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Microeconomic Case Studies

Economist Zone

Welcome to our in-depth analysis of microeconomic case studies. This blog post aims to shed light on the fascinating world of microeconomics through real-world case studies. We will explore different scenarios, dissect the economic principles at play, and understand how these principles affect individuals, firms, and markets.

The Power of Supply and Demand: The Case of the Housing Market

Let's kick things off with a classic example of supply and demand in action - the housing market. The housing market is a perfect illustration of how changes in supply and demand can dramatically impact prices.

When demand for houses increases (due to factors like population growth or increased income), and supply remains constant, house prices tend to rise. Conversely, if the supply of houses increases (perhaps due to new construction) and demand remains constant, house prices usually fall.

An interesting case study is the San Francisco housing market. The city has seen a significant increase in demand due to the tech boom, but strict zoning laws have limited the supply of new housing. The result? Skyrocketing house prices.

This case study underscores the importance of understanding supply and demand dynamics. Policymakers, for instance, can use this understanding to address housing affordability issues.

The Impact of Government Policies: Minimum Wage Laws

Next, let's turn our attention to government policies, specifically minimum wage laws, and their impact on the labor market.

Minimum wage laws set a floor for wages. Employers must pay their workers at least the minimum wage. While the intention behind these laws is to protect low-income workers, they can have unintended consequences.

Consider the case of Seattle. In 2014, the city decided to gradually increase its minimum wage to $15 per hour. Some businesses, unable to afford the higher wages, reduced their workforce or closed down altogether. This led to a decrease in employment opportunities for low-skilled workers - the very group the policy aimed to help.

This case study highlights the importance of considering the potential unintended consequences of government policies. It also underscores the role of elasticity in labor demand.

The Role of Elasticity: The Case of Luxury Goods

Elasticity is a key concept in microeconomics. It measures how much the quantity demanded or supplied of a good changes in response to a change in price.

Luxury goods typically have high price elasticity of demand. This means that a small change in price can lead to a large change in quantity demanded.

Take the case of luxury cars. If the price of a luxury car increases by a small percentage, the quantity demanded can decrease significantly. This is because luxury cars are not a necessity, and consumers can easily switch to cheaper alternatives.

This case study demonstrates the importance of understanding elasticity for businesses. It can help them make informed pricing decisions and predict how changes in price will affect their sales.

Market Structures and Competition: The Case of the Tech Industry

Now, let's explore different market structures through the lens of the tech industry.

The tech industry is often characterized as an oligopoly, a market structure in which a few large firms dominate the market. These firms have significant market power and can influence prices.

A notable case study is the rivalry between Apple and Samsung in the smartphone market. Both companies have a significant share of the market and continuously innovate to outdo each other. This competition drives technological advancements and benefits consumers.

This case study illustrates the dynamics of competition in an oligopoly. It also highlights the role of innovation in competitive markets.

Externalities and Public Goods: The Case of Vaccination

Finally, let's delve into the concepts of externalities and public goods.

Vaccination is a classic example of a positive externality - a benefit that affects people who did not choose to incur that benefit. When a person gets vaccinated, they not only protect themselves from disease but also reduce the likelihood of disease transmission, benefiting society.

This case study emphasizes the role of government in addressing externalities. In the case of vaccination, governments often provide vaccines for free or at a subsidized cost to maximize societal benefits.

The Role of Information: The Case of Used Cars

Our last case study focuses on the role of information in markets, using the used car market as an example.

The used car market often suffers from a problem known as "information asymmetry" - a situation where one party has more or better information than the other. Sellers often have more information about the car's condition than buyers. This can lead to a "lemons problem," where only low-quality cars ("lemons") are offered for sale.

This case study highlights the importance of information in markets. It also underscores the role of institutions (like warranties or certification programs) in addressing information asymmetry.

Wrapping Up Our Journey Through Microeconomic Case Studies

We've journeyed through various microeconomic case studies, each highlighting a different economic principle. From the power of supply and demand in the housing market to the role of information in the used car market, these case studies offer a glimpse into the fascinating world of microeconomics. They underscore the relevance of microeconomic principles in our daily lives and the importance of understanding these principles for decision-making, whether as consumers, business owners, or policymakers.

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The AEA provide this index to recent, accessible research summary articles from the Journal of Economic Perspectives , collected under the concept that each article illustrates. The resulting list gives alternatives to the standard examples for topics like asymmetrical information, externalities, or incentives.

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Case Studies

Discover all the ways our 2,000 customers succeed, thrive and grow with Oxford Economics. Read success stories from Oxford Economics' clients in sectors such as pensions, energy and Real Estate. Learn how they solved their business challenges, supported their businesses' growth and adapted to new markets using Oxford Economics market-leading consulting and subscription services.

Case Study | US-China Business Council

Modelling the costs of US-China tariffs

Businesses are increasingly concerned about a possible escalation of US-China trade policy, given their supply-chain dependencies on China. We quantify this risk by simulating higher tariffs leveraging state-of-the-art trade and macro models.

Case Study | Tata Steel

Transitioning towards a clean, green and circular future

Examining the socioeconomic effects of decarbonisation investments in the steel industry and the impact these can have on the national economy.

Case Study | AVSIS

Understanding the importance of a rapid action plan to fight climate change in Italy

Leveraging the Global Climate Service scenarios to evaluate the macroeconomic implication of mitigation policies and global warming

Case Study | Multinational Drinks Company

Bespoke dashboards and agile on-demand economics support

Background Today’s turbulent macroeconomic and consumer environment makes strategy and planning particularly difficult for firms in the business-to-consumer sector. The pandemic, major global conflicts and geopolitical tensions have caused major supply-side disruptions. At the same time, the ever-changing consumer environment, recent unprecedented levels of inflation and the ensuing cost of living crisis have been a...

Case Study | Royal London

Exploring the implications of higher pension contributions

Many households fail to save adequately for retirement. Using in-house models, the study assesses the impact of higher pension contributions on both pension savings and UK economic growth.

Case Study | A global aggregate and building materials provider

Constructing Success by Capitalising on Long-Term Opportunities

Helping a strategy department identify its 10-year growth opportunities

Case Study | Semiconductor Industry Association

A unique policy-driven impact scenario for CHIPS Act

How Oxford Economics engaged the world’s largest chip manufacturers to develop an industry-wide impact assessment of the CHIPS and Sciences Act.

Case Study | Building material manufacturer

Benchmarking Success: Building a Global Market Demand Indicator

Creating a new demand measure to enable a building material manufacturer to gauge its performance.

Case Study | Multinational services company

Quantifying the impact of climate on customers

Leveraging industry-specific climate forecasts to future-proof revenue.

Case Study | Energy UK

Achieving net zero advocacy goals

Highlighting the economic opportunities the energy transition presents and the consequences of not grasping them.

Charting a course for global growth in the shipping industry

Empowering a leading shipping company to enhance its strategic planning and identify new routes for growth

Global macroeconomic and risk scenario tool

Enabling a major automotive manufacturer to anticipate and respond effectively to evolving market dynamics across its global operations.

Risk signal identification, prioritisation and monitoring evaluation model

Despite existing internal risk management processes, a major automotive manufacturer was unprepared for and failed to anticipate and mitigate significant risks and shocks that have significantly affected its operations in recent years, including its sales, supply chain and financing.

Bespoke automotive sector sales forecasting

Automotive companies face many challenges: regulations, emission controls, litigation, political uncertainty, complex and problematic supply chains and disruptive technology are perhaps among the most pressing.

Case Study | Australian Finance Industry Association

The economic impact of Buy Now Pay Later in Australia

Governments globally are realising the importance of payments and financial services efficiency to economic growth, financial wellbeing and social participation.  The Australian Finance Industry Association (AFIA) recognises innovation, competition, market efficiency, economic growth and consumer protection are interrelated and, therefore, must be addressed collectively. An informed understanding of the Buy Now Pay Later (BNPL) sector...

Case Study | City of Sydney

City of Sydney’s 2022 Business Needs Survey Report

The City of Sydney required an advisor with the capability to develop a high-impact, user-focused report to: The report had to be engaging and highly visual, containing a range of different devices to communicate economic insights to a range of readers. The solution Oxford Economics Australia developed a rich and compelling report to engage and...

Case Study | Leading Australian Law Firm

Expert Witness Report on property market influences and outlook

The repudiation of an existing development agreement resulted in Supreme Court proceedings whereby residential property market forecasts were required to demonstrate the outlook for the Darwin residential market at that time. Separate sale price and rent projections were needed (on an annual basis) for detached house and attached dwellings for the period of 2017-2030. Importantly,...

Case Study | QBE LMI

The Annual Housing Outlook 2022 – the Green Edition

The objective of this work was to reinforce QBE LMI’s position by providing an outlook of housing market performance and stimulate informed discussion about environmental sustainability within the housing market and a state by state performance analysis of housing market prices and rents. The solution The project was approached collaboratively with the QBE LMI project...

Case Study | Australia Energy Market

Forecasts and scenarios to inform the future of Australia’s energy market

Oxford Economics Australia was commissioned to produce macroeconomic and commodity scenario projections that could be used to generate long-term gas and electricity demand and supply projections across a range of energy transition scenarios. The solution We worked closely with the client’s team and their stakeholders to produce long-term (30-year) macroeconomic and commodity price forecasts, across...

Case Study | National Bureau of Statistics

Developing a leading statistical ecosystem to empower decision makers in government, the private sector​ and ​broader society

The National Bureau of Statistics asked Oxford Economics to redesign its existing statistical publications to make them more user-focused.  This included: The solution Oxford Economics worked closely with the National Bureau of Statistics over a period of six months to develop 57 redesigned publication templates. The work was completed in two broad stages: The final...

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The case method can be a powerful tool to teach economic concepts and frameworks. Topics in this section cover a wide range of real-life examples from around the world on a host of issues including infrastructure, trade, taxation, regulation and development.

Integrating Systems at Scale: Coordinating Health Care in Houston

Publication Date: November 8, 2023

 This case concerns the Patient Care Intervention Center (PCIC) a values-based health technology social enterprise in Houston, Texas. This organization was founded to tackle fundamental problems in social and health services in the United...

A User-Centered Design Process for Data-Driven Policymaking

Publication Date: August 22, 2023

Well-conceived, user-friendly data visualizations have the potential to bring fresh perspectives derived from analyzing, visualizing, and presenting data to inform evidence-based policymaking. This case uses the Metroverse project from the...

Leadership and Negotiation: Ending the Western Hemisphere’s Longest Running Border Conflict

Publication Date: October 4, 2022

For centuries, Ecuador and Peru each claimed sovereignty over a historically significant, but sparsely inhabited tract of borderland in the Amazonian highlands. The heavily disputed area had led the two nations to war—or the brink of...

Pratham: The Challenge of Converting Schooling to Learning in India

Publication Date: November 18, 2020

This multimedia case brings video, text, and graphics together to offer a rare, immersive experience inside one of the developing world's most pressing challenges, low levels of learning. Pratham, counted among India's largest non-profits, has...

Video Series: Public Policy Applications of Microeconomic Concepts

Publication Date: September 24, 2019

MATERIALS FOR VIDEO CASEThe materials for this case are included in the teaching plan and are for registered instructors to use in class. If you do not have Educator Access, please register here (notification received within 2 business days). Abstract:...

Evaluating the Impact of Solar Lamps in Uganda

Publication Date: August 26, 2019

IDinsight, an evaluation company founded by graduates of the Harvard Kennedy School, designs and conducts evaluations that best suit the needs of clients across the developing world, offering timely and rigorous evidence to help decision making...

Untapped Potential: Renewable Energy in Argentina (Sequel)

Publication Date: October 6, 2020

In 2015, Mauricio Macri became President of Argentina and declared solving the energy crisis one of his top priorities. When Macri attempted to raise utility tariffs, however, he faced loud protests from citizens. In search of solutions to...

Untapped Potential: Renewable Energy in Argentina

Publication Date: August 23, 2019

Christine Lagarde (C): Managing the IMF

Publication Date: August 20, 2018

This case covers the career of Christine Lagarde from 2011 to 2018 as she takes the helm of troubled multilateral organization during a time of deepening economic turmoil. As the first female leader of the International Monetary Fund (IMF), and...

Christine Lagarde (B): Being a Public Servant

This case covers the career of Christine Lagarde from 2005 to 2011 after she joins the French Government. After serving several grueling years as Finance Minister during the financial crises that started in 2007/2008, she is being considered as...

Christine Lagarde (A): A French Prime Minister Calls

This case covers formative events and influences in Christine Lagarde's childhood and her trajectory from studying political science and law to heading the world's largest law firm. As she prepares to transition back to practice in 2005, the new...

Christine Lagarde (Extended)

For a modular presentation of the same material, please see Christine Lagarde (A): A French Prime Minister Calls (2136.0), Christine Lagarde (B): Being a Public Servant (2137.0), and Christine Lagarde (C): Managing the IMF (2138.0). These...

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Top 40 Most Popular Case Studies of 2021

Two cases about Hertz claimed top spots in 2021's Top 40 Most Popular Case Studies

Two cases on the uses of debt and equity at Hertz claimed top spots in the CRDT’s (Case Research and Development Team) 2021 top 40 review of cases.

Hertz (A) took the top spot. The case details the financial structure of the rental car company through the end of 2019. Hertz (B), which ranked third in CRDT’s list, describes the company’s struggles during the early part of the COVID pandemic and its eventual need to enter Chapter 11 bankruptcy. 

The success of the Hertz cases was unprecedented for the top 40 list. Usually, cases take a number of years to gain popularity, but the Hertz cases claimed top spots in their first year of release. Hertz (A) also became the first ‘cooked’ case to top the annual review, as all of the other winners had been web-based ‘raw’ cases.

Besides introducing students to the complicated financing required to maintain an enormous fleet of cars, the Hertz cases also expanded the diversity of case protagonists. Kathyrn Marinello was the CEO of Hertz during this period and the CFO, Jamere Jackson is black.

Sandwiched between the two Hertz cases, Coffee 2016, a perennial best seller, finished second. “Glory, Glory, Man United!” a case about an English football team’s IPO made a surprise move to number four.  Cases on search fund boards, the future of malls,  Norway’s Sovereign Wealth fund, Prodigy Finance, the Mayo Clinic, and Cadbury rounded out the top ten.

Other year-end data for 2021 showed:

• Online “raw” case usage remained steady as compared to 2020 with over 35K users from 170 countries and all 50 U.S. states interacting with 196 cases.
• Fifty four percent of raw case users came from outside the U.S..
• The Yale School of Management (SOM) case study directory pages received over 160K page views from 177 countries with approximately a third originating in India followed by the U.S. and the Philippines.
• Twenty-six of the cases in the list are raw cases.
• A third of the cases feature a woman protagonist.
• Orders for Yale SOM case studies increased by almost 50% compared to 2020.
• The top 40 cases were supervised by 19 different Yale SOM faculty members, several supervising multiple cases.

CRDT compiled the Top 40 list by combining data from its case store, Google Analytics, and other measures of interest and adoption.

All of this year’s Top 40 cases are available for purchase from the Yale Management Media store .

And the Top 40 cases studies of 2021 are:

1.   Hertz Global Holdings (A): Uses of Debt and Equity

2.   Coffee 2016

3.   Hertz Global Holdings (B): Uses of Debt and Equity 2020

4.   Glory, Glory Man United!

5.   Search Fund Company Boards: How CEOs Can Build Boards to Help Them Thrive

6.   The Future of Malls: Was Decline Inevitable?

7.   Strategy for Norway's Pension Fund Global

8.   Prodigy Finance

9.   Design at Mayo

10. Cadbury

11. City Hospital Emergency Room

13. Volkswagen

14. Marina Bay Sands

15. Shake Shack IPO

16. Mastercard

17. Netflix

18. Ant Financial

19. AXA: Creating the New CR Metrics

20. IBM Corporate Service Corps

21. Business Leadership in South Africa's 1994 Reforms

22. Alternative Meat Industry

23. Children's Premier

24. Khalil Tawil and Umi (A)

25. Palm Oil 2016

26. Teach For All: Designing a Global Network

27. What's Next? Search Fund Entrepreneurs Reflect on Life After Exit

28. Searching for a Search Fund Structure: A Student Takes a Tour of Various Options

30. Project Sammaan

31. Commonfund ESG

32. Polaroid

33. Connecticut Green Bank 2018: After the Raid

34. FieldFresh Foods

35. The Alibaba Group

36. 360 State Street: Real Options

37. Herman Miller

38. AgBiome

39. Nathan Cummings Foundation

40. Toyota 2010

• Understanding Poverty
• Environment

The Economic Case for Nature

• Economies rely on the flow of goods and services generated by nature (such as food, raw materials, pollination, water filtration and climate regulation), but nature is under unprecedented threat.
• A new World Bank report, The Economic Case for Nature, uses innovative economic modelling techniques to estimate how changes in select ecosystem services impact the economy, helping decision-makers understand the cost of inaction.
• The report also lays out options for nature-smart policies that reduce the risk of ecosystem collapse and are “win-win” in terms of biodiversity and economic outcomes.

The Economic Case for Nature  is part of a series of papers by the World Bank that lays out the economic rationale for investing in nature and recognizes how economies rely on nature for services that are largely underpriced. This report presents a first-of-its-kind integrated ecosystem-economy modelling exercise to assess economic policy responses to the global biodiversity crisis. Modeling the interaction between nature’s services and the global economy to 2030, the report points to a range and combination of policy scenarios available to reduce the impact of nature’s loss on economies. This modeling framework represents an important stepping-stone towards ‘nature-smart’ decision-making, as it seeks to support policymakers who face complex tradeoffs involving the management of natural capital, and hence achieving growth that is resilient and inclusive.

This report presents a novel modeling framework that integrates select ecosystem services into a computable general equilibrium (CGE) model. This allows the study of the impact of changes in select ecosystem services on the global economy and vice versa between 2021 and 2030. The report assesses the link between the decline of select ecosystem services—pollination of crops by wild pollinators, climate regulation from carbon storage and sequestration, provision of food from marine fisheries and provision of timber—and the performance of key sectors that rely on these services, such as agriculture, forestry, and fisheries sectors, and related industries.

METHODOLOGY

The integrated model is used to compare the baseline (economy-only) scenario with a set of scenarios that simulate the interactions between ecosystems and the global economy to   2030. First, the ‘business-as-usual’ scenario where economic growth leads to a decline in the ecosystem services analyzed, and two, a ‘partial ecosystem collapse’ scenario where pressure on select ecosystems pushes them to tipping points, with dire economic consequences. A third set of scenarios assesses the effects of introducing various nature-smart policy reforms on environmental and economic outcomes in 2030.

Finding Solutions to Development Challenges in Nature

• PRESS RELEASE: Protecting Nature Could Avert Global Economic Losses of $2.7 Trillion Per Year
• REPORT: The Economic Case for Nature
• INFOGRAPHIC: The Economic Case for Nature
• KEY FINDINGS: The Economic Case for Nature
• World Bank and Environment
• World Bank and Biodiversity
• Global Program on Sustainability

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In this setting, the need to integrate environmental, social and governance (ESG) factors when investing has become even more critical. Institutional investors must employ ESG not just to mitigate risks and identify opportunities, but to engage with companies to bring about the positive change needed to drive a sustainable economic recovery in the post-Covid world.

In order to understand how ESG could be both a new performance marker and a growth driver in this environment, as well as how institutional investors are using ESG to make investment decisions and to assess their own performance, The Economist Intelligence Unit (EIU), sponsored by UBS, surveyed 450 institutional investors working in asset and wealth management firms, corporate pension funds, endowment funds, family offices, government agencies, hedge funds, insurance companies, pension funds, sovereign wealth funds and reinsurers in North America, Europe and Asia-Pacific.

Download the report and infographic to learn more.

Accelerating urban intelligence: People, business and the cities of tomorro...

About the research

Accelerating urban intelligence: People, business and the cities of tomorrow is an Economist Intelligence Unit report, sponsored by Nutanix. It explores expectations of citizens and businesses for smart-city development in some of the world’s major urban centres. The analysis is based on two parallel surveys conducted in 19 cities: one of 6,746 residents and another of 969 business executives. The cities included are Amsterdam, Copenhagen, Dubai, Frankfurt, Hong Kong, Johannesburg, London, Los Angeles, Mumbai, New York, Paris, Riyadh, San Francisco, São Paulo, Singapore, Stockholm, Sydney, Tokyo and Zurich.

Respondents to the citizen survey were evenly balanced by age (roughly one-third in each of the 18-38, 39-54 and 55 years and older age groups) and gender. A majority (56%) had household incomes above the median level in their city, with 44% below it. Respondents to the business survey were mainly senior executives (65% at C-suite or director level) working in a range of different functions. They work in large, midsize and small firms in over a dozen industries. See the report appendix for full survey results and demographics.

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Talent for innovation

Talent for innovation: Getting noticed in a global market incorporates case studies of the 34 companies selected as Technology Pioneers in biotechnology/health, energy/environmental technology, and information technology.

