NATURAL RESOURCE SUPPLY CONSTRAINTS AND REGIONAL ECONOMIC ANALYSIS: A COMPUTABLE GENERAL EQUILIBRIUM APPROACH

(Fire) and business service sectors (Edl) are the least impacted with less than 1 percent loss in
employment and factor income.

The Loss of Unemployment Benefits

This section summarizes the impact of federal log supply restrictions on regional economic
activity under the assumption labor unemployed by the log shock eventually exhausts the benefits
period and/or must leave the region to seek employment.¹⁰ The loss of unemployment
compensation further reduces regional household income and additionally dampens regional
household consumption demand. The reduction in regional household demand feeds back mainly
in terms of induced effects in the service part of the economy. This, in turn, lowers output,
employment, and income derived from that part of the economy. The loss of unemployment
benefits approximately doubles the percent loss in household income. For example, in the case of
a 100 percent reduction in federal log supply, the percent loss in household income for low,
medium, and high income households is 0.57 percent, 2.47 percent, and 2.79 percent. For the
same shock with no unemployment compensation the income loss is 1.28 percent, 5.59 percent,
and 5.68 percent. Clearly, unemployment compensation makes a difference in the measured
impact of reductions in federal log supply and should be accounted for in any short-run analysis of
log supply impacts on regional household income.

As expected, the goods producing part of the economy is virtually unchanged by the
elimination of unemployment transfers. The story is different, however, for the service sectors.
Both the trade and other service sectors feel most of the impact. In the case of total elimination
of federal logs, the loss of unemployment benefits reduces service sector jobs by approximately

¹⁰Due to page limitations the empirical results for this scenario and all subsequent
scenarios are primarily summarized within the text without supporting tables.

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