Economic Resilience and Well-being of Gulf Communities: Environmental Disaster Events and Changes in Economic Diversity

Economic Resilience and Well-being of Gulf Communities: Environmental Disaster Events and Changes in Economic Diversity

Jason Chun Yu WongUniversity of MarylandEnvironmental Science and Policy Environmental Economics

Resilient Coastal Communities and Economies

National Centers for Coastal Ocean Science - Hollings Marine Laboratory, Charleston, SC

Dr. Susan Lovelace, Maria Dillard

1Good afternoon. Im here today to share with you a summary of my work during my summer internship here at Hollings Marine Laboratory on the Economic Resilience and Well-being of Gulf communities environmental disaster events and changes in economic diversity. I am Jason Wong, a rising senior at the University of Maryland currently studying Environmental Economics 1

2http://www.tcpalm.com/photos/galleries/2010/jan/01/reader-drawing-board-2010/44384/If you are wondering what that is well allow the dolphins to illustrate.2OutlineMotivationQuestionsMethodologyResults & AnalysisFuture ResearchMy Next StepAcknowledgementSources3

Here is a brief outline of my presentation (and me in a lab coat at the HD lab)3Motivation

4How did this project come about? My work forms a small segment of a larger well-being study in the GoM, as a result of the DWH oil spill disaster in 2010. I was glad to contribute to the economic side - to developing measures of economic well-being that would be easy to collect, use, calculate, analyze, for a long-term monitoring effort.

Well-being definitionthe basic material needs for a good life, health, good social relations, security, and freedom of choice and action. (UNEP 2006)the preferred end-states of existence, including those required for human survival and reproductive success, which taken together circumscribe human well-being. (Wallace 2007)42010Deepwater Horizon Oil Spill approx. 205.8 million gallons20032004200520062007Hurricane Dennis- $3.4b in property damagesHurricane Katrina- Total Resident Population declined from 455,188 on July 1, 2005 to 208,548 on July 1, 2006 in Orleans, LA Hurricane Rita- $108,755 decrease in Revenue at Sea Rim State Park (Jefferson, TX)Hurricane Ivan- $6.6b in property damages (AL, FL, LA, MS)Gulf of Mexico Timeline

5Since 2011 data are not available, my work is retrospective in nature, to provide a framework to assess the well-being changes in GoM. I specifically focus on 2005 as a pivot year, where a significant amount of disasters occurred in the region, including Hurricane Katrina. 5

6They impact the sample coastal counties in varying frequency. Environmental events are total number of hurricanes, tropical storms, tornados, and severe thunderstorms for each county; from NWS data by Lauren Brown data6Why do we care about economic diversity?Conventional wisdom: portfolio and risk diversification shock resistanceDont put all your eggs in one basket!

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So how do env. Disasters relate to the economy? You can probably imagine that property damage is one important economic impact of disasters but there may be more long-term effects - structural changes - in the variety of local businesses, giving rise to the analysis of economic diversity how diverse is the local economy in question.

- Which has been used as a proxy for measuring econ. Resilience - how able communities are to bounce back. Why? Well, it is a conventional wisdom you and I share. Who has a good investment portfolio in this room? Well if you did you probably wont be here! What do we know about investment? We always hear about diversifying low medium high risk buy a few things. Why to like this lovely lady here not keep all your eggs in one basket. That way, when there is a shock in the economy you are more resilient to the shock. (analogously) Similarly, if industries are diverse in a region, it is probable that the region would be more able to withstand shocks like hurricanes and oil spills. So I looked into the spread out ness of the regional economy.7Research QuestionsWas there a significant difference in economic diversity over time, from 2003-2007, in Gulf States counties?What socioeconomic factors could help explain economic diversity? Does the number of environmental disaster events affect economic diversity?How could we interpret economic resilience from diversity indicators?8

Focusing on my 2005 pivot year, I have a few questions to answer, (read)8Measuring Economic Diversity

By Employment, or EarningsSecondary Data Needs:U.S. Census, Bureau of Economic Analysis