Leonardo Da Vinci unquestionably had it in the 15th century; so did Thomas Edison in the 19th century. But today, "talent for innovation" means something rather different. Innovation is no longer the work of one individual toiling in a workshop. In today's globalised, interconnected world, innovation is the work of teams, often based in particular innovation hotspots, and often collaborating with partners, suppliers and customers both nearby and in other countries.

Innovation has become a global activity as it has become easier for ideas and talented people to move from one country to another. This has both quickened the pace of technological development and presented many new opportunities, as creative individuals have become increasingly prized and there has been greater recognition of new sources of talent, beyond the traditional innovation hotspots of the developed world.

The result is a global exchange of ideas, and a global market for innovation talent. Along with growth in international trade and foreign direct investment, the mobility of talent is one of the hallmarks of modern globalisation. Talented innovators are regarded by companies, universities and governments as a vital resource, as precious as oil or water. They are sought after for the simple reason that innovation in products and services is generally agreed to be a large component, if not the largest component, in driving economic growth. It should be noted that "innovation" in this context does not simply mean the development of new, cutting-edge technologies by researchers.

It also includes the creative ways in which other people then refine, repackage and combine those technologies and bring them to market. Indeed, in his recent book, "The Venturesome Economy", Amar Bhidé, professor of business at Columbia University, argues that such "orchestration" of innovation can actually be more important in driving economic activity than pure research. "In a world where breakthrough ideas easily cross national borders, the origin of ideas is inconsequential," he writes. Ideas cross borders not just in the form of research papers, e-mails and web pages, but also inside the heads of talented people. This movement of talent is not simply driven by financial incentives. Individuals may also be motivated by a desire for greater academic freedom, better access to research facilities and funding, or the opportunity to work with key researchers in a particular field.

Countries that can attract talented individuals can benefit from more rapid economic growth, closer collaboration with the countries where those individuals originated, and the likelihood that immigrant entrepreneurs will set up new companies and create jobs. Mobility of talent helps to link companies to sources of foreign innovation and research expertise, to the benefit of both. Workers who emigrate to another country may bring valuable knowledge of their home markets with them, which can subsequently help companies in the destination country to enter those markets more easily. Analysis of scientific journals suggests that international co-authorship is increasing, and there is some evidence thatcollaborative work has a greater impact than work carried out in one country. Skilled individuals also act as repositories of knowledge, training the next generation and passing on their accumulated wisdom.

But the picture is complicated by a number of concerns. In developed countries which have historically depended to a large extent on foreign talent (such as the United States), there is anxiety that it is becoming increasingly difficult to attract talent as new opportunities arise elsewhere. Compared with the situation a decade ago, Indian software engineers, for example, may be more inclined to set up a company in India, rather than moving to America to work for a software company there. In developed countries that have not historically relied on foreign talent (such as Germany), meanwhile, the ageing of the population as the birth rate falls and life expectancy increases means there is a need to widen the supply of talent, as skilled workers leave the workforce and young people show less interest than they used to in technical subjects. And in developing countries, where there is a huge supply of new talent (hundreds of thousands of engineers graduate from Indian and Chinese universities every year), the worry is that these graduates have a broad technical grounding but may lack the specialised skills demanded by particular industries.

Other shifts are also under way. The increasing sophistication of emerging economies (notably India and China) is overturning the old model of "create in the West, customise for the East". Indian and Chinese companies are now globally competitive in many industries. And although the mobility of talent is increasing, workers who move to another country are less likely to stay for the long-term, and are more likely to return to their country of origin. The number of Chinese students studying abroad increased from 125,000 in 2002 to 134,000 in 2006, for example, but the proportion who stayed in the country where they studied after graduating fell from 85% to 69% over the same period, according to figures from the OECD (see page 10).

What is clear is that the emergence of a global market for talent means gifted innovators are more likely to be able to succeed, and new and unexpected opportunities are being exploited, as this year's Technology Pioneers demonstrate. They highlight three important aspects of the global market for talent: the benefits of mobility, the significant role of diasporas, and the importance of network effects in catalysing innovation.

Brain drain, or gain?

Perhaps the most familiar aspect of the debate about flows of talent is the widely expressed concern about the "brain drain" from countries that supply talented workers. If a country educates workers at the taxpayers' expense, does it not have a claim on their talent? There are also worries that the loss of skilled workers can hamper institutional development and drive up the cost of technical services. But such concerns must be weighed against the benefits of greater mobility.

There are not always opportunities for skilled individuals in their country of birth. The prospect of emigration can encourage the development of skills by individuals who may not in fact decide to emigrate. Workers who emigrate may send remittances back to their families at home, which can be a significant source of income and can help to alleviate poverty. And skilled workers may return to their home countries after a period working abroad, further stimulating knowledge transfer and improving the prospects for domestic growth, since they will maintain contacts with researchers overseas. As a result, argues a recent report from the OECD, it makes more sense to talk of a complex process of "brain circulation" rather than a one-way "brain drain". The movement of talent is not simply a zero-sum gain in which sending countries lose, and receiving countries benefit. Greater availability and mobility of talent opens up new possibilities and can benefit everyone.

Consider, for example, BioMedica Diagnostics of Windsor, Nova Scotia. The company makes medical diagnostic systems, some of them battery-operated, that can be used to provide health care in remote regions to people who would otherwise lack access to it. It was founded by Abdullah Kirumira, a Ugandan biochemist who moved to Canada in 1990 and became a professor at Acadia University. There he developed a rapid test for HIV in conjunction with one of his students, Hermes Chan (a native of Hong Kong who had moved to Canada to study). According to the United States Centers for Disease Control, around one-third of people tested for HIV do not return to get the result when it takes days or weeks to determine. Dr Kirumira and Dr Chan developed a new test that provides the result in three minutes, so that a diagnosis can be made on the spot. Dr Kirumira is a prolific inventor who went on to found several companies, and has been described as "the pioneer of Nova Scotia's biotechnology sector".

Today BioMedica makes a range of diagnostic products that are portable, affordable and robust, making them ideally suited for use in developing countries. They allow people to be rapidly screened for a range of conditions, including HIV, hepatitis, malaria, rubella, typhoid and cholera. The firm's customers include the World Health Organisation. Providing such tests to patients in the developing world is a personal mission of Dr Kirumira's, but it also makes sound business sense: the market for invitro diagnostics in the developing world is growing by over 25% a year, the company notes, compared with growth of only 5% a year in developed nations.

Moving to Canada gave Dr Kirumira research opportunities and access to venture funding that were not available in Uganda. His innovations now provide an affordable way for hospitals in his native continent of Africa to perform vital tests. A similar example is provided by mPedigree, a start-up that has developed a mobile-phone-based system that allows people to verify the authenticity of medicines. Counterfeit drugs are widespread in the developing world: they are estimated to account for 10-25% of all drugs sold, and over 80% in some countries. The World Health Organisation estimates that a fake vaccine for meningitis, distributed in Niger in 1995, killed over 2,500 people. mPedigree was established by Bright Simons, a Ghanaian social entrepreneur, in conjunction with Ashifi Gogo, a fellow Ghanaian. The two were more than just acquaintances having met at Secondary School. There are many high-tech authentication systems available in the developed world for drug packaging, involving radio-frequency identification (RFID) chips, DNA tags, and so forth.

The mPedigree system developed my Mr Gogo, an engineering student, is much cheaper and simpler and only requires the use of a mobile phone — an item that is now spreading more quickly in Africa than in any other region of the world. Once the drugs have been purchased, a panel on the label is scratched off to reveal a special code. The patient then sends this code, by text message, to a particular number. The code is looked up in a database and a message is sent back specifying whether the drugs are genuine. The system is free to use because the drug companies cover the cost of the text messages. It was launched in Ghana in 2007, and mPedigree's founders hope to extend it to all 48 sub-Saharan African countries within a decade, and to other parts of in the developing world.

The effort is being supported by Ghana's Food and Drug Board, and by local telecoms operators and drug manufacturers. Mr Gogo has now been admitted into a special progamme at Dartmouth College in the United States that develops entrepreneurial skills, in addition to technical skills, in engineers. Like Dr Kirumira, he is benefiting from opportunities that did not exist in his home country, and his country is benefiting too. This case of mPedigree shows that it is wrong to assume that the movement of talent is one-way (from poor to rich countries) and permanent. As it has become easier to travel and communications technology has improved, skilled workers have become more likely to spend brief spells in other countries that provide opportunities, rather than emigrating permanently.

And many entrepreneurs and innovators shuttle between two or more places — between Tel Aviv and Silicon Valley, for example, or Silicon Valley and Hsinchu in Taiwan — in a pattern of "circular" migration, in which it is no longer meaningful to distinguish between "sending" and "receiving" countries.

The benefits of a diaspora

Migration (whether temporary, permanent or circular) to a foreign country can be facilitated by the existence of a diaspora, since it can be easier to adjust to a new culture when you are surrounded by compatriots who have already done so. Some observers worry that diasporas make migration too easy, in the sense that they may encourage a larger number of talented individuals to leave their home country than would otherwise be the case, to the detriment of that country.

But as with the broader debate about migration, this turns out to be only part of the story. Diasporas can have a powerful positive effect in promoting innovation and benefiting the home country. Large American technology firms, for example, have set up research centres in India in part because they have been impressed by the calibre of the migrant Indian engineers they have employed in America. Diasporas also provide a channel for knowledge and skills to pass back to the home country.

James Nakagawa, a Canadian of Japanese origin and the founder of Mobile Healthcare, is a case in point. A third-generation immigrant, he grew up in Canada but decided in 1994 to move to Japan, where he worked for a number of technology firms and set up his own financial-services consultancy. In 2000 he had the idea that led him to found Mobile Healthcare, when a friend was diagnosed with diabetes and lamented that he found it difficult to determine which foods to eat, and which to avoid.

The rapid spread of advanced mobile phones in Japan, a world leader in mobile telecoms, prompted Mr Nakagawa to devise Lifewatcher, Mobile Healthcare's main product. It is a "disease selfmanagement system" used in conjunction with a doctor, based around a secure online database that can be accessed via a mobile phone. Patients record what medicines they are taking and what food they are eating, taking a picture of each meal. A database of common foodstuffs, including menu items from restaurants and fast-food chains, helps users work out what they can safely eat. Patients can also call up their medical records to follow the progress of key health indicators, such as blood sugar, blood pressure, cholesterol levels and calorie intake.

All of this information can also be accessed online by the patient's doctor or nutritionist. The system allows people with diabetes or obesity (both of which are rapidly becoming more prevalent in Japan and elsewhere) to take an active role in managing their conditions. Mr Nakagawa did three months of research in the United States and Canada while developing Lifewatcher, which was created with support from Apple (which helped with hardware and software), the Japanese Red Cross and Japan's Ministry of Health and Welfare (which provided full access to its nutritional database).

Japanese patients who are enrolled in the system have 70% of the cost covered by their health insurance. Mr Nakagawa is now working to introduce Lifewatcher in the United States and Canada, where obesity and diabetes are also becoming more widespread — along advanced mobile phones of the kind once only found in Japan. Mr Nakagawa's ability to move freely between Japanese and North American cultures, combining the telecoms expertise of the former with the entrepreneurial approach of the latter, has resulted in a system that can benefit both.

The story of Calvin Chin, the Chinese-American founder of Qifang, is similar. Mr Chin was born and educated in America, and worked in the financial services and technology industries for several years before moving to China. Expatriate Chinese who return to the country, enticed by opportunities in its fast-growing economy, are known as "returning turtles". Qifang is a "peer to peer" (P2P) lending site that enables students to borrow money to finance their education from other users of the site. P2P lending has been pioneered in other countries by sites such as Zopa and Prosper in other countries.

Such sites require would-be borrowers to provide a range of personal details about themselves to reassure lenders, and perform credit checks on them. Borrowers pay above-market rates, which is what attracts lenders. Qifang adds several twists to this formula. It is concentrating solely on student loans, which means that regulators are more likely to look favourably on the company's unusual business model. It allows payments to be made directly to educational institutions, to make sure the money goes to the right place. Qifang also requires borrowers to give their parents' names when taking out a loan, which increases the social pressure on them not to default, since that would cause the family to lose face.

Mr Chin has thus tuned an existing business model to take account of the cultural and regulatory environment in China, where P2P lending could be particularly attractive, given the relatively undeveloped state of China's financial-services market. In a sense, Qifang is just an updated, online version of the community group-lending schemes that are commonly used to finance education in China. The company's motto is that "everyone should be able to get an education, no matter their financial means".

Just as Mr Chin is trying to use knowledge acquired in the developed world to help people in his mother country of China, Sachin Duggal hopes his company, Nivio, will do something similar for people in India. Mr Duggal was born in Britain and is of Indian extraction. He worked in financial services, including a stint as a technologist at Deutsche Bank, before setting up Nivio, which essentially provides a PC desktop, personalised with a user's software and documents, that can be accessed from any web browser.

This approach makes it possible to centralise the management of PCs in a large company, and is already popular in the business world. But Mr Duggal hopes that it will also make computing more accessible to people who find the prospect of owning and managing their own PCs (and dealing with spam and viruses) too daunting, or simply cannot afford a PC at all. Nivio's software was developed in India, where Mr Duggal teamed up with Iqbal Gandham, the founder of Net4India, one of India's first internet service providers. Mr Duggal believes that the "virtual webtop" model could have great potential in extending access to computers to rural parts of India, and thus spreading the opportunities associated with the country's high-tech boom. A survey of the bosses of Indian software firms clearly shows how diasporas can promote innovation.

It found that those bosses who had lived abroad and returned to India made far more use of diaspora links upon their return than entrepreneurs who had never lived abroad, which gave them access to capital and skills in other countries. Diasporas can, in other words, help to ensure that "brain drain" does indeed turn into "brain gain", provided the government of the country in question puts appropriate policies in place to facilitate the movement of people, technology and capital.

Making the connection

Multinational companies can also play an important role in providing new opportunities for talented individuals, and facilitating the transfer of skills. In recent years many technology companies have set up large operations in India, for example, in order to benefit from the availability of talented engineers and the services provided by local companies. Is this simply exploitation of low-paid workers by Western companies?

The example of JiGrahak Mobility Solutions, a start-up based in Bangalore, illustrates why it is not. The company was founded by Sourabh Jain, an engineering graduate from the Delhi Institute of Technology. After completing his studies he went to work for the Indian research arm of Lucent Technologies, an American telecoms-equipment firm. This gave him a solid grounding in mobile-phone technology, which subsequently enabled him to set up JiGrahak, a company that provides a mobile-commerce service called Ngpay.

In India, where many people first experience the internet on a mobile phone, rather than a PC, and where mobile phones are far more widespread than PCs, there is much potential for phone-based shopping and payment services. Ngpay lets users buy tickets, pay bills and transfer money using their handsets. Such is its popularity that with months of its launch in 2008, Ngpay accounted for 4% of ticket sales at Fame, an Indian cinema chain.

The role of large companies in nurturing talented individuals, who then leave to set up their own companies, is widely understood in Silicon Valley. Start-ups are often founded by alumni from Sun, HP, Oracle and other big names. Rather than worrying that they could be raising their own future competitors, large companies understand that the resulting dynamic, innovative environment benefits everyone, as large firms spawn, compete with and acquire smaller ones.

As large firms establish outposts in developing countries, such catalysis of innovation is becoming more widespread. Companies with large numbers of employees and former employees spread around the world can function rather like a corporate diaspora, in short, providing another form of network along which skills and technology can diffuse. The network that has had the greatest impact on spreading ideas, promoting innovation and allowing potential partners to find out about each other's research is, of course, the internet. As access to the internet becomes more widespread, it can allow developing countries to link up more closely with developed countries, as the rise of India's software industry illustrates. But it can also promote links between developing countries.

The Cows to Kilowatts Partnership, based in Nigeria, provides an unusual example. It was founded by Joseph Adelagan, a Nigerian engineer, who was concerned about the impact on local rivers of effluent from the Bodija Market abattoir in Ibadan. As well as the polluting the water supply of several nearby villages, the effluent carried animal diseases that could be passed to humans. Dr Adelagan proposed setting up an effluent-treatment plant.

He discovered, however, that although treating the effluent would reduce water pollution, the process would produce carbon-dioxide and methane emissions that contribute to climate change. So he began to look for ways to capture these gases and make use of them. Researching the subject online, he found that a research institution in Thailand, the Centre for Waste Utilisation and Management at King Mongkut University of Technology Thonburi, had developed anaerobic reactors that could transform agro-industrial waste into biogas. He made contact with the Thai researchers, and together they developed a version of the technology

suitable for use in Nigeria that turns the abattoir waste into clean household cooking gas and organic fertiliser, thus reducing the need for expensive chemical fertiliser. The same approach could be applied across Africa, Dr Adelagan believes. The Cows to Kilowatts project illustrates the global nature of modern innovation, facilitated by the free movement of both ideas and people. Thanks to the internet, people in one part of the world can easily make contact with people trying to solve similar problems elsewhere.

Lessons learned

What policies should governments adopt in order to develop and attract innovation talent, encourage its movement and benefit from its circulation? At the most basic level, investment in education is vital. Perhaps surprisingly, however, Amar Bhidé of Columbia University suggests that promoting innovation does not mean pushing as many students as possible into technical subjects.

Although researchers and technologists provide the raw material for innovation, he points out, a crucial role in orchestrating innovation is also played by entrepreneurs who may not have a technical background. So it is important to promote a mixture of skills. A strong education system also has the potential to attract skilled foreign students, academics and researchers, and gives foreign companies an incentive to establish nearby research and development operations.

Many countries already offer research grants, scholarships and tax benefits to attract talented immigrants. In many cases immigration procedures are "fast tracked" for individuals working in science and technology. But there is still scope to remove barriers to the mobility of talent. Mobility of skilled workers increasingly involves short stays, rather than permanent moves, but this is not yet widely reflected in immigration policy. Removing barriers to short-term stays can increase "brain circulation" and promote diaspora links.

Another problem for many skilled workers is that their qualifications are not always recognised in other countries. Greater harmonisation of standards for qualifications is one way to tackle this problem; some countries also have formal systems to evaluate foreign qualifications and determine their local equivalents. Countries must also provide an open and flexible business environment to ensure that promising innovations can be brought to market. If market access or financial backing are not available, after all, today's global-trotting innovators increasingly have the option of going elsewhere.

The most important point is that the global competition for talent is not a zero-sum game in which some countries win, and others lose. As the Technology Pioneers described here demonstrate, the nature of innovation, and the global movement of talent and ideas, is far more complicated that the simplistic notion of a "talent war" between developed and developing nations would suggest. Innovation is a global activity, and granting the greatest possible freedom to innovators can help to ensure that the ideas they generate will benefit the greatest possible number of people.

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Valuing Ground Water: Economic Concepts and Approaches (1997)

Chapter: 6: case studies, 6— case studies.

This report has emphasized the importance of valuing ground water resources and suggested a framework and valuation methods that could be used to quantify the economic values associated with a suite of ground water services. This chapter provides brief descriptions of seven existing situations that highlight the importance of valuing ground water resources. These case studies also include some information on applicable valuation methods. The chapter offers some insight into the difficulties that water managers (and policy-makers in general) face in attempting to translate recommendations regarding valuation methods into usable estimates of ground water values. Such difficulties can derive from institutional constraints or conflicts in specific locales; political considerations; terminology and conceptual problems related to communicating information; and uncertainties associated with technical analyses, determination of effects, and economic assumptions.

These site-specific studies are brief and are not intended to offer solutions for any other case. Instead, these examples demonstrate that valuing ground water resources is not a recipe that can simply be followed at any site. The planning and implementation of economic valuation studies requires the interdisciplinary efforts of economists, engineers, scientists, and policy-makers. These studies show that although a complete accounting for all components of the TEV of ground water is often impossible to obtain, quantifying some components can provide information to improve decision-making and increase the efficiency of the use of scarce ground water resources. Table 6.1 summarizes the theme of each case study.

The first case study illustrates the link between surface water use and the

TABLE 6.1 Comparative Information on Seven Case Studies

quantity and quality of ground water in the Treasure Valley area of eastern Oregon and southwestern Idaho. In this setting, which is typical of many areas in the West, agriculture relies primarily on surface water supplies, and ground water is used mainly for human and industrial consumption. The presence of pollutants from agriculture in an aquifer reduces the value of the ground water for human consumption and poses challenges for water resource managers. Without estimates of the value of the services associated with unpolluted ground water, managers may design allocation and management policies that could lead to suboptimal use of both the scarce ground water and the surface water supplies.

The Laurel Ridge, Pennsylvania, case study is an example of competing uses of an aquifer and the interplay between ground water and surface water supplies. In this area the user conflicts are between development (mining) and tourism and among the many fragmented local governments whose jurisdictions overlay the watershed. Economic valuation is a crucial component to achieving a more systematic approach to planning in this watershed.

