of
'
direct
'
employees is used
as
the multiplicand
in
the calculation of indirect effects.
No
attempt is made to
quantify
the effects
of the initial capital expenditure
on
the
mill
(normally considered as the
'
first round
'
of the multiplier) or of
any
succeeding
accelerator effects. All
calculations relate to the level of employment
in
the
mill
on
January
1, 1969.
(i)
First
Round
Multiplier
Since the leakages in the multiplier for a small region (in economic terms)
like the Highlands are likely to
be
relatively large, it follows that the first
round of the multiplier
will
be
the most significant. Consideration of the
likely first round effects suggests that some modification of the normal
multiplier, which uses marginal propensities,
is
necessary
in
this
round. Since
the majority
of
the people employed
0;
the project are either immigrants
to the area or potential emigrants, then their contribution to regional income
would depend
on
their average propensity to save,
import,
and their average
tax
rate.a For those previously unemployed, the appropriate measure would
seem to
be
their
marginal propensities to save,
import.
and
tax
out
of
their
additional income
from
employment. Since this group
is
quantitatively
unimportant in the first round, then it
is
thought that the use of average
propensities is justified
in
this
round.s Were
this
group more numerous, then
separate calculations for each group would be
necessary.
The use of a standard
form
of
income multiplier, even with average
substituted for marginal propensities. would still
be
likely to underestimate
true income and employment generation; some employment may not
be
related to increased income. but to increased population and hence
to
the
increase
in
employment (given that the employees are immigrants or potential
emigrants).
In
particular, employment
in
education, health and local authority
services (henceforward
known
as
'
public service
'
employment) would be
likely to
be
related
to
the size of the workforce.
This
introduces an element
of interaction between the income and employment multipliers
in
the first
2
A
similar argument
is
used
by
Leven
(1964).
This
will
slightly
overstate the
first
round
impact
of
the
project
in
the
'
lower
'
case
(see
later).
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