9To answer these questions, First, I have to measure the extent of diversity, which can be measured by earnings, or employment level; such secondary data come from Census and BEA, categorized by the NAICS.910OgiveNational Average

This study uses four static measures: Ogive, National Average, Herfindahl, and Entropy/Log ShareT-Tests, Wilcoxon Rank Sum, Correlation and Regression Analysis

Measuring Economic Diversity There are a few indicators calculated; I focus on two diversity indicators, measured by employment. namely the nat. average and Ogive

They look similar but they are different in that the Ni here measures deviation from the States industrial composition; and the Ogive measures deviation from an equiproportional standpoint (assuming highest diversity is when each of the industries employ equal share of the economy)1011

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12Results: Difference in Diversity?13

13Wilcoxon Signed-Rank ResultsPaired YearsIndicator2003-20070.01312003-20070.0346*2003-20070.0624*2003-2007-0.0647*14

Coastal, n=139

Non-Coastal, n=441

Coastal counties experienced less significant changes in industrial composition compared to non-coastal counties from 2003-2007* Pr > |S| < 0.05Results revealed, there were more significant composition changes in non-coastal economies than coastal, meaning that some structural changes is taking place in non-coastal places and the coastal is relatively stable in terms of economic diversity. This means that composition of industries remained more in tact over time.

Now we see what factors help explain economic diversity found in coastal communities and whether env disaster has an effect.

14Results: What can help explain economic diversity?Correlation: using existing socioeconomic dataset on coastal counties, selected variables based on literature and data availabilityCount of Environmental Disaster Events in 2005 includedRan multiple regressions (standard, Max R, Stepwise); checked for multicollinearity with Variance Inflation Factor

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I now matched my diversity indicator in the pre-existing HML socio-economic database; including the aforementioned env disaster counts.Running some correlation and regression analysis for the 139 coastal counties.15Correlation 2007Pearson R 2007Pearson R% Working age-0.01360-0.10700% Female-0.35496*-0.11879% Hispanic/Latino 0.26036*0.21240*Income per capita-0.24315*-0.25622*Poverty rate0.094050.05459Unemployment-0.067500.10999Environmental disaster events, 2005-0.23995*-0.21269*16

* Pr > |r| < 0.05In the CORR matrix; some significance but small R value. The variables were picked from running larger models to see which were consistent among all indicators and what made sense in literature. Discuss significant ones, see how they fare in multiple reg.16Regression 2007Variance Inflation FactorR20.26400.1512-Intercept12.700781.664640% Working age-0.05408-0.002681.95517% Female-0.13964*-0.004091.82239% Hispanic/Latino0.01037*0.00253*1.43765Income per capita-0.00002434-0.00001154*1.91350Poverty rate-0.00597-0.01204*2.10565Unemployment-0.19043*0.010051.49754Environmental disaster events, 2005-0.03147-0.007651.0990917

* Pr > |t| < 0.05Multiple regression model displayed - among many from larger Max R/Stepwise models; we see that the two measures are picking up different significant explanatory variables; Hispanic being a common one, where a more specialized economy can be seen in areas of higher hispanic population.

Env disaster drops out of significance

VIF all under 5, multicollinearity (heavily correlating var making reg. sensitive)

Take home message: small R squared, does not explain the patterns of diversity very well; interesting to see which were significant; may be dependent on other things avail resources, historic development, investments, political, so forth not in our dataset.17LimitationsTime frame & boundary problemPopulation may have a threshold effectFactors requiring population-adjusted measures: Education, Resource availabilitySpecialization may be stableDiversity measures sensitive to number of industries

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Time-frame: already recovered? (picking end points matter) May have already bounced back quickly within the time frame we chose dimming the immediate structural changes cant seePolitical boundary here diversity crosses political county boundaries not individual economy entities more interactionPop: high pop must mean more diversity by nature need some even spread at some level18Economic ResilienceEmployment diversity = resilience?How to measure the ability of communities bounce backSimulation-based modeling Using Computable General Equilibrium (CGE) Hypothetical, constructed measureRetrospective data analysisAdapted the resilience method for ex post facto resilience analysis19

What does this all mean in terms of resilience? Well studies done before equating div=resilienceNot necessarily imply resilience as we discussed the factors that have inherent effects on diversity

Studies have been done in regional science literature on this topic away from econ div directly, by applying CGE (Computable General Equilibrium) to a regions economy. Prominent example presents simulation based study -on earthquake impacts to the water supply economy.