The next two case studies deal with the buffer value of ground water. In Albuquerque, New Mexico, ground water is the primary source for municipal water supply, although the city also has rights to surface water from nearby rivers. Recent concerns with both the size of the aquifer and increased population growth along with ground water mining have initiated a series of engineering and economic studies to assess the long-term strategies for water use. This example provides concrete evidence of the role that economic values can play in formulating policy alternatives for water use management.

The Arvin-Edison Water Storage District in southern California is another example of a buffer value success story, where the surplus water from wet years is being used to recharge the aquifer. This water management system in the Bakersfield area has been in place for nearly 30 years and by some estimates has generated millions of dollars in net returns to agricultural interests that would have been foregone during critically dry years.

The second California example deals with the issue of irreversibilities associated with the intrusion of sea water in the ground water basin underlying Orange County, in southern California. Loss of the basin to sea water intrusion would require the Orange County Water District to rely more heavily on imported water and would preclude the use of the aquifer for water storage. Knowing the value of the ground water was clearly an important component in the decision to construct and operate Water Factory 21 (an advanced wastewater treatment plant) and two water injection projects. Combinations of imported water and highly treated municipal wastewater are recharged as a barrier to sea water intrusion.

The sixth case study, a Superfund example, illustrates the importance of ground water valuation to federal regulations regarding remediation of contaminated aquifers. Policy decisions on the extent to which ground water remediation should be pursued need to be based on a careful assessment of the costs and benefits of proposed actions. The benefits of restoring the quality of a contami-

nated aquifer will be reflected in the potential gains or value of improvements to the ground water resource and will be site-specific.

The empirical findings of this Woburn, Massachusetts, case study refute conventional wisdom concerning the economic efficiency of ground water remediation at Superfund sites for the sole purpose of restoring drinking water supplies (i.e., that the costs of remediation far outweigh the benefits). In some cases ground water remediation can be the efficient alternative; it should not be dismissed without conducting a cost-benefit analysis. This case study also highlights the complexities involved in conducting an empirical analysis of the value of restoring ground water resources and the impacts of uncertainties in the economic and physical dimensions, and in potential health consequences, and the public response to ground water usage.

The final case study concerns the potential application of the valuation framework described in Chapter 3 and some valuation methods described in Chapter 4 . Options in this Tucson, Arizona, case include ground water recharge using Central Arizona Project (CAP) water or treatment of CAP water prior to usage. This study provides information on the types of methods that could be used to value a complete suite of ground water services for both options.

CHALLENGES IN WATER QUALITY MANAGEMENT Treasure Valley, Oregon

The Treasure Valley of eastern Oregon and southwestern Idaho is high desert (10 inches of precipitation on average per year) that is intensively irrigated using surface water from the Owyhee, Malheur, and Snake Rivers. All the water of the Owyhee and Malheur Rivers (tributaries of the Snake River) is diverted to irrigation. Stream flow below the diversions is maintained by irrigation return flows and recharge from a shallow aquifer supported in part by irrigation recharge (Gannett, 1990).

Crop agriculture in the area is characterized by a range of high valued crops including potatoes, sugar beets, and onions, as well as cereal grains and hay. In the Oregon portion of the valley, approximately 180,000 acres are in irrigated crop production (Schneider, 1992). The primary source of water irrigation is from federal (U.S. Bureau of Reclamation) reservoirs and distribution systems. In terms of total agricultural sales, animal agriculture (cattle and dairy) accounts for 36 percent of sales, onions 25 percent, potatoes 11 percent, sugar beets 9 percent, cereal grains 9 percent, and the remaining crops 10 percent.

Ground water is used largely for industrial or human consumption. Between 1983 and 1986, the Oregon Department of Environmental Quality (ODEQ) tested water wells in the study area. Elevated nitrate levels were found in 67 percent of the wells tested; 35 percent of the wells exceeded the federal drinking water

standard for public water supplies of 10 mg/l. In 1989 ODEQ declared Malheur County a ground water management area and ordered that ground water nitrate levels be 7 mg/l or less by the year 2000. The ODEQ and local water quality management groups have identified agriculture as the primary contributor to ground water nitrates. Pesticides (dacthal) associated with onion production have also been found in test wells.

Valuation/Management Issues

The geohydrological link between surface water applications and ground water quality and quantity found in Treasure Valley is typical of many ground water situations in the West. Specifically, percolation of irrigation water serves to recharge the ground water aquifer (and in this case surface water percolation augments the natural flow in the aquifer). This ground water recharge/augmentation process serves a number of beneficial purposes. For example, recharge increases seepage from the aquifer into lowlan ds, creating wetlands for wildlife. Irrigation returns, whether through surface runoff or through eventual seepage of ground water to the Snake River and its tributaries, helps to stabilize stream flows. However, unwelcome consequences may accompany this recharge, including the elevated levels of agricultural pollutants of concern to the ODEQ.

Ground water is the primary source of water for household and industrial uses around Ontario, Oregon, located near the center of the valley (Gannett, 1990). The presence of pollutants from agriculture, with associated health concerns, reduces the value of water for human consumption. Pollutants in ground water also degrade water quality in streams, with possible adverse consequences for fish and wildlife. Given present concerns about endangered salmon fisheries in the Snake River (the U.S. Fish and Wildlife Service have listed Snake River sockeye and chinook salmon as endangered), water quality has assumed increased importance.

A number of strategies to reduce the amount of agricultural effluents reaching the aquifer have been proposed. A feature common to most strategies is ''better" irrigation water management, which implies less total water application per acre and hence less deep percolation. Such practices, however, also reduce the volume of water moving into the aquifer. This in turn affects the volume of seepage into wetlands and return flows to rivers. Further, if irrigation water "saved" by improved irrigation management is used to expand irrigated acreage, the total return flow and hence stream flow may be markedly reduced. Reduction in stream flow and wetlands will exacerbate some wildlife problems.

Assessment of the Value of Ground Water

The interplay of surface water use, ground water quality, and, ultimately, stream flow, creates challenges for public water resource managers as they try to

achieve multiple objectives. Institutional constraints, including the nature of water rights (prior appropriation doctrine) and below-cost pricing of water in public supply projects, further complicates water management. A plan that achieved optimal use across all water resources in the basin would likely vary dramatically from the use pattern typically observed in such settings. Assessment of the values from one type of water resource, such as ground water, in isolation will lead to suboptimal resource use.

To date, the benefits of ground water quality or ground water services in general have not been estimated for this area because of the focus on human health issues. Specifically, federal and state regulations require that water quality in the aquifer be brought into compliance with state water-quality standards. Economic analysis has been limited to assessment of the consequences to farmers of meeting the standards (Fleming et al., 1995; Connor et al., 1995). An understanding of the values of ground water could aid in comprehensive management of water.

Against this backdrop of complex geohydrologic linkages, institutional constrains, and a regulatory mandate to improve water quality, it is instructive to consider whether the valuation techniques discussed in Chapter 3 can be used to estimate the value (benefits) of the ground water services provided here. The answer is a qualified yes. For example, the value of unpolluted ground water for household uses can be estimated through expenditures on averting behavior, such as purchase of bottled water or purification systems. Values of stream flow for recreational fishing can be estimated through travel cost procedures. Direct elicitation of nonuse values to maintain or enhance a species (e.g., existence values) could be estimated by the contingent valuation method, although the costs of performing defensible CVM surveys are quite high. Similarly, TCM or CVM can be used to determine the value of ground water recharge of wetlands for both use and nonuse services the wetlands provide. A compilation of these use and nonuse values would supply information on the trade-offs between management goals across water users, including protection of ground water services.

Connor, J. D., G. M. Perry, and R. M. Adams. 1995. Cost-effective abatement of multiple production externalities . Water Resources Research 31:1789-1796.

Fleming, R. A., R. M. Adams, and C. S. Kim. 1995. Regulating groundwater pollution: Effects of geophysical response assumptions on economic efficiency. Water Resources Research 31:1069-1076.

Gannett, M. W. 1990. Hydrogeology of the Ontario Area, Malheur County, Oregon. Ground water Report 34. Salem: Oregon Department of Water Resources.

Scneider, G. 1992. Malheur County Agriculture. Ontario: Oregon State University Extension Service.

COMPETING USES OF AN AQUIFER Laurel Ridge, Pennsylvania *

Laurel Ridge covers 330 square miles in southwestern Pennsylvania. The generally forested, mountainous topography forms a distinct break with the surrounding plateau lowlands. An estimated 15 million tourists visit Laurel Ridge each year. Recreational activities such as hunting, fishing, boating, and skiing are supported by abundant, clean water and large holdings of public land (41 percent of the area). The dominant land uses of Laurel Ridge, such as recreation, water supply, wildlife habitat, and forestry, contrast with those of the peripheral lowlands, which are largely devoted to agricultural pursuits and coal mining. While tourism is an invaluable resource to communities within the area, high rates of unemployment and slow growth in other economic sectors persist. This area also has the highest acidic deposition in Pennsylvania. The Allegheny and Pottsville rock units are influenced by acid deposition and yield ground water high in hydrogen ion concentration and dissolved aluminum. Buffering from the Mauch Chunk/Burgoon aquifer and its discharges into area streams help support aquatic life (Beck et al., 1975).

Pennsylvania government is fragmented. With over 2,500 minor civil divisions, the state ranks second in the nation in terms of the number of local government divisions. The Laurel Ridge region reflects this fragmentation: parts of four counties (Somerset, Cambria, Fayette, and Westmoreland) come together along the historic ridge-line boundary; within these counties, 22 townships and two boroughs form an intricate web of administrative jurisdictions. Thus the natural resources of the Laurel Ridge are not managed as a cohesive region.

Ecosystem Characteristics

The Mauch Chunk/Burgoon aquifer is the only source of high-quality ground water in the Laurel Ridge. It supplies most of the total public and domestic water supply and provides base flow to many of the region's exceptional surface waters. Compliance with the 1986 amendments to the federal Safe Drinking Water Act requires that all surface water used as drinking water for public water systems be filtered. From 1990 to 1995, some 30 high-yield municipal water wells were drilled in the area. The aquifer supplies high-quality upland streams through

artesian head-water springs. The effect of this development on streams has raised concerns about both the quantity of water withdrawn and the impact on water quality. Specifically, changes in withdrawal patterns have threatened aquatic environments that support fish and other organisms. Water quality is further affected by a combination of geographic and geologic factors that create in one of the highest rain acidities in the country.

Water Users and Use Conflicts

The rapid development of the aquifer, the lack of rules to allocate ground water among competing uses, and, in most cases, the absence of local water management and planning has led to a situation where it seems the person with the biggest pump or deepest well wins. Currently, there is little economic incentive for users to conserve. Since regulation is likely to occur in the future, users who establish an early claim to the resource stand to win by drilling before regulations are developed and carried out.

There are several conflicting interests. The legacy of coal mines is prevalent throughout Pennsylvania. On both sides of the ridge in the lowlands there is degradation from coal mining; the aquifer is thus threatened on its boundaries. Assigning responsibility for past damage from coal mining is problematic from both a political and economic standpoint.

The region is home to two destination resorts whose ground water withdrawals are generally substantial from late November to early April. The resorts have recently established golf courses that have increased off season withdrawals. A rise in the number of second homes on the ridge ("suburbanization") has multiplied water demand. The impacts of the resorts' usage are not well understood. Some parties argue that efforts to recycle runoff and sewage serve to increase or maintain ground water levels by replacing water on the ridge, in effect performing an environmental service. Others deny this claim and fear that the resorts' usage threatens water quality down slope. Furthermore, the ground water pumping may move waters out of areas favorable toward fish stocks and recharges areas unfavorable to fish stocks, compromising wildlife habitat.

The resorts have a significant economic impact in providing employment as well as an influx of tourist dollars. Are the benefits of development greater than the costs in terms of resource degradation and other foregone opportunities? If, on the other hand, development inspires resource decisions that have high costs or are irreversible, such as ground water contamination by toxics, the sustainability of the local economy and its ecological systems is called into doubt. If, on the other hand, restrictive regulations or the absence of a plan to provide for long-term water and sewer requirements inhibits development, then attempts to attract new industry and lower the unemployment rate will be stymied.

Issues Related to Economic Valuation

Efforts to understand the physical systems of the watershed must be combined with equal efforts to measure how people value these systems. Policy-makers must address four issues:

How much water is safely available from this aquifer system, and are there areas where the aquifer is potentially overdeveloped?

What is the impact of ground water withdrawals on the quality and base flow of the upland surface water systems fed by Laurel Hill Spring?

How can economic values for different uses be measured so that decision-makers may adequately take into account competing uses?

Can effective watershed management increase the potential for optimizing the different uses? What is the best way to develop institutions to help carry out comprehensive planning?

Economic Values and Decision-Making

Regional watershed organizations have stepped up to meet these challenges, but their efforts may be insufficient to educate the public and measure and map resources. Even armed with accurate knowledge of ground water functions, policy-makers face complex decisions. The fragmented nature of municipal government in Pennsylvania poses serious challenges to intercommunity communication and cooperation, challenges that may be overcome only by a more systematic watershed approach to planning and policy implementation.

In April 1992, the Laurel Ridge Forum was created in recognition of the region's vast public holdings, outstanding natural resources, and recreational opportunities. Composed of members from state and local government, business, and water suppliers, the forum focuses on future development in the area. Water rights conflicts between residents and second-home owners are at the center of the development debate. Research is beginning to define the physical impact of recreational uses and the extent of past degradation from coal and limestone mining, brine disposal, and road salting. Economic valuation is necessary to interpret how different members of the community value these environmental changes. New or different institutional arrangements among the layers of government could facilitate the comprehensive and systematic management of natural resources. The Laurel Ridge Forum's Coordinated Resource Management Plan (CRMP) attempts to deal with governmental fragmentation.

Decision-makers must identify and study alternative policies for effectively managing these water resources. It might make sense, for example, to manage the watershed as well as the basin as a whole. As research defines the aquifer's physical limits and capabilities, stakeholders and decision-makers must continue to ask questions about the economic value of ground water. Specifically, they

need to better understand and quantify the economic benefits of protecting the aquifer from depletion or degradation.

The Laurel Ridge area offers a unique and challenging context for ground water valuation. Rapid development and competing interests have brought the water issue to the forefront, forcing increased efforts to understand and measure water resources and begin constructive public debate. Economic values will allow local officials to make more informed decisions relative to resource use by helping them gauge the community's values regarding water resources and the trade-offs between protecting these resources and economic development. Economic valuation coupled with a comprehensive systems approach to the watershed should guide decision-makers toward effective water resource management choices.

Beck, M, G. Cannelos, J. Clark, W. Curry, and C. Loehr. 1975. The Laural Hill Study: An Application of the Public Trust Doctrine to Pennsylvania Land Use Planning in an Area of Critical State and Local Concern. Department of Landscape Architecture and Regional Planning. Philadelphia: University of Pennsylvania.

THE BUFFER VALUE OF GROUND WATER Albuquerque, New Mexico

The city of Albuquerque, New Mexico, like many other rapidly growing metropolitan areas in the arid Southwest, draws much of its municipal water supply from ground water. Unlike most other cities, however, Albuquerque does have rights to surface water supplies from the nearby middle Rio Grande and to waters from the Colorado River basin (San Juan and Chamba Rivers) that are diverted to the Rio Grande basin. The city's historical reliance on pumping ground water in lieu of accessing available surface water reflects a mix of geohydrological, institutional, and cultural forces. These forces are changing and call into question the economic and physical sustainability of Albuquerque's water use patterns.

In response to concerns over the long-term viability of ground water pumping, the city commissioned a series of engineering and economic valuation studies to assist managers in developing sustainable management strategies (CH2M-Hill, 1995; Boyle Engineering, 1995; Brown et al., 1995). In addition, other agencies involved in water issues in the area have issued or commissioned studies pertaining to water (Middle Rio Grande Conservancy District, 1993; EcoNorthwest, 1996). Albuquerque's strategies for water use, as described in

these studies, provide examples of the role economic values can play in assisting policy formation.

The middle Rio Grande valley has been inhabited and intensively farmed by Native Americans for at least 500 years. In addition to providing a stable water supply for irrigation, the riparian, tree-lined areas, or bosque, along the River were important to Native Americans for wood for fuel and shelter as well as cultural and spiritual purposes. Hence, communities (pueblos) sprang up at points on or near the River and its tributaries. Europeans were also attracted to the riverine environment of the Rio Grande valley and established settlements on the sites of present-day cities such as Albuquerque.

As settlement progressed and the region grew, residents encountered new water issues. Competition among states (Colorado, New Mexico, and Texas) and between the United States and Mexico for the scarce surface water supplies of the basin resulted in a series of compacts and agreements allocating water among the parties. Albuquerque was given rights to 48,000 acre-feet of water from the Rio Grande and 22,000 acre-feet of imported water from the Colorado River basin. Total surface allocations in the middle Rio Grande basin exceed 350,000 acre-feet; they are used primarily for irrigated agriculture.

While agriculture relies heavily on surface water, the settlements in the valley, including Albuquerque, have relied heavily on ground water to meet the needs of the increasing population. Albuquerque sank deep wells as early as 1910 to secure municipal water. This use of ground water was motivated in part by the high quality of ground water, the steady supply (even in years of drought) and the belief that the aquifer supply was large and recharge rapid. Rapid recharge of the aquifer from the River led city water managers to believe that they were simply pumping their surface water allocation, albeit with a slight lag time.

Present Situation

Recent geohydrological information that challenges past assumptions, increased competition for water, continuing population pressures, and concerns over the environmental health of riverine habitat in the middle Rio Grande valley cast doubt on the wisdom of Albuquerque's reliance on ground water. Perhaps the most important development was a 1993 U.S. Geological Survey study that revealed that the aquifer was not as large as originally believed nor is recharge (from surface flows) as rapid as assumed. This meant that Albuquerque was not using its surface water supplies but was instead mining or overdrafting its ground water. Inventory information also suggested that if Albuquerque continued to rely on the aquifer to meet its urban needs, the aquifer would be economically exhausted by 2060. During this same time period, the U.S. Fish and Wildlife Service (USFWS) listed the Rio Grande silvery minnow, found in the middle Rio Grande, as an endangered species. To ensure survival, the USFWS proposed

increases in instream flows and protection of riparian habitat. Meeting these instream and other habitat needs implies changes in water use patterns.

Once city water managers understood that Albuquerque was mining ground water and not using its surface water supplies, they reexamined the long-term water management strategy. The city's failure to use its surface water supplies meant that someone else had been using those supplies. The significance of the use issue is contained in western water law; specifically, western water law requires that users demonstrate a beneficial use of water within a specific time period. While cities may be treated differently from other (private) users of water, increased competition for this water places pressure on the city to begin actively using its allocation. However, the total water allocation (of 70,000 acre-feet) is not adequate to meet future needs. Thus some combination of policy options, including securing alternative surface water supplies, most likely from agriculture, and increases in urban rates to reduce consumption, will be needed if the city wishes to develop a sustainable aquifer management policy.

Valuation Issues

The situation in Albuquerque is similar to that in many other cities in arid regions of the West. Historical preference for use of ground water in meeting urban needs reflects some of the advantages ground water provides, including stability of supply, high water quality (no treatment of ground water is required in Albuquerque), and ease of access (no collection and transport system is required, as in the case of most surface water supplies). The value of these advantages is typically not reflected in the "price" of ground water (the "price" that cities charge consumers is usually set at the cost of pumping and distributing the water). A low price for ground water encourages higher use of the resource.

If ground water were not scarce (i.e., were available in unlimited quantities), then its price would simply be the cost of extraction. However, ground water, like surface water, is scarce; and when water is used in one setting, such as urban use, it is not available for another purpose, such as in riparian habitat enhancement. Ground water price should thus reflect not only extraction costs but also foregone benefits from its use in some other setting or in the same use but at some future time (its opportunity cost). Until recently, most cities did not include such values in the price of water.

In the presence of mining, as is occurring in Albuquerque, potential long term adverse effects jeopardize the flow of future services. The lost benefits (costs) from the reduced flow of these services should be reflected in water pricing. One of these effects is land subsidence (due to compaction of the pore spaces in the aquifer). Subsidence may lead to damages to buildings, roads, and other structures. Mining also affects water quality; water quality in aquifers tends to decline as pumping depth increases. Falling water levels in the aquifer also reduce the ability of the aquifer to maintain or support stream flows and maintain

riparian zone health. Such drawdowns of water levels also increase pumping costs to all users. Eventually, mining eliminates the potential use of an aquifer as a buffer against drought. In arid regions, which are typically characterized by high annual variation in precipitation and surface water supplies, the use of ground water to meet needs during drought may be one of the most valuable ground water services.

Brown et al. (1995) examine a series of options or scenarios for the city to reduce aquifer use to a long-term, sustainable level by limiting use to periods of extended drought. Sustainability (to build up the aquifer to a level sufficient to provide a buffer against an extended drought) requires that the city live within its annual water budget as defined by renewable surface water supplies (again, except for periods of drought). The implications of ongoing use of the aquifer are short-term gains, accruing primarily to present users, with costs (of overdrafting) delayed to some future period (future generations), when the adverse effects described above would begin. Alternative strategies imply costs to present users but with potential long-term benefits. To weigh the benefits and costs of alternative actions requires the measurement of economic values, over time, for the array of services under the range of options available to the city.

