A Methodological Framework for Decomposing the Value-Chain Economic Contribution: A Case of Forest Resource Industries of the Lake States in the United States

Abstract

The forest products industries play a vital role in the economic, social, and environmental well-being of the Lake States in the United States. While various economic contribution analyses of forest products industries have been conducted to highlight the importance of such industries to regional economies, little effort has yet been made to parse out the contribution of activities in the value chain. The value chain is a series of steps involved in producing goods or services. This study used a matrix decomposition approach to estimate the economic contribution along the value chain through multiple pathways of four forest resource-based industries using wood as inputs: biomass power generation, sawmills, paper mills, and the construction of new single-family residential structures in the Lake States. The direct and indirect economic output values in 2017 resulting from the construction of new single-family residential structures were $19.1 billion, sawmills were $2.5 billion, paper mills were $17.6 billion, and the biomass power generation industry was $759 million. Of the direct and indirect economic output contributed by each industry, the highest percentage of output attributable to the logging industry was observed from the sawmills industry (12%), followed by biomass power generation (9%), paper mills (1.4%), and the construction of new single-family residential structures (<1%), respectively. The percentage of total economic output attributable to the stumpage industry in the region followed a similar trend as commercial logging for all value-chain industries. The relative economic contribution of the value-chain industries to the total economic contribution of the final industry varied based on whether the industry was a primary or secondary forest products industry and the pathways used for sourcing wood inputs.