The calculator is built from input-output models, which are tools used by economists to track purchases of inputs between industries. These models estimate the local input purchases needed to produce a given item, and then iterate backwards through the supply chain to determine the local input purchases required to satisfy the demand for inputs at each step in the supply chain. For example, a farmer needs a tractor to efficiently produce his vegetables; the dealership, from whom the farmer buys the tractor, needs to have the tractor, other implements, spare parts, etc. available from the manufacturer. The manufacturer needs numerous parts made from steel, aluminum, rubber and plastic to produce the tractor. The steel manufacturer will need ore, fuel and equipment to produce the steel to be used in the tractor. This cycle of impacts is often summarized as a single number called a multiplier; the multiplier summarizes the economy-wide circulation of activity from an initial shock.
The Local Food Impact Calculator tool is designed to estimate the impact that a local or regional food project, emerging sector, or initiative (for example, the activities of food hubs, farmers markets, copackers, and other food projects) might have on the surrounding economy. Given a project region, value, and distribution strategy, the impact calculator uses economic multipliers to estimate the economic impact of a project.
The impact value generated represents an upper limit of the economic benefit your project has on your community’s economy. The calculator below is simplistic in that it does not account for ways in which existing commercial activity may be impacted by local food production.
It is important to note this calculator does not explicitly net out the substitution effects of what potential other local economic activity is displaced by the local food production and, consequently, this calculator (and input-output analysis generally) is not meant to demonstrate the feasibility or tradeoffs of a local food project.
Local food systems projects looking to estimate the economic impact of a project in a given region can use this tool.
Studies have consistently found, on net, the positive economic impacts of greater local food sourcing will outweigh the negative economic impacts resulting from displaced sales. The key thing to note is that there shifts among sectors.
For instance, an increase in farmers market sales will provide positive impacts to the region’s farms. It could also have a positive impact on education, health, and social service sectors that provide services to people in the farming sector. However, there could be negative impacts to the food retail sector, like grocery stores, that experience displaced sales. The impacts on other sectors may be ambiguous. For instance, the trade and transportation sectors may experience both increased sales to the farming sector and decreased sales to the food retail sector.
For example, USDA’s Food and Nutrition Service reported that schools made $789 million in local food purchases in the most recent Farm to School Census. Does that mean, on a national-level, that the economic impact of local school food purchases is $1.3 billion (for a multiplier in a range between 1.6 and 1.7)?
No. The multipliers are only localized estimates. The aggregate impacts of these purchases cannot reported using these multipliers. For example, if a San Diego school began buying vegetables from farms in San Diego instead of Phoenix, and Phoenix schools began buying vegetables from farms in Phoenix instead of San Diego, then there would be positive localized impacts in both regions. However, in the aggregate, these effects would cancel each other out.
This impact represents an estimated comparative analysis of the change in a community’s economy measured before and after a shock. A shock could be any event or change in behavior that occurs at a point in time, such as growth in sales to local farmers or food manufacturers that can be directly tied to an event, investment, new market or promotion.
In the context of local food systems, the impact might reflect the before or after of some key initiative, such as the establishment of a farmers market (or a special event at the farmers market), the opening of a food hub, or a measured sales increase in a local market from media campaign to increase awareness of the health benefits from eating fresh fruits and vegetables
Hughes, D.W., C. Brown, S, Miller, and T. McConnell. 2008. Evaluating the economic impact of farmers market using an opportunity cost framework. Journal of Agricultural and Applied Economics 40(1): 253-265.
Shideler, D., and P. Watson. 2019. Making change through local food production: Calculating the economic impact of your local food project. Journal of Agriculture, Food Systems, and Community Development 8(Suppl. 3): 165-177. https://doi.org/10.5304/jafscd.2019.08C.011