In planning conjunctive management of the water resources of this region, policy-makers can benefit from an understanding of the value of water in its various uses. As they consider alternative water strategies, they should, as is practical, look at the full range of economic consequences associated with each alternative. The range of services affected by each option includes the potential for changes in both use and nonuse values. Use values in this case are as input in production (e.g., agriculture, manufacturing) and recreation; nonuse values are associated with the Rio Grande bosque, such as riparian habitat, endangered species, and aesthetic or visual services. Estimates of some use values in the region are discussed in Brown et al. (1995). Researchers have also measured nonuse (existence) values for provision of instream flows for preservation of the silvery minnow (Berrens et al., 1996). Thus information is available to assess some economic trade-offs involved in moving to a sustainable aquifer management policy.

The choice among alternative policies for ground water management should reflect, at a minimum, the opportunity costs of that decision (what is given up in selecting that option, or the benefits foregone from some other use of the water). A full accounting would include the willingness to pay for changes in services associated with each option (the maximum benefit or value associated with those services). The costs (lost benefits) are not likely to be spread uniformly or equally across affected parties. The political and judicial process can address some equity issues but typically does not reflect the interests of future generations. Only by achieving sustainability (by establishing a safe minimum reserve capacity in the aquifer) can the interests of future generations be guaranteed.

Berrens, R. P., P. Ganderton, and C. Silva. 1996. Valuing the protection of minimum instream flows in New Mexico. Journal of Agricultural and Resource Economics. In press.

Boyle Engineering. 1995. Water Conservation Rates and Strategies. Report prepared for Albuquerque, New Mexico.

Brown, F. L., S. C. Nunn, J. W. Shomaker, and G. Woodard. 1995. The Value of Water: A report submitted to the city of Albuquerque, New Mexico. Albuquerque, N.M.: City of Albuquerque.

CH2M-Hill. 1995. Albuquerque Water Resources Management Strategy: San Juan-Chama Options. Report prepared for the city of Albuquerque, New Mexico.

EcoNorthwest. 1996. The Potential Economic Consequences of Designating Critical Habitat for the Rio Grande Silver Minnow. Draft report prepared for the U.S. Fish and Wildlife Service, New Mexico field office.

Middle Rio Grande Conservancy District. 1993. Water Policy Plan; Working Document.

THE BUFFER VALUE OF GROUND WATER Arvin-Edison Water Storage District, Southern California

The Arvin-Edison Water Storage District is located at the southern end of California's Central Valley, about 20 miles south of the community of Bakers-field. The district contains approximately 132,000 acres of highly productive agricultural land. The economy of the area is almost wholly dependent on agriculture, as there is little other industry. The value of agriculture in the district approaches $300 million annually, and land values range from $1,600 to $2,300 per acre. The principal crops include grapes, potatoes, truck crops, cotton, citrus, and deciduous fruit. Seventy-five percent of California's carrot acreage is found here. The climate is hot and arid, with average annual precipitation totaling only 8.2 inches. Almost all precipitation occurs between October and April. The sparseness and seasonality of precipitation means that irrigation is essential. On average growers apply 3 acre-feet of water per acre (Arvin-Edison Water Storage District, 1996).

Development of the area began after the turn of the century, and growers relied primarily on ground water supplemented by small and erratic flows from minor local streams. Most growers had their own wells and were responsible for providing their own supplies of irrigation water. As agriculture in the region grew, ground water extractions began to exceed rates of recharge and growers experienced declining ground water tables. Between 1950 and 1965, for example, water tables fell from an average depth of 250 feet to 450 feet. In 1965, average annual overdraft in the district totaled 200,000 acre-feet, which accounted for almost half the water applied districtwide. Continued overdrafting threatened the area's economic base.

Some years earlier local growers anticipated this situation and organized the Arvin-Edison Water Storage District to bring supplemental surface water sup-

plies to the area to offset the overdraft. Beginning in 1966, Arvin-Edison received imported surface water from the Friant-Kern Canal, the southernmost component of California's Central Valley Project (CVP). The advent of significant surface water deliveries did not fully solve the area's water supply problems, however.

The district's water service contract called for annual importation of 40,000 acre-feet of firm (guaranteed) supply and up to 311,675 acre-feet of interruptible or nonfirm supply on an as-available basis. Although the district was subsequently able to increase the quantity of firm supply through an exchange arrangement, actual deliveries from 1966 to 1994 ranged from 30,000 acre-feet to almost 270,000 acre-feet. The problem lies with the significant portion of supply that is interruptible and therefore not available in years when precipitation is below average. This problem was resolved by percolating surplus supplies in wet years to recharge the underlying aquifer through the district's water-spreading facilities. Dry-year deficiencies were then offset by pumping previously percolated waters from the aquifer and delivering them to growers through the district's canal system (Vaux, 1986).

Over the period 1966-1994, more than 4 million acre-feet were imported to the district, 1 million of which were percolated to the underlying aquifer. Despite significant withdrawals to meet demands in the dry years of 1976-1977, 1982, and 1986-1992, net aquifer recharge has totaled 372,000 acre-feet and water table levels have stabilized. This has provided direct use benefits in the form of reduced pumping costs to approximately 20 percent of the growers in the district who are not connected to the distribution system and must continue to rely on direct ground water pumping. Perhaps more significant, the operation of Arvin-Edison's water supply system provides a clear illustration of the buffer value of ground water (Arvin-Edison Water Storage District, 1994).

In California less-than-average precipitation occurs with a frequency of about four years out of seven. To the extent that precipitation shortfalls are reflected in reductions in deliveries of surface water, ground water buffering values will be realized in each year that precipitation is less than average. The magnitude of the value will depend upon the degree to which surface water deliveries are deficient. In the critically dry years of 1977 and 1991, the surface water imports available to Arvin-Edison were 22 and 26 percent of average, respectively. Yet the district was able to make deliveries to water users that amounted to 85 and 90 percent of average annual deliveries, respectively. Rough calculations suggest that in 1991 more than 26,000 acres would have been fallowed had water stored in the aquifer not been available. Assuming typical cropping patterns and typical prices (in 1991 dollars) the gross value of production on this acreage exceeded $38 million. The returns to growers net of fixed and operating costs were almost $6 million (Arvin-Edison Water Storage District, 1994).

The use of ground water and aquifer storage capacity by the Arvin-Edison Water Storage District has yielded both direct use benefits and buffering benefits.

However, there are a number of issues that await resolution. The Metropolitan Water District of Southern California (MWD) is considering a long-term contract that would allow MWD to store water in the Arvin-Edison aquifer in wet years and withdraw it in drier years to meet urban and industrial demands in the Los Angeles area. Such a contract would increase the buffering value of the aquifer. Growers in the district face the issue of whether to renew contracts with the federal government for surface water supplies at prices reflecting full cost. These increased costs of surface water imports will need to be weighed against the present and future costs of pumping ground water as the sole source of irrigation water. it is clear that the availability of low-cost surface water that could be used for aquifer replenishment has sustained the agricultural economy of the Arvin-Edison District on a larger scale than would have been possible if ground water were the sole source of supply. The issue of whether the buffering value of imported supplies will be sufficient to offset potential increases in the cost of imported surface water remains to be resolved.

Arvin-Edison Water Storage District. 1994. The Arvin-Edison Water Storage District, Water Resources Management Program. Arvin, California.

Arvin-Edison Water Storage District. 1996. The Arvin-Edison Water Storage District, Water Resources Management Program. Arvin, California.

Vaux, H. J., Jr. 1986. Water scarcity and gains from trade in Kern County, California. Pp. 67-101 in Scare Water and Institutional Change, K. D. Frederick, ed. Washington D.C.: Resources for the Future.

THE VALUE OF AVERTING SEA WATER INTRUSION Orange County, California

The Orange County Water District (OCWD) operates and maintains a 15-million-gallon-per-day (mgd) reclamation sea water barrier project that protects a 350-square-mile ground water basin. OCWD constructed Water Factory 21 in 1973 for the purpose of protecting the quality of the county's extensive ground water resources by preventing sea water intrusion.

Loss of the basin beyond any possible use would require the district to rely on imported water for its entire water supply. However, this is not the only value of a ground water basin: the basin also provides storage and distribution, supplying water for peak and emergency use.

Sea Water Intrusion

Sea water intrusion occurs in ground water basins located along the coast. As overdrafting of a basin continues, the sea water front is drawn inland, threatening the ground water basin. Two fundamental conditions must exist before a ground water basin can be intruded by sea water. First, the water-bearing materials comprising the basin must be in hydraulic continuity with the ocean; second, the normal seaward ground water gradient must be reversed or at least too flat to counteract the greater density of sea water.

Sea Water Intrusion in Orange County

The largest body of ground water in Orange County is the coastal basin of the Santa Ana River, which yields most of the ground water produced in Orange County. The Santa Ana Gap is a coastal lowland lying between the Huntington Beach and Newport Mesas. This gap was formed by the Santa Ana River, which begins high in the San Bernardino Mountains and flows over 100 miles south-westerly to discharge into the Pacific Ocean at Huntington Beach.

The gap is an alluvial valley about 2.5 miles in width and extends about 4.5 miles inland. Its surface elevations range from sea level at the coast to about 25 feet at its inland portions, while the adjoining mesa surfaces have elevations ranging from 50 to 110 feet above sea level.

During the 1890s, agricultural interests were attracted to the flat fertile surface of the Santa Ana Gap, where artesian wells yielded water of excellent mineral quality. Until about 1920, water flowed freely from these wells. By the mid-1920s the increased production of ground water had led to the lowering of pressure levels in the shallow water-bearing zone to elevations below sea level. Consequently, encroachment of water from the ocean began to occur in the shallow zone, called the Talbert aquifer.

A wet period from 1936 to 1945 replenished the ground water basin and partially restored historic high water levels. During the period immediately following 1945, ground water was extracted in quantities that exceeded natural annual fresh water recharge, and a rapid decline in ground water levels ensued. In addition, upstream diversions from the Santa Ana River were reducing the flows to Orange County, resulting in less recharge to the basin. As the saline waters intruded from 1930 to 1960, a number of wells tapping the zones below the Talbert aquifer also began to experience intrusion.

The Orange County Water District

The Orange County Water District was formed in 1933 by a special act of the California legislature. The district has a broad authorization to protect and man-

age the ground water basin in Orange County. OCWD functions as a manager of the basin for those agencies that provide retail water service to consumers.

The district initially covered 163,000 acres inhabited by 60,000 people. Total water use in 1933 was 150,000 acre-feet, of which 86 percent was used for irrigation of agricultural land. Today the district covers nearly 220,000 acres and has a population of more than 2 million. Water usage has completely reversed since 1933, and urban use constitutes 94 percent of the district's total water demand. The basin supplies approximately 75 percent of northern Orange County's annual water demand, averaging 300,000 acre-feet. Although the basin contains between 10 million and 40 million acre-feet of water, its usable storage is limited by sea water intrusion and possible subsidence to approximately 1 million acre-feet.

Innovations to Prevent Seawater Intrusion

Recharging the basin.

With the importation of Colorado River water in 1940-1941 the district's water demands on the ground water basin were reduced. However, ground water levels continued to drop until 1954, when imported water was used to supplement the district's ground water replenishment program.

In 1956, with an accumulated overdraft of 705,000 acre-feet, water levels were at an historic low. The purchase of imported replenishment water escalated dramatically from approximately 80,000 acre-feet in 1957 to 235,000 acre-feet in 1963. More than 1.165 million acre-feet of imported water from the Colorado River was purchased for replenishment of the ground water basin during the period 1956 to 1965. After 1956, water levels began to recover and rose through 1964, despite the continuing drought.

The replenishment program was a success, reducing the accumulated overdraft to approximately 15,000 acre-feet. By 1964, average water levels in the basin were 24 feet above sea level, up from 20 feet below sea level in 1956 and equal to the average water level in the landmark year of 1944. Because of changes in the distribution of water in the aquifers, however, the average water levels inland were far above 1944 levels while those along the coast were far below what they were in 1944. Despite replenishment efforts, sea water intrusion continued along two areas of the coast, at the Alamitos Gap and the Talbert Gap.

Intrusion Barrier Projects

Together with the Los Angeles County Flood Control District, OCWD constructed the Alamitos Barrier Project located near the mouth of the San Gabriel River. By 1950 the ground water level in the Alamitos Gap, which straddles the boundary between Los Angeles and Orange Counties, was 30 feet below sea

level. By the spring of 1962, sea water intrusion had proceeded more than 3 miles up Alamitos Gap. Barrier operation began in 1965 with 14 injection wells and has expanded to 26 wells.

An average of 5,000 acre-feet of imported water purchased from MWD is injected at the Alamitos Barrier Project each year. The barrier has halted salt water intrusion in the Central Basin located in Los Angeles County and the Orange County basin, protecting them from further degradation. Operation of the barrier continues to be a joint project of the Los Angeles County Department of Public Works and OCWD.

By the late 1960s, district officials recognized that sea water intrusion of the Talbert Gap could not be averted solely by replenishment of the basin through its recharge operations and began construction of the Talbert Barrier Project. To provide a supply source for the Talbert Barrier, an advanced wastewater treatment plant, Water Factory 21, was built in 1973. The project includes a 15 mgd advanced wastewater treatment plant and a hydraulic barrier system consisting of 23 multipoint injection wells with 81 injection points. At present, injection water for Water Factory 21 is a blend of 14 mgd reclaimed wastewater and 9 mgd of ground water pumped from a deep aquifer zone that is not subject to sea water intrusion.

Water Factory 21 treats secondary effluent using lime recalcination, multimedia filtration, carbon adsorption, disinfection, and reverse osmosis. All components of the reclamation system and hydraulic barrier facilities have functioned well since operations began in 1976. The quality of the injected water has consistently met or exceeded all health regulatory agency requirements.

With the completion of the two sea water intrusion injection barriers, the ground water levels in the two basins now can be safely kept below sea level, which allows for a more efficient ground water management plan. The Alamitos Barrier and the Talbert Barrier have effectively halted sea water intrusion in the basin so that it can be used as a ground water storage reservoir, providing more access to available local supplies.

The Value of Averting Sea Water Intrusion

The principal economic effects on an area where the ground water basin is subjected to seawater intrusion are the impairment of the basin as a storage reservoir, the degradation and loss of the potable water supply stored in the basin, and the loss of the basin's value as a fresh water distribution system. Each of these functions, which can be impaired or completely destroyed by sea water intrusion, has tremendous economic value in a large basin area such as Orange County. If protected from intrusion, this water supply would continue to be fully available for use.

The Value of the Basin as a Storage Reservoir

The absence of precipitation during summer months reinforces the seasonal variation in the demand for water in southern California. Furthermore, average annual precipitation is not only modest but also highly variable. Dry years often come in succession for a decade or more. Thus ground water basins have functioned as natural regulators of runoff and as storage reservoirs for daily, cyclical, and seasonal peaking requirements. These requirements must be met either from surface storage facilities or from ground water basins.

In southern California standby pump and well capacity is much more economical to develop and maintain than surface storage and distribution facilities. When the additional sizing costs necessary to meet peaking requirements in surface distribution facilities are considered, the critical economic importance of ground water basins for peaking purposes in southern California becomes apparent. If ground water storage is not continuously available for peaking purposes, alternative surface facilities would be required. Based on the present value and scarcity of land and construction costs, these facilities would represent a cost of hundreds of millions of dollars.

Underground storage is also preferable in several respects to storage in surface reservoirs. Water stored underground does not evaporate, as it does in surface storage and aqueducts. If the water needs to be stored for long periods, evaporation losses can be a serious concern, especially in arid regions where evaporation rates are high.

In addition, natural runoff that percolates into a ground water basin loses economic value if it flows into a basin degraded by sea water. This fresh water supply of approximately 270,000 acre-feet per year in Orange County would become unusable as a potable source.

Value of the Fresh Water Distribution System

The ground water basin acts as a distribution system because water may be extracted in a wide area overlying the basin. If the basin is lost, then a distribution system to deliver the alternative surface supply to the consumers must be constructed. In addition, the abandonment of the capital investment in wells and pumping facilities would represent a substantial economic loss.

Value of Potable Water Supply in Basin

The dependency on imported sources is becoming less desirable for southern California. The Metropolitan Water District provides the region with two sources of imported water. One is from northern California through the State Water Project and the other is from the Colorado River. Environmental concerns over the San Joaquin/Delta River system have had an impact on State Water Project

FIGURE 6.1 Estimated annual cost of water to retail producers: With or without ground water basin.

resources, and Arizona and Nevada are looking to increase their allotment of Colorado River water. Access to Orange County's valuable local ground water resource decreases the district's dependence on this more costly, less reliable imported water supply.

Ground water is generally less expensive than imported water, primarily because of the development and transmission costs of the imported supplies. As seen in Figure 6.1 , it is projected that the value of Orange County's ground water over a 20-year period will be approximately $1.39 billion, and the value of imported water will be as high as $4.80 billion. Figure 6.1 shows the annual cost of water for the district with and without a ground water basin and indicates that the present value difference of the two scenarios is approximately $3.41 billion; this is one measure of the value of the ground water basin although it presumably represents a lower bound estimate of the true value.

Under current conditions with the ground water basin, retail producers within the district are able to meet approximately 75 percent of their demands by pumping from the ground water basin. The price of this water is estimated at $138 per acre-foot. Which includes a pumping assessment of $85 per acre-foot and an energy cost of $53 per acre-foot.

In 1995 approximately 300,000 acre-foot of water was pumped from the ground water basin. Approximately 130,000 acre-foot of imported water was purchased from MWD. Of the water purchased from MWD, approximately 100,000 acre-foot was noninterruptible treated water at a price of $426 per acre-foot. The remaining 30,000 was purchased as seasonal shift water at a price of $286 per acre-foot. By having access to a ground water basin, retail producers are able to participate in the MWD seasonal shift program, which allows them to purchase imported water at a discount during the winter months.

The total cost of purchasing these three types of water (ground water, imported, and imported ''seasonal shift") by the retail producers to serve their customers was approximately $92.6 million in 1995. Alternatively, if the ground water basin were not available, the entire 430,000 acre-foot of necessary supplies would have to be purchased from the MWD at the rate of $426 per acre-foot. The total cost of this water is approximately $183 million, which is roughly twice the water supply cost when the ground water basin is available.

In addition, the savings derived from the use of the ground water basin, compared to the cost of sea water intrusion facilities, offsets the cost of constructing and operating a barrier. For instance, capital and construction costs for Water Factory 21 were approximately $57 million (in 1995 dollars), with an average operation cost of $6 million per year.

Although a dollar value cannot readily be assigned to it, the value of the ground water basin for an emergency water supply and distribution system constitutes an important justification for protection. If the surface distribution system should become unusable because of a natural or human-made emergency or the imported supply were interrupted, reduced, or contaminated, ground water could eliminate tremendous economic loss or even assure survival. The value of an emergency supply would also be enormous during a period of extended drought. The value of the basin would increase with the severity and duration of the emergency.

Ground water and ground water basins are valuable resources because of the quantity of supply and the possibility for storage and distribution. William Blomquist stated in "dividing the Waters," "When a ground water basin is destroyed, water users not only lose the comparative advantages of underground water storage and distribution, but they also suffer enormous financial costs. Replacement of ground water storage and distribution capacity, even if feasible, would be an economic disaster" (Blomquist, 1992).

Communities in Orange County would be forced to turn to more costly imported water to meet their water supply needs if the ground water basin were lost to sea water intrusion. To replace local ground water supplies in Orange County with enough imported water from the MWD of southern California to maintain current levels of use for a 20-year period would cost water users at least $4.8 billion dollars

Blomquist, W. A. 1992. Dividing the Waters: Governing Ground Water in Southern California. San Francisco: ICS Press.

INCORPORATING THE VALUE OF GROUND WATER IN SUPERFUND DECISION-MAKING Woburn, Massachusetts

Knowing the value of ground water is important in evaluating remediation alternatives for Superfund sites involving ground water resources. Unlike other case studies where the primary concerns are maintaining the quantity and/or quality of the ground water, in the Superfund setting the ground water resource has been contaminated and the issue is primarily one of restoring quality. Thus the value of the ground water will be reflected in the values associated with moving from a situation where the aquifer is not usable to situations where some uses can be made of the aquifer.

In this section a brief overview is provided of a study on the costs and benefits of ground water remediation for a Superfund site located in Woburn, Massachusetts (Spofford et al., 1989). This study, conducted by Resources for the Future (RFF), illustrates the importance of valuing ground water as a component in a cost-benefit analysis of ground water remediation decisions and the complexities that such an assessment involves.

In 1980 the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) was enacted to facilitate cleanup of the nation's worst hazardous waste sites. CERCLA and the subsequent 1986 Superfund Amendments and Reauthorization Act (SARA) created a fund, the Superfund, to pay for site cleanup when parties who caused the contamination could not be found or could not pay for the cleanup themselves.

