The Economics of Buying Local
The recent increase in momentum seen in the local food movement has brought to light the need for analysis of the impacts of increased consumption of locally produced food. This cost-benefit analysis is composed primarily of environmental and economic components. Changes in consumption of locally grown food are measured by changes in direct farmer-to-consumer sales. The economic impacts on the consumer of such changes are quantified for the Greater Treasure Valley and Idaho. The proposed changes in consumption of local food are also of primary interest to those involved in the production of local food. The state of Idaho is also a large stakeholder, due to the impacts on tax revenue, as well as their central role in encouraging a shift to local food. The research on the environmental component included investigation of reductions in transportation costs, packaging costs, fuel consumption savings, green houses gas emissions reductions, the increased likelihood of responsible harvesting practices, and the effect on public health. These effects are highly sensitive to the methods of production and choice of crop and so are not quantified as part of the cost-benefit analysis. Benefits of increased economic activity in the community are quantified through the use of multipliers. The cost to consumers accruing from payment of a premium are calculated using an average of the premium percent charged on 13 different goods. The impact on state tax revenues, and the costs of subsidizing such an increase in local consumption is also measured. To gage the local willingness to pay for local produce, a survey was conducted using contingent valuation methods. The resulting elasticity of demand was then used to gage the necessary changes in the price of local food needed to increase demand. The analysis concluded that the benefits exceeded the costs. A state subsidy offsetting the premium on locally grown food would spur an increase demand. In addition, such a subsidy would be more than covered by increases in tax revenue and would therefore come at no cost to the state.