I adapted the approach and devised a resilience measure revised to be retrospective, which can be applied to DWH using county GDP and projections. This retrospective resilience indicator needs more statistical work but is available at the end of the slideshow

when well developed, it can be regressed on capacity, relief, socialohesion, etc and diversity; to test what affects resilience and whether diversity has anything to do with it. 19ConclusionFramework for economic well-being assessmentIndustrial composition in coastal communities is mature and establishedEnvironmental disasters were not a strong explanatory variable for economic diversityTime frame may be a significant factor that is industry-dependentFuture research finance and input-output methods20

Take home messages: diversity highlights composition a quick snapshot of the ease of the economy to bounce back; but not the whole picture; nevertheless Contribute to developing a framework of assessing economic well being

Interesting: Coastal economys composition does not change much; could be because the underlying structure is mature; they are used to it and anticipate

Future:Dynamic methods, changing time points and caring for specific industry types and shiftsEvent Study (Finance shock analysis), Input-output based diversity measures, Multi-Panel Data Regression20My Next StepHonors Thesis Contingent Valuation Survey Rain GardensGermany Study Abroad International Environmental Law Interdisciplinary PhD in Environment and Resources: Environmental Economics, Sociology, Law, PolicyEconomics of Climate Change and Valuation of the Environment; Non-Market Valuation Techniques; Survey MethodologyA teacher, a researcher, and a scholar in environmental economics and policy21

Join you at NOAA soon!21AcknowledgementsSusan LovelaceMaria DillardLauren Brown, C of C MES 12Mark Plummer, NMFS, NWFSCPeter Edwards, NMFS, HabitatJeffery Adkins, NOS, CSCLinwood Pendleton, Acting Chief EconomistHML Human Dimensions Lab MembersHML admin and IT staff; OEd Scholarship Team22

It was truly a privilege to work at the picturesque, historic city of Charleston. I was definitely greeted with Southern Hospitality by Maria and Susan pictured here (in front of Folly Beach). Aside from this project, I got to do many things, including participating in a workshop on socioeconomic monitoring of Coral Reef jurisdictions, go on a Harbor Trawl in the Charleston Harbor, inspect a N Charleston wetland restoration site; and of course, spend a few weekends on the beach (tho sometimes with my GRE book). I owe Susan and Maria for a truly memorable and engaging summer internship; and I hope that Ill be back! I also want to thank Lauren Brown, for her work on the socio-economic data set; economists at NOAA that commented on the project; HML HD lab members and staff; and of course, our beloved Scholarship Team +Regis who made all the arrangements smoothly and trouble-free.22SourcesUS Census, Bureau of Economic AnalysisWagner, J. E. (2000). "Regional Economic Diversity: Action, Concept, or State of Confusion." Journal of Regional Analysis & Policy 30(2): 1-22.Rose, A. L., Shu-Yi (2005). "Modeling Regional Economic Resilience to Disasters: A Computable General Equilibrium Analysis of Water Service Disruptions." Journal of Regional Science 45(1): 75-112.Rose, A. (2004). "Defining and measuring economic resilience to disasters." Disaster Prevention and Management 13(4): 307-314.State of Hawaii (2008). Measuring Economic Diversification In Hawaii, Research and Economic Analysis Division, Department of Business, Economic Development and Tourism, State of Hawaii.Manyena, S. B. (2006). "The concept of resilience revisited." Disasters 30(4): 435-450.Quigley, Thomas M.; Haynes, Richard W; Graham, Russell T., tech. eds. 1996. Integrated scientific assessment for ecosystem management in the interior Columbia basin and portions of the Klamath and Great Basins. Gen. Tech. Rep. PNW-GTR-382. Portland, OR: U.S. Department of Agriculture, Forest Service, Pacific Northwest Research Station

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23Thank you!24

24ex post facto resilience indicator25

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