Many of the Superfund sites involve contamination of ground water resources or are listed as potential threats to local public water supply wells (Canter and Sabatini, 1994). Contaminants found in public ground water supplies are mainly volatile organic contaminants (VOCs) such as TCE (trichloroethylene), PCE (tetrachloroethylene), 1,2-DCE (dichloroethylene), vinyl chloride, and benzene; other contaminants commonly present in various combinations included heavy metals (chromium, lead, and arsenic) and polynuclear aromatic hydrocarbons (PAHs).

Economic considerations should play a key role in determining the extent to which ground water remediation is pursued at these sites. If the expected costs of cleanup exceed the expected benefits of improving the quality of the ground water, then the economically rational alternative is not to remediate the ground water. This might be the case if the contaminated ground water resource is not used and is perceived to have a low potential for future use or if there are relatively low-cost substitutes. Alternatively, there may be different levels of remediation depending upon the future uses and expected costs of the ground water resources. Thus, in the context of Superfund remediation, the value of

ground water is reflected in the benefits associated with improvements in the quality of the contaminated aquifer, and the value will depend upon the level of remediation. In addition, the benefits of remediation cannot exceed the total economic value of the ground water for that level of remediation.

Analysis of the Woburn Superfund Site

The Superfund site in east Woburn, Massachusetts, included two municipal water supply wells, which had been found to be contaminated with chlorinated solvents in 1979. Prior to contamination, the local aquifer segment had served as a drinking water supply for the city of Woburn and as a water source for several industrial users. Possible levels of remediation included restoring the aquifer to drinking water quality as well as maintaining the aquifer for nonconsumptive purposes only.

Because of measured contaminant concentrations and related health concerns, TCE had been identified as the key contaminant for remediation planning. The costs of remediation that were analyzed in the RFF study were based on withdrawal of the contaminated ground water from the aquifer using extraction wells, treatment using aeration towers, and return of the treated water to the aquifer using injection wells.

In estimating the benefits of remediation, the RFF study considered only those benefits that were associated with direct use of the aquifer. The benefits that were not measured in the RFF study but that should be considered in a study designed to measure the TEV of the contaminated aquifer include reductions in losses of recreational opportunities; reductions in ecological damages; reductions in losses of intrinsic value, including bequest and existence values; reductions in health damages due to morbidity as opposed to losses due to mortality (these were included in the assessment of health damages in the RFF study); and reductions in fear and anxiety associated with switching from a water supply that is perceived to be safe (bottled water or a municipal water source) to a water supply that may be perceived as unsafe (the remediated ground water). As the authors indicate, estimates of these benefits were not included in the report since the primary purpose of the research was to illustrate the impact of uncertainties on measures of net benefits as opposed to replicating the true benefits and costs for a specific site, and study funds were limited (Spofford et al., 1989).

To estimate the benefits of remediation, the researchers hypothesized two management contexts. The first is fairly simple and basically involved using an alternative water supply for the entire city of Woburn. The contaminated ground water supply was assumed to be replaced with water purchased from the Massachusetts Water Resources Authority (MWRA), which was the least expensive alternative available to the city. The additional cost per gallon of using MWRA water as opposed to pumping the aquifer multiplied by the total use of water in the city provides a lower bound on the value of the aquifer in a given year. (The

study estimated this cost to be approximately $0.32 per 1,000 gallons in 1986.) This method of valuing the ground water resource is basically a replacement cost approach, which does not reflect the values people may attach to clean ground water or the disutility attached to knowing that the aquifer is contaminated.

The second management context developed in the study was more complex and was based on the underlying assumption that all the households that had previously relied on private wells as opposed to a municipal water supply system would continue to use "contaminated" water, although the extent of uses by these households could vary. The study hypothesized a range of situations from ones in which consumers avoided using the water for drinking, food preparation, and personal hygiene, in which case the direct use value of the ground water would be reflected in the costs of purchasing alternative drinking water supplies, to situations where individuals continued to consume the contaminated ground water. In the latter situation, the direct use value of the ground water would be reflected in the health costs, or damages, associated with the consumption of contaminated water.

To implement this second management context, a model of consumer decision-making under uncertainty that incorporated perceived health risks associated with consumption of contaminated water and the costs of alternative drinking supplies (such as bottled water) serves as the basis for determining how individuals made their consumption choices and for constructing a demand curve for ground water. The value of ground water can then be measured as the area under the demand curve. The consumers' demand for ground water depends upon many factors, including the normal demand determinants (income, price of substitutes, etc.) as well as attitudes toward perceived health risks and the levels of TCE in the water. Over time, the demand for ground water may shift as these underlying factors change, and thus the value of the ground water will change.

The direct use value of the ground water in this second management context will depend upon the extent to which the contaminated ground water is consumed as a source of drinking water. For example, if the water is not consumed as a source of drinking water, then the direct use value of the ground water would be reflected primarily in the costs of bottled water, which substitutes for the human consumption component of per capita water consumption. RFF estimated this level of use to be approximately 3.65 gallons per person per day out of a total use level of 130 gallons per person per day. In this context the direct use value of ground water can be estimated using the estimates of avoidance costs, but as in the first management context, this value does not reflect any of the indirect or nonuse values of the aquifer.

If consumers continue to drink the contaminated water from the private wells, there are no avoidance costs per se, and the value of the ground water is reflected in the health costs associated with its consumption as drinking water plus the indirect or option value. These two extremes provide some bounds on the direct use value of ground water or, alternatively, provide bounds on the

average benefits of ground water remediation for the management context where households in the area still continue to use private wells.

As the RFF study noted, estimates of the benefits of ground water remediation depend on many assumptions. For example, in specifying the model of consumer behavior, assumptions are needed regarding the level of the potential health damages, discount rates, concentrations of TCE over time in the aquifer, and future costs of alternative drinking water supplies. These assumptions affect decisions on avoidance costs and measures of health damages and thus the direct use value attached to ground water by individuals who have private water supply wells.

An additional source of uncertainty relates to the behavior of individuals confronted with different levels of TCE in drinking water that exceed the standard. The extent to which individuals will avoid contaminated well water and their willingness to pay for such avoidance varies with perceived risks to health of different levels of TCE in the drinking water. The authors cite the lack of an adequate methodology for measuring perceived health risks as a major limitation in using this approach to quantify the value of ground water or using this management context as a basis for remediation decisions (Spofford et al., 1989).

The general findings of the RFF report indicate that for the first management context the net benefits of remediation were positive, indicating that from an economic perspective it is more efficient to remediate the aquifer than to continue using an alternative water supply. This finding also held true for the second management context, where it was assumed that all the households affected by the contaminated aquifer had previously relied on private wells: it is more efficient to remediate the ground water than it is to permit the exposed population to continue to use contaminated well water. Comparisons among the net benefits for alternative remediation designs would shed some light on the relative efficiency of alternative cleanup options.

Conclusions

Several conclusions pertaining to the value of ground water can be drawn from the Woburn case study:

Economic valuation of ground water for the specific hazardous waste site is crucial to making informed decisions regarding the status of remedial action. The conclusions reached will be site specific, depending on the nature of the contaminant and the current uses of the aquifer.

Determining the full economic value of the aquifer will often be difficult because of the indirect nature of many of the benefits. However, assessing the direct use benefits poses a much simpler task and may serve as a lower bound on the benefit estimates.

Technical and economic uncertainties must be recognized in quantifying

the value of the ground water resource. While the RFF study noted many uncertainties, those that pertain to the benefit side of the equation are substantial enough to warrant further research.

Canter, L. W., and D. A. Sabatini. 1994. Contamination of public ground water supplies by Superfund sites. International Journal of Environmental Studies, Part B 46:35-57.

Spofford, W. O., A. J. Krupnick, and E. F. Wood. 1989. Uncertainties in estimates of the costs and benefits of ground water remediation: Results of a cost-benefit analysis. Discussion Paper QE 89-15. Washington, D.C.: Resources for the Future.

APPLYING GROUND WATER VALUATION TECHNIQUES Tucson, Arizona

The objective of this case study is to illustrate how incorporating the economic concepts and techniques developed in Chapters 1 through 4 of this report can assist in management of ground water resources over the long term. Unlike the previous case studies, which are limited to reviews of existing work and demonstrations of value of ground water in various contexts, the Tucson case study illustrates the application of the conceptual valuation framework described in Chapter 3 .

The Tucson case study is notable both for the diversity of ground water services it illustrates as well as for the urgency of policy attention the area's water management system requires. The intent is not to calculate the incremental change in value of services provided by ground water in the "with treatment" and "without treatment" condition but to identify the steps required to implement the valuation process in a real-world context. This case study simplifies and abstracts information from the actual Tucson situation in order to better illustrate the role of economic valuation in improving management of ground water resources.

Ground water provides numerous extractive services in Tucson, including residential, commercial, agricultural, and industrial water uses. The region's ground water resources also provide a range of in situ services, such as prevention of land subsidence, reservoir functions that will buffer future drought associated with shortages in surface water supplies, bequest value, and ecological services such as maintenance of riparian habitat. Policy-makers in Arizona have struggled to reduce the extent to which ground water supplies in the region are mined. Ground water policies have been put in place as a mechanism to ration and conserve supplies for future use. Alternative renewable surface water sup-

plies to augment and substitute for ground water have been developed at great cost in anticipation of future demands.

As is the common practice, the price of ground water in Tucson does not reflect any of the commodity values, including the extractive and in situ service flow values. It is based on the cost of distribution, including capital, operations and maintenance, and administrative costs. Ground water is thus the least expensive and highest-quality water supply available. In a dynamic pricing environment, water would be priced to incorporate marginal extraction cost and user cost and would reflect the values of all use and nonuse service flows.

Instead of relying on price to ration scarce ground water supplies, Arizona water managers have focused on regulations and other nonprice policies to reduce water use. The total economic value of ground water supplies in any location is affected by the institutional, policy, and hydrological constraints that shape current and future use and define management options. Policy-makers must recognize this institutional and political context in order to make an accurate assessment of the services ground water provides.

Tucson's Water Resources

Tucson has relied on a high-quality ground water supply to meet all of its demands for water. Ground water use has exceeded natural recharge (precipitation and return flows) annually since 1940, leading to a situation in which over half of annual use is from mined ground water. In Tucson's desert climate, there are no viable local renewable surface supplies (other than municipal effluent) to substitute for ground water resources.

Although there is a substantial amount of ground water in the aquifer, dependence on mined ground water has a number of negative consequences. Falling ground water levels have eliminated many of the free-flowing rivers, streams, and associated riparian habitat in most of southern Arizona. The risk of subsidence with continued depletion of ground water is quite severe in the central Tucson wellfield that underlies the city of Tucson; a worst-case estimate is that the ground level will drop by 12 feet by 2024 (Hanson and Benedict, 1994). In addition, the most productive parts of the aquifer are nearly exhausted, which can be expected to lead to substantial increases in pumping costs. As a consequence of municipal pumping in the central Tucson wellfield, ground water levels have fallen as much as 170 feet.

Legal and Institutional Constraints

Legal and institutional constraints on ground water use frame the valuation context. The Tucson Active Management Area (AMA) is one of five AMAs in the state established pursuant to the 1980 Groundwater Management Code. The Tucson AMA has a statutory goal of safe yield by 2025. The safe yield goal

requires that the amount of ground water used on an average annual basis must not exceed the amount that is naturally or artificially recharged.

The code established stringent limitations on ground water use within AMAs. Farmers receive an allocation based on historic cropping patterns assuming maximum irrigation efficiency. No irrigation of new agricultural land is allowed. Allocations to municipal water providers are on the basis of their average historical use in gallons per capita per day. A "reasonable" reduction is required within each water company, based on an evaluation of conservation potential. All large industries are directly regulated, using an approach based on either allotment (for golf courses) or best management practices (for copper mines, sand and gravel, electric power, etc.).

In addition to demand management policies, there are economic incentives to discourage development of new ground water uses and encourage use of renewable supplies, primarily imported surface supplies (from the Central Arizona Project, or CAP) and wastewater effluent. One of the primary tools for moving from the current state of overdraft to the safe-yield condition is the 100-Year Assured Water Supply (AWS) Program. This program, administered by the Arizona Department of Water Resources, severely limits the amount of ground water that can be used for municipal purposes. The cumulative amount of ground water that the city of Tucson can legally withdraw as part of its AWS is approximately 3.5 million acre-feet. If the city were to rely solely on ground water for its supply, its cumulative ground water withdrawals would exceed this amount before 2030. Without utilization of Tucson's CAP allocation, Tucson would not qualify for a designation of AWS.

Demand for Water

The population of the Tucson AMA is estimated at 750,000 for 1995 and is projected to reach 1.3 million by 2025. The majority (78 percent) of the population in the Tucson AMA is served by Tucson Water, the water utility operated by the city of Tucson.

Total water use in the AMA is currently close to 300,000 acre-feet per year (see Table 6.2 ); more than half of the total water supply is mined ground water.

TABLE 6.2 Tucson AMA Water Demand

Under current population projections, total demand for water in the Tucson AMA is expected to be approximately 427,000 acre-feet per year by 2025 (Arizona Department of Water Resources, 1995 and 1996), increasing by 50 percent from the 1995 levels.

Development of Alternative Renewable Water Supplies: The Central Arizona Project

The Central Arizona Project is a 330-mile canal built by the U.S. Bureau of Reclamation, with pumping stations and associated distribution and flood control facilities. It extends from Lake Havasu to Tucson; the total cost, including federal, local, and private investment, exceeds $4 billion. A major feature that has not been constructed is a reliability feature for Tucson, a terminal storage reservoir. Tucson has the largest municipal allocation of Colorado River water—148,200 acre-feet.

Applying the Economic Valuation Framework in Tucson

Policy constraints on use of renewable supplies.

At the end of 1992, nearly half of Tucson Water's customers (84,000 metered connections) began receiving CAP water. After unanticipated water-quality problems arose (rusty water, turbidity, taste and odor problems, and bursting pipes), 37,000 metered connections in the older parts of town were returned to ground water in October 1993. Water-quality problems were attributed to old cast iron and galvanized steel water mains and household plumbing, combined with pH and other chemical attributes of the imported surface water that encouraged corrosion.

In January 1995, the Tucson City Council voted not to directly deliver CAP water to customers until the water-quality problems were fixed. On November 7, 1995, the citizens of Tucson approved a citizen's initiative (Proposition 200; the Water Consumer Protection Act) prohibiting direct delivery of CAP water to customers unless it is treated to the same quality as ground water for hardness, salinity, and dissolved organic material. This can be accomplished only through advanced treatment, probably reverse osmosis or nanofiltration.

Defining the Management Options Within Current Constraints

Under the existing constraints, Tucson's water planners must define feasible options for meeting Tucson's present and future water needs. These options are constrained by the above policies and laws.

In this application of the conceptual framework, recharging the untreated CAP water supplies into overdrafted aquifers is the base or "without-treatment"

case. Water to meet all demands would continue to be pumped from ground water supplies in a conjunctive management scheme. Treating surface water with advanced membrane filtration to remove salinity and organic material prior to direct delivery to customers is the "with-treatment" option. It is important to note that in this example the valuation techniques are not used to calculate the TEV for ground water. Rather, they are used to evaluate the change in ground water value that results from a particular policy decision.

Identifying Changes in the Quantity and Quality of Ground Water

Initially, hydrologists must establish the quantity and quality of Tucson's ground water resources. Policy-makers need to assess how the "with-treatment" management option would change this baseline quantity and quality. Since the recharge option is considered the baseline, an accurate assessment of the impacts of artificial recharge potential is also needed.

The quality of the water that is pumped depends on where the CAP water is recharged relative to the location of recovery, the nature of the aquifer materials, the degree of blending with local ground water, the distance the water travels in the subsurface, and the presence of any source of contamination. The Groundwater Management Code allows an entity to recharge in one location and recover at a distant location within the same AMA, provided certain criteria are met.

Identifying Changes in Service Flows

The next step is to link the management decision with the changes that result in the time path of services that the ground water will provide under the alternative. This is where the critical input from scientists and hydrologists is required. The "without" scenario describes the services provided in the base case and the incremental changes that result from substituting treated surface water supplies.

Incremental Changes in Extractive Service Flows

Although Colorado River water is viewed as a high-quality water source for millions of people in the Southwest, there are several ways in which recharge using CAP water can reduce the quality of the water available for extractive uses. CAP water as treated with conventional surface water treatment methods meets all of the EPA maximum contaminant levels (MCLs), but the aesthetics, taste, and hardness of CAP water were a major issue for Tucson Water when the supply was directly delivered to customers from 1992 to 1994. Any use of CAP water in the basin, whether through direct delivery or recharge, will increase the salinity level of the aquifers within the Tucson AMA. The only way to avoid the increase in salinity is to utilize an advanced treatment approach (probably using membrane technology) to remove the salts. This technology is expensive; it is there-

fore important to identify the value of the changes in service flows that would be provided to decide whether the additional expense is justified. Unlike native ground water, surface water tends to contain pathogens, some of which are difficult to remove.

CAP water has roughly twice the total dissolved solids (TDS) and salinity of the local ground water, and it contains organic precursors that can, in combination with chlorine, cause formation of trihalomethanes, a group of chemicals known as carcinogens. Depending on the contact time and travel through aquifer materials, the recharge process may reduce the organics and disease-causing organisms (bacteria and viruses), but it does not affect the salinity and hardness of the water. Therefore, recharge of untreated CAP water is likely to influence the quality of the water in the aquifer. To the degree that this same water is recovered for delivery to municipal customers, costs for end users will increase, because higher salinity and hardness translate into the need to replace appliances more frequently and increase the maintenance of irrigation and cooling systems.

Depending on the location of the recharge, impact on water quality may not be substantial. For example, there are areas in the AMA where the end users may not experience negative effects from the higher salinity (agriculture usually has few problems with 700 mg/l TDS). However, it is important to note that the salt load brought in with the CAP water will be distributed in the vicinity of the recharge facilities and could migrate over time to surrounding aquifer materials unless the withdrawal facilities are in the same location.

Recharge will have a positive effect on extractive values if the water is recharged in the vicinity of wells supporting extractive uses. However, several of the prime recharge locations are not near the central Tucson wellfield.

The treatment option requires the development of an advanced water treatment facility, probably nanofiltration or reverse osmosis, to remove the salts, organics and solids as required by Proposition 200. Aside from the capital cost of the facility, which is several hundred million dollars, a major concern is disposal of the brine stream. Depending on how this salt-laden wastewater is directed, the effect on ground water service flows varies. The brine stream from such plants is normally discharged into surface water or injected into deep wells. Neither of these options is available in Tucson. The most likely disposal alternative is evaporation ponds, with the sludge deposited in lined landfills.

The advanced treatment option provides the highest-quality water for municipal uses. It would not affect the quality or quantity of water for agriculture or mining. Direct delivery has many benefits, since it leaves the ground water in place and should allow for at least partial recovery of all of Tucson's wellfields. Advanced treatment will limit the avoidance costs of many municipal end users, who would otherwise buy bottled water, resort to point-of-use treatment devices, or replace their appliances more frequently as a result of using CAP water either directly or after recharge. Membrane treatment will also eliminate the possibility of Cryptosporidium or Giardia outbreaks, if the treated water is blended with

ground water rather than surface water before delivery to customers. Blending of membrane-treated water is generally recommended to improve the taste, reduce corrosiveness, and reduce costs.

Depending on the brine stream disposal method (most likely through evaporation ponds), there could be localized impacts on water quality in the aquifer. Another option is to deliver the brine to existing wastewater treatment plants, to be blended with less salty effluent before discharge. This would result in high salinity downstream from the wastewater facilities. The ground water quality in these areas could be degraded, affecting service flows.

Incremental Changes in In Situ Service Flows

In situ service flows can be categorized as use and nonuse. For Tucson, in situ uses include use of the stock to: (1) assimilate contaminated runoff from extractive uses and attenuate existing areas of ground water contamination; (2) buffer future drought on the Colorado River system in a conjunctive use scheme; and (3) support the soil structure in the aquifer and prevent subsidence. Additional in situ services include: existence value (based on a desire to protect the aquifer as part of the natural system); bequest value (the intent to protect water for future generations); and ecological services in which ground water supports surface water flows and riparian habitat.

Recharge Effects

If recharge is used to limit water-level declines in areas that are prone to compaction, it will help support in situ uses. There are two ways to limit the subsidence potential in the central Tucson wellfield: reduce the amount of future pumping there by withdrawing ground water elsewhere and recharging within the central wellfield. The former is easier in this case, since Proposition 200 precludes an effective way to recharge in the central basin (injection recharge). Surface recharge in areas of subsidence can actually accelerate subsidence, since its weight adds stress to the aquifer materials.

Recharge results in the storage of water for future use, which increases the buffer value of the aquifer. If the water is available for future generations, then it supports the bequest value as well. Those who stress the existence value of the aquifer would likely prefer that higher-quality ground water be maintained rather than degraded by CAP water through recharge. However, it is not clear what the quantity/quality trade-off is for existence value.

