This study develops and analyzes a conceptual model of inter-industry economic flows for state economies with attention focused on the role of producing and processing of agricultural products in the overall economy. Three types of multipliersimpact, interim, and total multipliers-are estimated. These multipliers describe the initial, intermediate, and ultimate responses of the overall economy to changes in food and farm sectors.
The US agricultural economy has been subject to frequent and dramatic shifts in production, prices, and income. Basic reasons for this problem include unstable international markets, weather, and even government programs which frequently reduce production in order to balance supply and demand. These shifts in agricultural production, prices, and farm income affect not only farmers but also income and employment in agribusiness firms that process and handle agricultural products and supply inputs to farming. The effects of these changes do not, however, stop here, as agribusiness firms purchase from other industries and workers in agriculture and agribusiness spend their money for goods and services produced by other industries. With the frequent shifts in the agricultural economy, individual communities, regions within states, and entire states are becoming more aware of the interface between agriculture and nonfarm sectors.
Traditional analytical procedures to quantify the inter-industry flows between agriculture and nonfarm sectors are complex and expensive to use. Econometric techniques appear to offer a feasible alternative for quantifying the effects of changes in agricultural production and processing of agricultural products on important economic variables. However, appropriate models have not yet been fully developed. The purpose of this study is to develop and analyze a conceptual model of inter-industry economic flows for state economies with attention focused on the role of producing and processing of agricultural products in the overall economy. The conceptual model will be empirically estimated for a cross-section of state economies. Three types of multipliers-impact, interim, and total multi-