Short-term employment, income and output consequences of a decline in flue-cured tobacco production: the case of Southside Virginia

Abstract

This study has objectives that address current concerns about the possibility of a sudden, negative, shock in domestic consumption of tobacco products. A mostly rural, six-county region of south-central Virginia is the area selected for a focus on these concerns. The study conducts a regional descriptive analysis to introduce the study area and its economic base, and this includes a focus on the regional tobacco trade. Estimates of the economic contribution of tobacco to the study area are generated using input-output analysis and the IMPLAN model. Survey data, interviews and other published sources are employed to verify and change portions of the IMPLAN base model data and to supplement the results.

Tobacco’s contribution to the regional economy is estimated for the tobacco production and tobacco stemming and redrying industries, and for other industries and groups. In total, tobacco contributes $756 million in total industry output, nearly $251 million to the value added portion of output and over 6800 jobs. This represents approximately 10.9 percent, 7.5 percent and 6.7 percent of the regional base economy, respectively.

Some policy perspectives relating to tobacco production are also analyzed. Economic losses for this study area due to absentee tobacco quota ownership are found to be relatively insignificant when compared to the total regional contribution of tobacco. The regional economic impact of a ten percent decrease in tobacco marketing quota, a ten percent decrease in margin earned by tobacco producers, and two other policy considerations is also estimated.