If recharge occurs in the vicinity of streambeds, it is likely to support riparian habitat or provide for an expansion of habitat values. Recharge facilities can easily be designed with a habitat/recreation component, guaranteeing a positive impact on ecological values. However, there are costs associated with increasing habitat values, particularly if threatened or endangered species become a compo-

nent of the new habitat. The costs are associated with endangered species regulations, which could require permanent maintenance of the artificially created habitat to protect a particular species. This introduces a cost associated with irreversibility—the decision to recharge could be legally required to continue even if another water use option were more desirable from other perspectives.

Advanced Treatment Effects

Substitution of treated surface supplies for pumped ground water means that most of the wellfields in the vicinity of key riparian areas would not be used often. In addition, the regional water tables should rise in the wellfields because of natural recharge. Both of these occurrences should increase the quantity of water available for ecological service flows.

The direct delivery option with advanced treatment protects both the quality (depending on the disposal of the brine stream) and the quantity of water in the aquifer. The buffer value of ground water would be the highest in this option, since there will definitely be future supply shortages, during which consumers will rely on ground water. By ending the current pumping in the central wellfield, additional subsidence is likely to be avoided. Ground water will be available for future generations, and those who value existence of the aquifer would have the quality as well as the quantity protected (at least in theory).

Valuing Changes in Extractive Service Flows

Incremental Extraction Costs (Marginal Benefits of Quality Changes) . In the Tucson example, the difference in the extractive service flows between the two options is related primarily to the reduced pumping costs and the reduced number of wells required to serve the community, as well as the water-quality issues caused by recharge of untreated CAP water that occurs in the one option. If the recharge does not occur in the vicinity of existing wellfields, water levels will continue to decline in those areas. Lowering the water level has two economic effects: it increases the amount of energy required to pump each acre-foot of water, and it results in the need to drill more wells since the most productive part of the aquifer may be exhausted. Direct delivery after treatment eliminates these costs because there would be little dependence on ground water as a supply except during infrequent CAP shortages and canal shutdowns.

The only methods identified for evaluating the change in services related to pumping costs for extractive purposes were standard engineering analysis techniques—increased energy costs associated with increased head and well drilling and system extension costs. The major issues associated with this type of analysis are uncertainty and discounting. It is unclear how productive deeper parts of the aquifer will be and how many wells will be required to replace the capacity of the existing high-capacity wells. The time element is also uncertain; it is not

known how many years will pass before expanded infrastructure is required to maintain current production levels. Since the growth rate on the city's system is 1-2 percent per year and long-term outages may occur on the CAP canal, pumping capacity must be expanded to meet the increased demand as well.

Incremental Quality Costs (Marginal Benefits of Quality Changes) . There is an additional reduction in service flows as the water level drops (assuming that recharge does not occur in the vicinity of production wells). The water that is withdrawn at greater depth in the Tucson basin is higher in salinity and TDS. This lower quality, like that of CAP water, will increase costs for end users in the residential, commercial, and industrial sectors. Households and firms may buy bottled water or in-home treatment devices (avoidance costs) or replace appliances more frequently. Industries and individuals with private wells will be similarly affected. These costs do not occur in the case of the direct delivery with advanced treatment option.

Possible techniques to evaluate the costs associated with reduced water quality include the averting behavior method and the contingent valuation method. To the extent that wellhead treatment or well replacement is required, standard engineering techniques must be used.

Opportunity Costs (Marginal User Costs) . Ground water in the Tucson area is essentially a stock resource, since it is not naturally replenished at a high rate. Using a unit of ground water today means that it will not be available for future use. Methods that can be used to measure this ''dynamic" opportunity cost include dynamic programming and intertemporal (optimal) control techniques. Although these methods are limited to measuring use values, they may be valuable in evaluating alternative options.

Valuing Changes in In Situ Service Flows

Subsidence Avoidance . The risk of subsidence is high in the central Tucson basin, where 60 percent of the city's water supply is currently pumped. In the recharge option, some pumping in the central wellfield would continue without replenishment in the same location. Subsidence costs include disruption of all utilities (sewer, water, electric, gas, etc.); damage to roads and buildings; and a possible permanent reduction in storage capacity of the aquifer. The direct delivery with treatment option eliminates the pumpage in the central wellfield, thereby essentially eliminating the possibility of increasing the rate of subsidence.

There are two techniques that can be used to measure the benefits associated with subsidence reduction. To the extent that utilities must be repaired or rerouted and roads and buildings must be repaired, standard production cost estimates can be prepared. The other method is the hedonic price (property value) method, since some areas are at considerable risk of subsidence and others are

unlikely to experience any damage. Differences in market prices across these zones may begin to reflect these costs.

The degree of uncertainty associated with predicting substidence damage is high. It is unclear how long it will take after an aquifer is dewatered for the compaction to occur. It is also unclear whether the whole basin will settle as a unit or whether it will settle differentially, causing subsidence cracks and substantially more damage. The normal pattern is that the cracking occurs near the edge of the basin, and downtown Tucson is near the base of the Tucson mountains. A risk/probability assessment may be required.

Reservoir Function . In some aquifers subsidence causes irreversible damage to the water-holding capacity because rewetting these areas fails to have any rebound effect. The irreversible aspects of subsidence need to be taken into account, at least from a qualitative perspective. Engineering analyses can be used to compare lost storage capacity to the costs of alternative storage facilities, such as reservoirs.

Buffer Value . A ground water value that is lost under the recharge option is the ability to buffer the effect of drought on the CAP system. This value is not as high in the recharge option, since all customers are receiving pumped ground water and continuous delivery is not critical. If a direct delivery option were selected in the future, however, the buffer value of the aquifer would have been lost if most of the ground water supply in the vicinity of the wells had been removed.

Methods associated with estimating buffer value, such as intertemporal optimization, may be applied (Tsur and Graham-Tomasi, 1991).

Existence Value . Certain values associated with maintaining the ground water aquifer intact are unrelated to any function or service the aquifer provides. This value is difficult to describe, so methods of estimating it are limited. The most likely technique to establish this value is the contingent valuation method.

Habitat Values Related to Water Quantity . Higher water levels in the vicinity of some proposed recharge sites are likely to enhance habitat values. In addition, recharge sites can be designed with habitat enhancement as a component. However, in comparing the two options, it should be noted that it may be possible to create habitat using the brine stream from the advanced treatment facility. The options for improving local habitat due to recharge are offset by the probability that existing mature riparian habitat (such as the Tanque Verde Creek area) in the Tuscon basin could be destroyed by continued pumping of the ground water.

Because impacts on habitat are visible only in limited areas, the hedonic price method (based on differences in property values) may be useful. Other

methods that can be employed for evaluating the recreational/aesthetic values of habitat include contingent valuation and travel cost. Sources of uncertainty include lack of definitive information about the relationship of ground water level and habitat quality, the length of time it will take for dewatering to occur, and the limited number of remaining high-quality habitats to evaluate.

Habitat Values Related to Water Quality. The recharge of untreated CAP water will increase the aquifer salinity in the vicinity of the recharge site and in areas that are down-gradient from the recharge site. It is unclear whether the increased salt levels will have any negative effect on the development or maintenance of high-quality ecosystems. However, it is unlikely that salinity and TDS concentrations in the CAP will have a measurable effect on mature vegetation. If it can be demonstrated that mature riparian vegetation or mammals and birds are affected, it is possible that salt-avoidance ecological values can be measured using the contingent valuation or travel cost method.

Based on this descriptive approach for applying the valuation framework presented in Chapter 3 , the following conclusions can be drawn:

The treatment option is likely to have a higher benefit/cost ratio when the TEV of ground water is considered.

Engineering analyses (changes in production costs) may continue to be used to establish costs where extractive services are a large component of cost, so long as costs are assessed at both the household level and the utility level.

Quality issues may represent a more crucial impact on service flows than do quantity issues.

There are any number of scientific and economic uncertainties associated with the use of ground water valuation methods.

Arizona Department of Water Resources. 1995. Proposal to Increase the Use of Colorado River Water in the State of Arizona. Arizona Department of Water Resources, Tucson, Arizona.

Arizona Department of Water Resources. 1996. State of the AMA: Tucson Active Management Area. Arizona Department of Water Resources, Tucson, Arizona.

Hanson, R. T., and J. F. Benedict. 1994. Simulation of ground water flow and potential land subsidence, Upper Santa Cruz Basin, Arizona. U.S. Geological Survey Water Resources Investigations Report 93-4196.

Tsur, Y., and T. Graham-Tomasi. 1991. The buffer value of ground water with stochastic surface water supplies. Journal of Environmental Economics and Management (21):201-224.

LESSONS LEARNED

Even though the case studies presented in this chapter are diverse, they share themes that provide the basis for observations and lessons.

Each study involves unique hydrogeological features, ground water quality, uses of the resource, institutional requirements and constraints, and political contexts. Although the principles of the valuation framework described in Chapter 3 can be transferred, then, limited opportunities exist for transfer of benefits in subsequent studies.

The case studies clearly demonstrate a range of ground water services even if comprehensive valuation studies have not yet been accomplished. Trade-offs in decision-making can be made based on descriptive (qualitative) information about this range. Clearly, quantification of the values of such services would provide more complete information for decision-making.

These case studies highlighted the extractive value (service) of ground water. Several studies, however, recognized other services and TEV, and some focused on changes in value at the margin. Accordingly, ground water valuation studies should consider all components of TEV even though not all can currently be quantified. This approach would provide more complete information for subsequent decisions.

Several cases illustrate the classic natural resource scarcity phenomenon where market indicators have been given only limited consideration relative to depletion. A price regime that more nearly mimics the market appears to be at least one of the ingredients of more rational water management. If that course is to prove fruitful for the long run, we probably must find a way to unbundle water demand and supply among such major extractive uses as drinking, bathing, laundry, lawn watering, and car washing—the variety of water uses likely to be valued very differently. Unbundling could involve dual water systems, or a single system with special treatment measures for drinking water, or creative water use accounting schemes.

Some of the case studies identified concerns associated with human health risks from extractive uses of contaminated ground water. These concerns underscore the importance of carefully designed epidemiological studies, though even these are scarcely conclusive by themselves. Further, in the absence of epidemiological studies or information, debate will continue regarding actual and perceived health risks associated with degraded ground water.

Ecological services provided by ground water are recognized in several cases; however, there appears to be a dearth of information on how to quantify and value ecological benefits. This need can be further emphasized by considering the contributions of ground water to the base flow of streams, maintenance of wetlands and their associated hydrological and biological functions, and the provision of riparian habitat.

Technical and economic uncertainties must be recognized in efforts to develop site-specific ground water valuation information. Each of the case studies provides illustrations of such uncertainties. For example, in ground water valuation studies for Superfund sites, stochastic modeling of the contamination problem and potential effectiveness of cleanup measures should be used to develop ranges of resultant information that can be viewed as a type of "sensitivity analysis." Decision-makers should also consider the possible influences of uncertainties and nondelineated costs and benefits (of ground water services) as they interpret information.

Ground water valuation studies must recognize the importance and limitations of the institutional and political context, which can lead to conflicts in conducting valuation studies and interpreting their results and influence on subsequent policies and decisions.

Planning and implementation of valuation studies require the interdisciplinary efforts of hydrogeologists, engineers, environmental scientists, and economists, who must be able to interact with and learn from related disciplines.

Because water in the United State has not been traded in markets, there is no meaningful estimate of what it would cost if it were traded. But failing to establish ground water's value—for in situ uses such as sustaining wetlands as well as for extractive uses such as agriculture—will lead to continued overuse and degradation of the nation's aquifers.

In Valuing Ground Water an interdisciplinary committee integrates the latest economic, legal, and physical knowledge about ground water and methods for valuing this resource, making it comprehensible to decision-makers involved in Superfund cleanup efforts, local wellhead protection programs, water allocation, and other water-related management issues. Using the concept of total economic value, this volume provides a framework for calculating the economic value of ground water and evaluating tradeoffs between competing uses of it. Included are seven case studies where ground-water valuation has been or could be used in decisionmaking.

The committee examines trends in ground-water management, factors that contribute to its value, and issues surrounding ground-water allocation and legal rights to its use. The book discusses economic valuation of natural resources and reviews several valuation methods.

Presenting conclusions, recommendations, and research priorities, Valuing Ground Water will be of interest to those concerned about ground-water issues: policymakers, regulators, economists, attorneys, researchers, resource managers, and environmental advocates.

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Making local economies prosperous and resilient: The case for a modern Economic Development Administration

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Amy liu , amy liu vice president - metropolitan policy program, adeline m. and alfred i. johnson chair in urban and metropolitan policy @amy_liuw brad mcdearman , brad mcdearman nonresident senior fellow - brookings metro xavier de souza briggs , xavier de souza briggs senior fellow - brookings metro @xavbriggs mark muro , mark muro senior fellow - brookings metro @markmuro1 anthony f. pipa , anthony f. pipa senior fellow - global economy and development , center for sustainable development @anthonypipa adie tomer , and adie tomer senior fellow - brookings metro @adietomer jennifer s. vey jennifer s. vey nonresident senior fellow - brookings metro @jvey1.

June 27, 2022

• 31 min read

Congress has recently shown serious interest in reauthorizing the Economic Development Administration (EDA), a Department of Commerce agency last authorized in 2004. Congressional appropriators will also have their turn in adequately resourcing the agency, following the extraordinary demands of the pandemic and other impacts to local economies over the past two years.  

The urgency and importance of congressional attention cannot be overstated. America’s global economic standing is under threat as digital disruption, the race for talent, and widening inequality both within and across regions challenge the nation’s competitiveness. Meanwhile, the U.S. economy regularly confronts recessions, extreme weather events, supply chain breakdowns, and other shocks that disproportionately impact some local economies and further test the nation’s collective ability to adapt and maintain economic resilience over the long run.  

In response, the country needs to marshal the economic assets that cluster in specialized ways across the regions that make up the U.S. economy—be they leading industries, research universities, entrepreneurs, or workers. These assets are critical if the nation hopes to, for instance, reduce its reliance on imports and boost supply chain resilience with greater homegrown capabilities in computer chip, renewable energy, and medical equipment design and production. Furthermore, regions with strong innovation, economic diversification, and civic capacities are more able to adapt and bounce back from economic disruptions. For these reasons, the federal government has a vested interest in spurring place-based regional economic development. To do that, it has the EDA—the one federal agency whose sole charge is to promote economic revitalization in communities of any scale, rural or urban, across the country. In short, the EDA’s role is essential if the U.S. is to compete globally and prosper locally.  

The concern is that the EDA is not properly resourced or equipped to meet its vital mission and nationwide mandate. The agency is tasked to do too much with too little—its chronically small annual budget, combined with unpredictable special appropriations, positions the agency as marginal when, in fact, the opposite is true. The EDA is the nation’s indispensable agency for supporting economic growth and resilience for communities large and small, as their leaders respond regularly to new opportunities and threats. But the policy and budget process does not yet treat it accordingly.  

Congress can do its part. It can use reauthorization, now decades overdue, to elevate and modernize the EDA. It can give the agency the tools and resources to match its mandate, so it can successfully help communities and the nation adapt and rise to the immense challenges of the 21st century economy, including the range of economic disruptions today and those to come. EDA reauthorization deserves bipartisan attention and action.  

To inform this process, this brief provides a rationale and framework for EDA reauthorization. It is organized in three sections. First, it expands on the case for a federal role in regional economic development. It then shows why only the legislative process can better equip the EDA to improve America’s capacity to innovate, compete, and expand economic opportunity for more people in more places. The brief closes with how: We recommend that the EDA become a $4 billion agency with a sharper purpose and set of roles and capabilities that match that mission. We believe this framework for EDA reauthorization and future appropriations would set the agency and its community partners up for success in today’s—and tomorrow’s—economy.   

The authors of this brief have worked for decades with local, state, tribal, and national leaders on economic development planning, strategies, and execution. We are attuned to the demands placed on economic development actors across urban and rural communities, small and large regions, tribal nations, and downtowns and Main Streets. We are familiar with the complexity of implementation in areas such as innovation, talent development, finance, community economic development, placemaking, infrastructure, and regional and environmental planning. We came together to test a simple proposition: That despite our diverse backgrounds and experiences in economic development, we could agree on the importance of making the EDA a high-performing federal partner in spurring innovation and economic renewal for every region of the country and a policy framework for how to make that happen.  

The case for a federal role in regional economic development   

There are several reasons the federal government needs to proactively engage and support place-based economic development.  

First, the path to national economic success will not come from a top-down, one-size-fits-all solution. That’s because the U.S. is not one monolithic economy, but a network of regional economies. Each is anchored by metropolitan areas and surrounding micropolitan and rural areas with their own unique industry specializations, labor and housing markets, and institutional capacities and relationships. Public, private, educational, and civic partners in each region often come together to help their businesses, industries, and workers adapt to new economic challenges or opportunities. Some regions benefit from a robust civic infrastructure; others suffer from weakened civic capacity reflecting years of economic disinvestment, siloed mandates, and talent flight. In short, any federal approach to bottom-up economic growth and renewal must unleash regions’ varied assets and governing capabilities.   

Second, while the economic geography of the U.S. has always been highly varied, what’s alarming is the extent to which it has become a winner-take-most economy from region to region. Since 2005, a handful of metropolitan areas have captured a predominant market share of the nation’s high-value innovation jobs, while hundreds of other communities lag behind. Indeed, the Organisation for Economic Co-operation and Development (OECD) finds that the average income gap between the most and least productive regions within wealthy nations grew an astonishing 60% over the past two decades.  

This uneven economic landscape is a national problem, not simply a local one, as it concentrates the country’s competitive advantages in too few places while leaving large swaths of the U.S. underperforming their economic potential. There are twin costs to this extreme imbalance: Workers and industries in high-growth markets suffer from an unaffordable cost of living (especially high housing costs) and sharp inequality between communities within their regions, while other urban and rural regions struggle to generate income, wealth, and economic security. The result is that too few communities and regions are economically dynamic, prosperous, and inclusive.  

A third reason for federal engagement is that in the wake of the pandemic, promising market forces are creating a valuable window to advance federal efforts to expand economic opportunity. While the aforementioned trends of regional divergence have largely continued since the onset of COVID-19, some cities and metro areas are beginning to grow tech jobs after years of job losses or stagnation. These places are buoyed by the movement of workers out of some of the largest metro areas and into smaller metro areas and rural towns, thanks to the flexibility of remote and hybrid work. Meanwhile, the future of work is reinventing downtowns, Main Streets, and other commercial corridors throughout regions. The geography of economic growth and opportunity is shifting, and rather than fuel more economic winners and losers from these dynamics, the federal government can use improved policies and investments to better enable leaders in every region, office, and commercial corridor to adapt and keep pace with the changing rules of the digital economy. In other words, the time is ripe to make wider and more resilient geographic prosperity a real possibility.   

Lastly, the federal government is uniquely capable of making the scale of investments required to help local actors adapt to external forces—from natural disasters to technological shifts—and unleash the economic potential of places. Despite their best intentions, local interventions alone are inadequate to address economic shocks and the yawning gaps of growth and opportunity across the U.S. map. However, for now, the U.S. invests significantly less than other OECD member nations in helping its lagging regions adapt and develop. Our federal government also coordinates less consistently with subnational units of government—states, territories, tribes, and localities—on critical policymaking such as industry regulation, which can have far-reaching and disparate effects on different regional economies.    

How changes in place-based economic development inform today’s federal support

To best understand the federal role, the federal government must first recognize how local economic development has changed and become even more resource- and capacity-intensive.  

For decades, the primary focus of local economic development efforts has been to market their regions for business attraction, which was viewed as the most effective way to create jobs and grow a regional economy. Regions would provide the marketing and coordination, and states would provide incentives to secure the deal. Sometimes, the federal government would make public works or other infrastructure investments in regions to support the location and expansion of businesses—reinforcing the transactional, project-based nature of traditional economic development practice.     

While incentives-driven business attraction remains one part of local economic development, numerous studies have found that it has not solved many of today’s local economic challenges. Rather, an increasing number of local leaders are going beyond measures of job growth to instead prioritize job quality, productivity, income growth, or other qualify-of-life measures, especially in smaller communities where job creation is not a realistic objective.  

To achieve these broader aims, leaders are moving away from singularly focused transactions and toward more holistic, integrated approaches. This includes investments in strategic initiatives such as helping existing firms and industries grow, innovate, and develop diverse talent; creating an inclusive, homegrown entrepreneurship ecosystem; rebuilding Main Streets, downtowns, or other neighborhood corridors as flywheels for broader market-based growth and wealth creation; and centering talent and housing affordability in economic competitiveness and inclusion. Finally, both regional and community actors are investing in good governance by bringing local leaders and institutions together to solve problems and create the conditions in which workers, families, businesses, and other key partners are willing and able to stay and invest in the community.   

As they do, local leaders are also increasingly mindful of ways to help vulnerable populations or protect the environment as sources of economic growth. For instance, local leaders are responding to the dislocating effects of disruptive technologies, especially to support Black, Latino or Hispanic, and other disadvantaged workers and entrepreneurs who are most vulnerable to automation and business closures in “high-risk” sectors such as food service, logistics, and retail. Regional leaders are aware of the costs of climate risk for businesses and communities and, conversely, the significant growth opportunities in building a low-carbon future.   

Both large urban centers and rural areas are pursuing these broader approaches to economic development, despite the false urban-rural binary that permeates the political and policy discourse. In fact, rural leaders share similar challenges to their urban counterparts. For instance, rural communities are becoming more racially and economically diverse , while they grapple with educational quality, inadequate incomes for workers and their families, and challenges in health care access, cost, and outcomes. The extractive nature of many rural economies leaves too little wealth and economic decisionmaking to the communities themselves. Just like urban areas, rural towns have hidden assets and innovation ready to be leveraged but too often overlooked. And rural and urban regions are interdependent in ways that dated economic development paradigms and practices barely acknowledge, let alone build on.    

That’s why economic development leaders from across the urban and rural continuum, such as in Indianapolis , Birmingham, Ala. , and Wytheville, Va. , have stepped up to create high-quality, entrepreneurial, and inclusive growth in their communities.   

But this kind of inclusive economic development is hard work—and even pioneers in the field face many barriers to implementation . Local leaders typically lack the resources and organizational capacity to plan well, coordinate across actors, and respond to a patchwork of rural , tribal, and place-based programs alongside other state or philanthropic resources.   

This reality prompted one of the authors of this brief to make the case for vigorous federal engagement to promote more centers of innovation and opportunity across the American landscape. Specifically, the report on growth centers from Brookings and the Information Technology and Innovation Foundation argues that absent robust federal action, few if any places (outside of the top U.S. metro areas) will be able to transform themselves into vibrant economies with self-sustaining innovation growth paths. The federal government is uniquely capable of investing at scale in targeted places to counter regional divergence and promote spillover benefits.  

Another Brookings report makes the case that the most successful and promising cluster initiatives in the U.S. are industry-driven, university-fueled, and government-funded . In each of the cases in the report, significant government funding—from local, state, and federal sources—gave the initiatives early credibility and provided the scale required to have real impact. Without government investment, it is likely that none of the profiled initiatives, from Milwaukee’s water tech cluster to central New York’s unmanned aerial systems, would have even made it out of the starting gate.   

Both reports reveal that public and private sector leaders in many U.S. regions have identified unique, high-potential opportunities, but also gaps in their local economies that are holding them back. They need adequate resources to grow and connect their economic and other assets in ways that can place them on a new economic trajectory.   

The federal government has a critical and unique role in such place-based economic development. It can assess federal budgets, trade and regulatory proposals, and other policies for differential impacts on regions of the country based on their distinct economic realities, as the United Kingdom and other advanced economies do. In addition to the OECD analysis mentioned above, there is a compelling research base here in the U.S. to support such regional equity analyses in national policymaking. To cite one costly example, the U.S. could have approached airline industry deregulation differently if regional economic disparities and likely impacts had been considered rigorously and creatively. The federal government needs to build out and fully exercise this ability if it wants the U.S. to remain a world leader in innovation and become one in inclusive economic growth.  

The EDA’s broad and under-resourced mandate  

If place-based economic development is critical to our nation’s economic future, then the EDA is well positioned as the lead federal agency to fulfill that mandate. Though larger federal agencies provide grants, loans, and other supports for local development, the EDA is the agency tasked to: 1) work most directly with all types of regions across the country specifically on economic revitalization; and 2) bring rigorous economic analysis to help local regions make the most promising choices.    

For these reasons, it is crucial that Congress reauthorize the EDA. More than that, Congress must use the process to elevate and modernize the agency. The dramatic shifts in the economy and economic development over the past several decades require the lead federal agency on economic development to be a meaningful partner to the regional entities that steward American competitiveness. And it should do so by reflecting the leading edge of practice in communities.    

The EDA was established by the Public Works and Economic Development Act of 1965 to help industrial areas (urban), agricultural communities (rural), and mining towns deal with economic distress. For these reasons, the EDA’s most consistent and best-resourced mandate has been in public works projects and infrastructure development, as documented in a recently published overview of the EDA by the Urban Institute. That mandate reflects a classic—but now dated—understanding of the federal role in local economic development to promote large-scale, place-targeted capital investments in major public works, such as the Erie Canal and the many projects made possible through the Tennessee Valley Authority.  

The EDA’s last reauthorization—in 2004—highlighted Congress’ understanding of the critical and evolving role of the federal government in place-based economic revitalization. The 2004 reforms recognized the need to expand the EDA’s mandate and mission to include promoting growth and competitiveness through better local economic planning; investments in economic innovation through university centers, new technologies, and broadband; brownfields remediation to prepare land for forward-looking, cluster-based development; assistance to respond to economic dislocation and adjustment triggered by growing global trade; and post-disaster assistance for economic recovery.  

Unfortunately, that extensive mandate—meant to serve thousands of communities nationwide, on a fair and inclusive basis—has been supported with very modest congressional appropriations, averaging approximately $283 million annually since fiscal year 2011. To put that in perspective, the city of Alexandria, Va., home to 159,000 residents in 2020, approved an annual budget of $761.5 million that year. The EDA is forced to spread itself thin across its wide-ranging mandates and geographic remit, and it often lacks the funds to waive or reduce matching-fund requirements for smaller, poorer jurisdictions that most need help strengthening their economic and fiscal base.  

The EDA’s budget is not only routinely inadequate—it is also unpredictable. For instance, in FY 2008, its budget more than doubled in absolute terms to reflect supplemental funding for Gulf Coast disaster recovery. In FY 2018, the agency was proposed for elimination due to arguments over government waste and redundancy. In stark contrast, in FY 2021, the agency received $1.5 billion through the CARES Act, followed by an additional $3 billion through the American Rescue Plan Act—10 times its typical annual appropriation over the past decade.  

On the plus side, these one-time appropriations and supplemental programs have allowed the EDA to experiment with new economic development initiatives, such as the recent Build Back Better Regional Challenge grant program. But this seesaw has also left the agency with an impossible task of delivering an expansive mix of new and existing programs—from targeted public works projects in rural areas to broad regional innovation grants to economic adjustment assistance for coal communities—all on a miniscule and unpredictable annual budget.  

In sum, the EDA enters reauthorization as an under-resourced agency. It is tasked to do too much with too little, employing a mix of new and outdated programs. It is time for Congress to reach the same awareness of needed change as it did in 2004 and reauthorize and modernize the EDA once again.    

The proposal: A framework for modernizing the EDA  

Reforming a federal agency through the legislative process is often hard, if not impossible, as competition between interest groups and agendas can produce a something-for-everyone patchwork and only incremental change. Fortunately, a group of national economic development groups and associations has unified to support EDA reauthorization. This EDA Stakeholder Coalition, which features diverse local membership representing all parts of the country, issued a statement for congressional leaders that includes nine shared priorities for the agency. There are many strong, tested programmatic ideas among the list that we reinforce below.   

However, our proposal addresses two first-order questions: What specific roles and functions are most important for the EDA now, given the changing context for its work and the range of places its tools must target? And in what ways should the EDA organize itself to deliver on those functions effectively? To answer these, we offer an organizing framework for legislators to consider so the EDA is equipped with the proper purpose, roles, and capabilities.   

The roles of a modern EDA

The EDA has a laudable, aspirational mission. From its website :   

Mission: To lead the federal economic development agenda by promoting innovation and competitiveness, preparing American regions for growth and success in the worldwide economy.

The U.S. Economic Development Administration’s investment policy is designed to establish a foundation for sustainable job growth and the building of durable regional economies throughout the United States. This foundation builds upon two key economic drivers — innovation and regional collaboration. Innovation is key to global competitiveness, new and better jobs, a resilient economy, and the attainment of national economic goals. Regional collaboration is essential for economic recovery because regions are the centers of competition in the new global economy and those that work together to leverage resources and use their strengths to overcome weaknesses will fare better than those that do not. EDA encourages its partners around the country to develop initiatives that advance new ideas and creative approaches to address rapidly evolving economic conditions.

Unfortunately, the EDA is not currently structured or resourced to effectively carry out a mission of innovation and competitiveness across the nation’s wide range of regional economies. So let’s clarify the roles and core competencies the EDA must have to meet its mission.   

To start, targeting and tailoring are crucial. The EDA’s overarching objective—given its place-based mission—is to unleash the latent economic potential in U.S. regions. To sharpen this purpose, the EDA must recognize that it demands expertise in both innovation and renewal. The former helps larger regions stay on the leading edge of discovery, development, and dynamism. The latter helps economically distressed places of all sizes stabilize or revitalize, putting them on the path to inclusive growth, a better business environment, and a better quality of life for residents. The paths to innovation and renewal have different starting points and, ultimately, different outcomes. They require different strategies, tools, and resources, and their programs are deployed at different scales, such as a region versus a Main Street.   

So then, what functions does the EDA require? To successfully unleash regions’ latent economic potential, the EDA must play four essential roles: thought leader, resource provider, capacity builder, and coordinator of federal support for local economic development. These roles complement the key roles of state, local, and public and private sector actors. 

• Thought leader: The EDA should be the intellectual home for regional economic analysis and state-of-the-art economic development policy and practice in the U.S. This will inform and guide its own work and expand the sharing of best practices and new ideas across local markets; both are critical to driving better outcomes.  
• Resource provider: The EDA should provide large, flexible funding in the form of regular challenge grants to urban and rural regions, so leaders can pursue comprehensive approaches to economic transformation. This is true not just for high-growth regional markets but smaller rural communities as well.  
• Capacity builder: The EDA can use its expertise and targeted assistance to build the capacity of local and regional intermediaries to plan and implement effective economic development strategies and use federal and state resources more effectively. Such intermediaries play a vital role in strengthening critical assets and aligning actors, and this EDA role helps them access the training and resources they need.  
• Federal coordinator: The EDA can serve as the convener agency working with multiple federal agencies to coordinate, align, or help administer cross-agency federal responses to regional innovation and renewal. Doing so would optimize the use of limited government funding. This function is well precedented in existing law and agency practice, but it needs to be affirmed by Congress and consistently supported by the executive branch.  

Funding and the signature activities to fulfill the EDA’s roles

  Today, the EDA’s programs are primarily organized around the following specialized investment areas: public works, infrastructure, and facilities; research and technical assistance; economic adjustment grants and disaster recovery; innovation and entrepreneurship; economic development planning; and trade adjustment assistance and consultant services for firms. Together, these wide-ranging programs have been funded at just $283 million per year on average. Through reauthorization, the EDA should emerge as a financially robust agency, with its suite of existing programs anchored by signature initiatives supporting the four key roles described above.  

To start, the EDA ought to operate with a dependable annual budget of at least $4 billion, which is commensurate with its vital mission and nationwide mandate. The agency received a $3 billion appropriation in the American Rescue Plan Act—a level we believe should be maintained given widespread demand for the new programs these resources were able to deliver. This would provide the EDA with the consistent scale of resources required to have real impact on local economies, and enable the agency to recruit, train, and retain the staff needed at both headquarters and regional offices to carry out its essential roles. This would also give the EDA the budget space to waive or reduce matching-fund requirements for the jurisdictions that most need help strengthening their economic and fiscal base. An investment of $4 billion in the EDA would match that of its popular complement, the Community Development Block Grant; the Biden administration’s FY 2023 budget request for that program is $3.8 billion.   

With those resources, the EDA could implement a set of signature activities that advance the four roles of a modern, place-focused economic development agency. An inventory of existing EDA programs demonstrates critical gaps and the opportunity to prioritize broader, more flexible offerings over narrow, categorical ones that tackle the spectrum of local interests in innovation and renewal. This structure would also allow the EDA to move beyond organizing tactically with a large number of independent programs to organizing strategically around clear national priorities that empower local communities to achieve measurable outcomes (for example, a more competitive and resilient domestic manufacturing base). Most existing programs, and the recommendations of the EDA Stakeholder Coalition, align with those functions. Below are the signature initiatives that could deliver coherently on those functions to ensure a measurable return on the taxpayer’s larger investment in the agency:   

• Thought leader: Issue a regular report on the economic health and challenges of U.S. regions and serve as a clearinghouse of state-of-the art strategies.

Given its mandate and resources, the EDA can and should be the go-to resource on the nation’s economic geography, thanks to its on-the-ground knowledge from regional field offices, its expertise in industry clusters, and its access to critical statistical agencies such as the Bureau of Economic Analysis and the Census Bureau, also housed in the Department of Commerce.  

To anchor this work, every four years, the EDA should produce a signature “State of U.S. Regions” report connecting national competitiveness, economic security, and broad-based geographic opportunity. This report would support improved federal decisionmaking and strategy, build awareness of new ideas across U.S. regions (and the globe), and monitor progress with innovative new initiatives. Additional reporting could address, for example, the health of the labor market, industry clusters, entrepreneurship, and wealth creation by race, gender, and region. This would give local and national leaders a picture of changing market conditions and how national place-based policies can solve problems or facilitate emerging competitive advantages in key sectors in different parts of the country. T hrough this process , the EDA could develop a unified definition of “economic distress” to guide programs that are aimed at supporting distressed places across all federal agencies. Further, the EDA could provide case studies of emerging practices, such as how economic developers are addressing talent needs, how-to guides informed by the work of pioneering intermediaries in the field, and workshops and conferences in which leaders can learn from one another. In this regard, the EDA would be mimicking and aligning itself with leading economic development entities that have strong market research teams—not solely for branding and marketing campaigns, but for helping leaders and partners make well-informed decisions and strategies.  

In short, to be an expert on how economic development can best address innovation and renewal, the EDA must have robust in-house staff capacity and expertise of its own, at headquarters and in the field offices, so it can bring that collective knowledge to the field.

• Resource provider: Make permanent the provision of large-scale, flexible challenge grants to boost innovation and competitiveness.

A core function of the EDA should be to manage a rotating set of large-scale competitive challenge grant programs to make flexible, transformative funding available to U.S. regions for pursuing promising innovations and strategies.  

The key is to enable the EDA to routinely administer high-demand “big bet” competitions, which have thus far been operated only from one-time supplemental appropriations, as outlined above. This proposal highlights the importance of scale (high-dollar, flexible challenge grants) in driving real, tangible change across regions.  As the aforementioned research on growth centers shows, it is critical to help midsized metro areas with high potential for success plug into the innovation economy’s tendency to concentrate in particular places with a critical density of assets. These competitive grants should also reward key outcomes that go beyond traditional job creation metrics. With its thought leadership function, the EDA can then capture lessons and evaluations from innovative practices and share them with other regions to inspire more evidence-driven strategies . Meanwhile, the EDA could support components of non-winning grant applications with existing, targeted EDA programs—for example, in public works or university innovation.    

To that end, the $3 billion for the EDA in the American Rescue Plan Act is a model approach. The funding enabled the agency to design and announce a set of grant competitions to meet nationally significant economic recovery priorities, including tech-enabled industry growth, a skilled workforce, travel and tourism, and prosperous Indigenous and coal communities. What’s notable here is that competitive grants can be deployed to support innovation and renewal across large regions as well as smaller urban and rural communities. That approach to allocating resources is inclusive, targeted, tailored, and intensive enough in each economic region to make a meaningful difference.   

Within that $3 billion package, the $1 billion Build Back Better Regional Challenge grant program demonstrates the promise of scale and flexibility in promoting global competitiveness. The funding—focused on a planning grant round and then implementation grants of $50 million to $100 million in selected regions—sufficiently empowers local leaders to implement smart, holistic regional cluster initiatives that create lasting economic competitiveness. It is flexible in that it rewards a suite of initiatives identified by multisector leaders (e.g., applied research, workforce training, entrepreneurship, community development) that create the conditions for industry clusters to succeed. What’s more, the program articulates clear and meaningful outcomes such as long-run industry competitiveness, quality jobs, racial and economic equity, and bridging urban and rural divides. As one of our local partners shared, “These targeted investments to fill [key intervention] gaps is one capability that EDA has that maybe no one else does. If this is the direction the EDA is going, then bravo.”  

Future EDA challenge grant programs could reward transformative initiatives that connect urban and rural economies through supply chains and other linkages (a core insight from development economists worldwide ); or address specific areas of innovation needs as surfaced by EDA regional clusters research ; or that leverage anchor institutions such as regional public universities to spearhead economic development in distressed places. . The main point is that categorical, capital-intensive project funding will not yield projects that accelerate or reinvent a region’s economic trajectory. Regions need well-resourced challenge grants like Build Back Better to become the norm, because that is what it takes to generate impact.  

State and regional stakeholders agree. The EDA received over 500 applications for the Build Back Better Regional Challenge from all 50 states and five territories, for just 60 planning grants and even fewer implementation grants. That’s an indication of the hunger for large-scale economic growth programs and of what’s right about this program’s design.  

• Capacity builder: Strengthen the capacity of local and regional intermediaries so they can effectively take on efforts related to both innovation and renewal .

The EDA should have a set of capacity-building programs that meet the needs of large regions and lagging communities. On the former, large metro areas ought not be dismissed as “high-capacity” places that can take care of themselves, when the reality is that organizing cross-sector, multijurisdictional regional competitiveness strategies toward greater equity and inclusion is complex, labor-intensive work. Meanwhile, many rural Main Streets, small towns, and urban corridors do not have the institutions or capacity to plan, design, or kick-start new initiatives to reverse or stem economic distress. In short, the EDA should adopt a flexible, locally responsive approach to capacity building that reflects the continuum of challenges across communities.    

To do this, Congress could equip the EDA to administer two broad sets of capacity-building programs.  

First, the EDA could offer grants to local, regional, and national intermediaries with the goal of increasing the capacity of local and regional entities to plan, develop, implement, and manage multisector economic revitalization strategies. This includes direct investment in organizations to hire and train staff and use market research. It also includes enabling smaller communities to participate and link up to regional strategies; this could prioritize giving lagging local economies the capacity to compete for large-scale funding, such as the challenge grants described above. Furthermore, via its thought leadership role, the EDA could provide or co-sponsor seminars and training programs for economic development professionals on the latest trends and practices. In short, to move regions out of distress, the EDA should invest in the capability of “backbone” organizations and other implementers to collectively execute high-quality visions and strategies that endure and adapt over time.  

Second, the EDA should administer an efficient national corps of deployable talent—for example, a “fellows” program that places qualified economic development professionals in local and regional organizations. These fellows could help local organizations develop regional planning strategies, organize civic planning processes in preparation for competitive grants, put together competitive grant applications, and design and execute key initiatives.

• Federal coordinator: Formalize the EDA’s capacity to coordinate with other federal agencies to ensure federal investment in local economies is cohesive and maximizes benefits.

Federal programs are too often siloed, burdensome to access and use, and not responsive enough to the varied economic conditions and institutional capacities at the local level. There are two ways in which Congress should empower the EDA to be a more effective coordinator of federal support for local economic development.  

The first way involves formally elevating the EDA’s role to bring greater coherence to interagency federal place-based economic development when appropriate. This is not a new role for the EDA, given its interagency collaboration on disaster recovery and manufacturing communities . This might include elevating the EDA head from an assistant secretary to an under secretary within Commerce, so its leadership is on par with that of the International Trade Administration or National Institute of Standards and Technology, and more able to convene other cabinet-level agencies. Congress could formally establish and resource the EDA’s small Economic Development Integration office to further the agency’s capacity to coordinate federal programs in its headquarters and field offices. Congress could also expand the EDA’s role as coordinator to include serving as a delivery partner with other agencies eager to benefit from its place-based economic expertise.

Second, Congress could support an EDA planning coordination program to maximize the alignment of federally mandated regional plans, so that required objectives actually map toward achieving coordinated, desired outcomes in communities. Currently, at least three other federal agencies—Housing and Urban Development (HUD), Labor, and Transportation—plus the EDA require regions to produce detailed long-range or consolidated plans. It is commendable that the EDA has worked with other agencies on cross-agency recognition of these plans (e.g., a consolidated plan submitted to HUD can count for the EDA’s program requirements, and vice-versa). However, there is little coordination between the processes driven by multiple agency requirements, resulting in regional plans that often operate on parallel but disconnected tracks, sometimes with contradictory or competing priorities. Yet leaders on the ground know that effective, inclusive regional economic development requires that workforce, housing, land use, and transportation goals and investments work in concert. Grants for this EDA coordination program would increase the capacity of EDA staff and regional entities to regularly convene regional actors, coordinate with the public, align goals and investments, and revise formal plans accordingly. The EDA, HUD, the Environmental Protection Agency, the Department of Transportation, and the Government Accountability Office have all affirmed the need to better coordinate federally funded regional and local planning efforts to ensure federal investments are more strategic, aligned, and effective. Not surprisingly, some of the most promising cross-agency work currently underway is both targeted and outcome driven—for example, seeking to accelerate economic innovation, diversification, and the creation of good jobs in coal and power plant communities.  

Beyond these four key roles, the EDA could employ some core principles to inform the design and implementation of its programs, policies, and partnerships. This is what the agency, at its best, already strives to be: flexible , to best meet the unique needs of different communities and regions; locally led , to increase the probability of success and better ensure it avoids favoring some communities over others; equitable and sustainable , to demonstrate that embracing diversity, equity, inclusion, and climate resilience is key to unleashing economic opportunity and boosting U.S. competitiveness; and outcome-driven , to reward local and regional initiatives that identify clear outcomes and measures to gauge progress on those outcomes.  

Conclusion  

As the U.S. confronts a range of economic shocks and intense global competition for leadership in innovation and economic growth, it is vital that policymakers remember that the nation’s competitiveness depends on the capacities of regions, both urban and rural, to innovate, prosper, and become more economically resilient.  

Today, America’s competitive advantages are concentrated in too few places. But there is a way to unleash the economic promise of more places, expand opportunity at home and competitiveness broadly, and make the economy work for all regions and all groups of people. With the EDA, the federal government has an indispensable agency whose sole mission is to revitalize local economies. But for now, the agency is tasked to do too much with too little, with a remit to renew distressed regions and accelerate innovation in others. Doing both effectively is crucial, and it is possible with the right support.  

For these reasons, the EDA’s reauthorization and future budget appropriations must go beyond the status quo in order to modernize and equip the agency to do transformative work.  

Brookings Metro Global Economy and Development

Center for Sustainable Development

Anthony F. Pipa

June 25, 2024

Glencora Haskins, Julia Bauer, Mayu Takeuchi, Patrick Rochford, Joseph Parilla

June 11, 2024

May 26, 2024

Case Studies in Economic Democracy

This four-part case study series shows what building economic power and liberation for Black and brown people looks like in practice. We highlight the actions and testimonies of movement organizers, community members, and power-building organizations across the country.

The Economic Democracy Project

The Economic Democracy Project aims to highlight and develop strategies that Black and brown communities can use to build economic and political power. It has 3 priorities that show up across this case study series:

• Break up and regulate new corporate power, including Amazon, Google, and Facebook.
• Expand the meaning of public goods and ensure that services are equitably and publicly administered.
• Strengthen “co-governance” strategies so that people and public agencies can collectively make decisions about the economy.

Learn more about Demos' Economic Democracy Project and its goals.

This case study will follow the coalition For Us, Not Amazon (FUNA) and members of the Athena Coalition as they organized to prevent one of the biggest corporations in the world from taking over the civic, social, and political life of Northern Virginia and beyond.

How the New Economy Project and the Public Bank NYC coalition are pressing for the creation of a public bank for New York City, as part of a broader vision for economic and racial justice.

This case study follows the New Economy Project as it organized a cross-sector coalition of local worker collaboratives, housing cooperatives, and community wealth-building organizations to win public-banking infrastructure in the city and state of New York—the finance capital of the country.

This study follows the Texas Organizing Project as it worked to build power and equity for working-class Black & Latino communities in greater Houston after Hurricane Harvey.

How the Texas Organizing Project implemented a winning inside-outside strategy—ultimately helping change how Harris County, Texas allocates relief funds and ensuring the people most impacted by the climate crisis have a seat at the table.

This case study examines how community leaders forced the city of Pittsburgh to provide safe, accessible, and affordable water—and developed an accountability model in the process, by which everyday people can oversee the public water utility. 

How Pittsburgh United and its partners in the Our Water Campaign worked to restore public governance over the local water authority after a private company left Pittsburgh’s water infrastructure corroded and contaminated.

Join our list to stay updated on our Economic Democracy work

Measuring Economic Impact Is a Win-Win for Developers and Municipalities

Introduction: At a time when financing for hospitality development projects is challenging for developers, it can often mean that some projects won’t ever come to fruition. At the same time, municipalities would like to increase their hotel or resort offerings to attract travelers to their destinations while remaining fiscally responsible. When developers seek government assistance for development projects, state and local authorities must balance the needs of developers in the community with the financial realities of the project. Commissioning an economic impact study will provide important data for stakeholders to understand the economic benefits of a project and assess its desirability and its overall economic impact on the local or regional economy. The case study presented in this report shows the occupancy impact that Kalahari Resorts has caused in the markets where they have been developed in Ohio, Pennsylvania, and Texas over the past 20 years. The statistical data shows strong positive growth in market occupancy levels caused by the addition of these themed resorts with high room counts and multiple attractions. An economic impact study can similarly provide developers and government representatives with financial information to forecast the economic impact of a proposed development.

PURPOSE OF ECONOMIC IMPACT STUDY

An economic impact study estimates the total benefits of a project, including tax revenues, employment changes, additional spending impacts during the construction and operational phases, revenues from increased commercial activity and tourism, and other changes in the community. It will also measure the impact on other local businesses in the area that may benefit from a new hospitality property. The results of this study are often used to calculate financial incentives that municipalities are willing to offer a development project based on the projected impact on the local economy. In addition, the study can also be used to demonstrate benefits that may persuade communities to support a project.

Resources: H&LA utilizes the following resources when preparing economic impact studies:

• Financial projections for the proposed resort or attraction. These are typically prepared by our firm but we can also consider projections prepared by the developer and other consultants.
• Employment and wage data supplied by the U.S. Department of Labor.
• The Regional Input-Output Modeling System II (RIMS II) generated by the U.S. Department of Commerce’s Bureau of Economic Analysis provides multipliers for output, earnings, and employment by industry aggregation for every county in the United States. There are similar multipliers provided in other countries.
• Visitor spending statistics for the local market, including information by tourism research firms such as Tourism Economics, Dean Runyan Associates, or Longwoods International.

Methodology: The economic impact can be broken down into two phases: short-term (construction) and long-term (operation). Both phases generate income, employment, and taxes in the affected region. The local community is generally most concerned about the additional employment and revenues a new development will bring to the area, while the governmental officials are generally most concerned about the anticipated fiscal (tax) impacts. Economic impacts are generally measured on three levels:

• Direct-Effect Impact , whichincludes the jobs and spending directly created by the construction and operations of the hospitality development
• Indirect or Induced Impact , which results from production changes in downstream industries associated with the initial direct spending and employment at the facility.
• Final Impact , whichrepresents the overall economic impact of a change in final demand on output, earnings, and employment on a region’s economy. The final impact calculations represent the increased output, earnings, and employment that occur in an economy because of spending caused by the proposed development.

Final Impact = Direct-Effect Impact + Indirect or Induced Impacts

The multiplier concept recognizes that income is spent in successive rounds within the community and that these chain reactions create an economic impact greater than the original expenditure and employment levels. For example, each dollar collected by the proposed resort will eventually recycle or multiply itself, creating many levels of economic activity in an area. As a prospective employer, a resort pays wages, and these wage earners in turn make purchases from local businesses. As taxpayers, all businesses and individuals benefiting from or adding incremental revenue to the economy also confer revenue to the community in terms of taxes. As a consumer, the proposed resort would buy goods and services from area businesses. Hence, the multiplier concept represents multilevel economic activity.

The multiplier effect is directly related to a region’s geographic size, population, and the diversity of its industrial and commercial base. Densely populated areas are generally able to support a more diverse economic base, and more products are likely to be manufactured and purchased locally rather than imported. Therefore, money injected into the economy is more often spent locally, causing greater changes in local business volume. The multiplier effects may be somewhat limited in that a portion of the impact might be directed to areas outside the county. For example, it is likely that the furniture, fixtures, and equipment for a resort will be manufactured and shipped from areas outside of the county where it will be constructed.

TYPES OF ECONOMIC IMPACT TO ANALYZE

There are multiple types of impact to analyze in an economic impact study. The following highlights major components to consider.

• Construction Impacts: Any hospitality property creates impact from its construction. The economic impact study should incorporate the development budget for the project, which represents a one-time activity, expected to occur over approximately a two-year period.
• Operations Impact: After construction, the resort or attraction will then open in the market, creating additional impact due to its operation in terms of employment, goods and services, and additional impacts.
• Visitor Spending Outside of Resort: The proposed resort or attraction will also have an impact on the economy of the surrounding area as a result of the increase in visitors and visitor spending. The proposed resort is projected to draw new visitors to the area. Our calculations of economic impact in this area are tied directly to the number of projected visitors. Economic impact results from the import of new dollars from spending primarily by nonresidents in the local economy. The extent to which visitor dollars are retained locally depends on the types of establishments that visitors utilize.
• Impacts on Existing Businesses: Local businesses will be impacted by the development and operation of the proposed project and those impacts, often to other local hotel, restaurant, and attraction properties, can be measured in terms of changes in occupancy, ADR, and revenue levels.

CASE STUDY IN ECONOMIC IMPACT

To demonstrate one aspect of what an economic impact study can measure, we highlighted recent research we have conducted concerning the impact of three Kalahari resort developments on their respective communities of Sandusky, Ohio; Pocono Manor, Pennsylvania; and Round Rock, Texas. While these resorts had measurable impacts on employment, spending, and taxes in their respective communities, this analysis shows the economic impact of these developments on the surrounding hotels in terms of occupancy points. It is important to note that the occupancy impact on surrounding hotels is only one metric of many that an economic impact study considers.

Impact on Area Hotels: Over the past two decades, Kalahari Resorts has opened large-scale indoor waterpark resorts in Sandusky, Ohio; the Pocono Mountains area of Pennsylvania; and Round Rock, Texas, just outside of Austin. The addition of any new property, particularly one with a high room count, has the potential to lower occupancy rates and hamper overall profitability within the local market. However, as the following tables illustrate, the areas surrounding these properties achieved improved occupancy performance in the years following the opening of the respective Kalahari Resorts properties.

Kalahari Resorts & Conventions – Sandusky opened in May 2005 as a 308-room resort with indoor and outdoor waterparks. It now features 890 rentable units, including 284 guestrooms, 192 three-key condominium units yielding 576 keys, and six 5-bedroom Nyumba Entertainment Villas. In 2023, the resort added a 15,000-square-foot outdoor pool and outdoor adventure park attractions.

In the years prior to Kalahari’s opening, occupancy rates in the Sandusky/Port Clinton hotel submarket ranged from about 38% to 45%. After 2005, occupancy rates increased gradually, hovering at about 50% by the mid-to-late 2010s. Following the disruption caused by the COVID-19 pandemic in 2020, the submarket’s occupancy rate returned to over 50% in 2021 and has averaged about 55% over the past three years. As shown, the introduction of the Kalahari Resort Sandusky has boosted overall market occupancy rates in the first decade after its opening by 4.6 points and more particularly in the second decade after opening by 8.1 points. The development of this large-scale resort has boosted the tourism economy in Sandusky and caused extensive related development in Erie County, Ohio.

Kalahari Resorts & Conventions – Poconos is in the Pocono Mountains region of Pennsylvania. The first phase of the resort opened in June 2015 and featured 457 rooms, a 106,000-square-foot indoor waterpark with a retractable roof, and an outdoor waterpark. A second phase opened in March 2017 and included 520 guestrooms, 114,000 square feet of additional indoor waterpark space, food and beverage outlets, and outdoor activities. In 2019, the property expanded their meeting and convention space. It now offers 977 rooms, 12 food & beverage options, 112,954 square feet of meeting space, and a 220,000-square-foot indoor waterpark.

In the years leading up to Kalahari Resort’s opening, occupancy rates in the Poconos & Stroudsburg hotel submarket ranged from about 45% to 52%. By 2019, the submarket’s occupancy had risen to almost 65%. In the years since the pandemic, the area has seen occupancy rates level off at around 60%, with an ADR of well over $200. The development of the Kalahari Resort has increased the appeal of the Poconos as a vacation destination and benefited all hotels within the market causing economic impact to a wide range of businesses.

Kalahari Resorts & Conventions – Round Rock opened in November 2020. The facility offers 975 rooms, a 223,000-square-foot indoor waterpark, the 80,000-square-foot Tom Foolery’s Adventure Park, 10,000 square feet of retail space, a 121,701-square-foot convention center, 11 food & beverage outlets, event barn, and a multi-acre outdoor waterpark. In 2023, the property expanded their outdoor waterpark with a new adventure river, outdoor pools, and water slides.

In the years leading up to 2020, occupancy rates in the Round Rock/Georgetown hotel submarket held at around 66% to 68%. Hotel performance in the Round Rock/Georgetown area recovered quickly after 2020, with occupancy returning to pre-pandemic levels in 2021 and 2022, then topping 70% in 2023. Hotel performance statistics in the Round Rock/Georgetown submarket have shown growth since the opening of the Kalahari Resort property. The market grew by 5.4 occupancy points when comparing the average of 2014 to 2020 to 2021 to 2023 timeframes. The local hotel market experienced gains in occupancy despite the addition of 975 rooms at the Kalahari Resort, indicating economic impact has been achieved in the short timeframe since they opened.

MUNICIPAL INCENTIVES

As a result of the economic impact that a hospitality project will have on a city or region, many cities have provided incentives for larger resort and waterpark projects through tax abatements, tax incremental financing districts (TIF), infrastructure support, marketing support, and tax credits or rebates. There have been numerous projects throughout the United States that have received municipal funding based on the projected economic impact. We have highlighted several to show the different types of incentives that can be available to developers of hospitality projects.

• Slated to open in 2026, the 900-room $885 million Kalahari Resort in Thornburg, Virginia, will receive tax incentives that include rebates on sales, food and beverage, bed, and admissions taxes. The government will also provide grants related to tangible personal property; business, professional, and occupational licenses; permit fees; and water and sewer fees. The grants are intended to incentivize the investments associated with Kalahari Resort as measured by the taxes. The company is required to make capital investments of at least $475 million prior to June 30, 2029. The board also approved a separate performance agreement allowing Kalahari Resorts to obtain financing through Virginia’s Tourism Development Financing Program under which Spotsylvania County and the state will contribute future sales tax revenues towards Kalahari’s debt with their lender. The county’s contribution is estimated at $74.8 million.
• The Town of Perryville and Cecil County, Maryland, jointly approved a 25-year tax incentive deal to bring a Great Wolf Lodge resort to the area. Great Wolf Resorts projected that the resort would generate 850 new jobs. The incentives are valued at $91.8 million in contributions, performance-based tax credits, grants, and fee reductions, the largest share coming from Perryville’s 6% hotel tax. Great Wolf Lodge will be reimbursed for 97.5% of the hotel tax in the first 10 years and for 95% in the following 15 years, totaling nearly $65 million. Additionally, Perryville provided infrastructure upgrades. Despite these incentives, the city anticipates a net gain of $18 million in tax revenues from personal property tax, hotel tax, and multiplier effect tax revenues as a result of the project.
• The 975-key Kalahari Indoor Waterpark Resort Round Rock, Texas, opened in November 2020. The City of Round Rock approved an incentive package for the resort in December 2016. The City built the $40 million convention center that was leased to Kalahari Resort, invested $30 million in bonded funds for public improvements, and purchased 351 acres for $27.5 million to lease to Kalahari Resort for 99 years. Kalahari Resorts will have the option to buy the land for $1/acre at the end of 99 years. Kalahari Resorts made an initial lease payment of $17 million while the city contributed $10.5 million. Kalahari Resorts will make a second lease payment of $10.5 million plus interest in eight years.
• Great Wolf Lodge constructed a 456-room indoor waterpark resort in LaGrange, Georgia, which opened in 2018. In October 2015, Great Wolf Lodge signed an agreement with the County Commission, Board of Education, Town Council, and Development Authority of LaGrange to invest at least $150 million in private equity for the development. The Development Authority of LaGrange approved a $170 million bond issue for the development that is backed by Great Wolf Lodge. The Town of LaGrange will own and finance the adjoining conference center using a $17 million taxpayer-backed bond. The Town is expected to lease the conference center to Great Wolf Lodge for $10 per year for a period of no more than 50 years. The occupancy taxes from the resort will be used to repay the taxpayer-backed bond. Additionally, 31.25% of occupancy tax revenues will be used to finance marketing of the resort and the LaGrange market. A 15-year property tax abatement has been approved for the development and will not affect school board revenues. Great Wolf Lodge will pay 10% of the assessed property value taxes in year one, after which it will increase by 5% every year until the end of the 15-year period.

Municipalities are looking for opportunities to support hotel, resort, or attraction development that will bring additional visitors and economic impact to their areas. This makes the economic impact study a vital tool for policymakers, developers, hotel companies, city and county officials, state tourism departments, and convention and visitors bureaus to quantify the potential economic benefits that may be realized from the development of a new hospitality or attraction project. The economic impact study provides financial projections to justify whether providing financial incentives to a hospitality development is justified.

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Government innovation

Governments today must be able to adapt to changing environments, work in different ways, and find solutions to complex challenges. OECD work on public sector innovation looks at how governments can use novel tools and approaches to improve practices, achieve efficiencies and produce better policy results.

• Global Trends in Government Innovation
• Tackling Policy Challenges Through Public Sector Innovation

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Key messages, innovation is a strategic function that must be integrated into broader public sector governance..

Innovation rarely happens by accident. Governments can increase innovation in the public sector through deliberate efforts using many different levers, from investments in skills or technology, to applying new policymaking methods or adapting existing processes. Our work helps governments assess their innovative capacity, providing practical and evidence-based steps to embed innovation in policymaking and administration. This means governments are better able to respond to changing environments and develop more impactful policies.

Behavioural science helps governments put people at the center of public policy.

Understanding cognitive biases, behavioural barriers, and social norms  is essential for the development of impactful policies and public uptake. Behavioural science is an interdisciplinary approach, providing insights that enable policymakers to design more effective and targeted policies that reflect actual human behaviour and decision-making. Our work encompasses research on context-specific behavioural drivers and barriers to support countries in the use of behavioural science from policy design to implementation and evaluation. Through the OECD Network of Behavioural Science Experts in Government, we further foster the exchange of best behavioural science practices and mutual learning.

Governments must anticipate, understand and prepare for the future as it emerges.

The nature of policy issues that governments are confronted by is volatile, uncertain, complex and often ambiguous. Governments need to consider a variety of scenarios and act upon them in real time. This requires a new approach to policymaking, one that is future and action oriented, involves an innovation function and anticipates the changing environment. By governing with anticipation and innovation, governments can prepare for what’s coming next. They can identify, test, and implement innovative solutions to benefit from future opportunities while reducing risk and enhancing resilience.

Innovation in public services unlocks efficiency, responsiveness and citizen satisfaction.

Innovating and digitalising public services can bring many benefits, including improving the quality, efficiency and effectiveness of services, enhancing equitable access and reducing administrative burdens. While it holds tremendous benefits for supporting the overall well-being and satisfaction of citizens and public trust in institutions, governments must ensure high standards of transparency and ethics, particularly when employing the use of data and artificial intelligence to improve or deliver public services. Our work is building towards an OECD Recommendation on the design of government services to effectively improve people's experiences including through life events and the development of more effective and equitable services.  

The public has a lack of confidence in public agencies adopting innovative ideas.

Governments must do better to respond to citizens’ concerns. Just fewer than one in four (38%, on average across OECD countries), feel that a public agency would be likely to adopt an innovative idea to improve a public service. Enhancing innovation capacity can strengthen resilience, responsiveness and trust in public institutions.

Confidence in governments’ adoption of innovative ideas is directly related to trust in civil servants.

People who say they are confident about innovation in a public office are more likely to trust civil servants. On average across OECD countries, the share of people who trust the civil service is equal to 70% among those who are confident about public sector innovation. This trust value is more than two times larger than among those who say that the public sector would not adopt innovative ideas.

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• Anticipatory governance In an era characterised by rapid technological advances, environmental shifts, changing demographics, geopolitical tensions, and evolving societal needs, traditional governance models are increasingly under pressure. Governments worldwide are seeking ways to not only respond to present challenges but also to anticipate and shape future possibilities. Anticipatory Innovation Governance is a proactive approach that integrates foresight, innovation, and continuous learning into the heart of public governance. Learn more
• Behavioural science Governments around the world are increasingly using behavioural science as a lens to better understand how behaviours and social context influence policy outcomes. At the OECD, we research context-specific behavioural drivers and barriers, and support countries in the use of behavioural insights, from policy design to implementation and evaluation. Learn more
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Community Economic Development

Division of Extension

Wisconsin REV Has Launched!

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Wisconsin’s Rural Entrepreneurial Venture (REV) program launched on June 3 rd with its inaugural cohort diving into the first phase known as eReady. Each WI REV community’s leadership team started their journey with an orientation meeting that included their WI REV coach and eReady coach to learn about the eReady three-month process and to start reviewing the Ord, NE case study.  They then gathered virtually for their first plenary session, coming together as a cohort to discuss the economic benefits Ord has seen over the past 20+ years and to reflect on potential goals their own communities might realize through employing the WI REV framework.

Ord is a rural city in Valley County, NE that began using this type of framework in 2000 to develop their small community through entrepreneur-led economic development. Their growth and economic prosperity have been studied and documented by e2 Entrepreneurial Ecosystems leader, Don Macke, and his colleagues for more than 20 years as ORD continues to utilize the tools this framework provides.

Rural Entrepreneurial Venture (REV), based on the e2 model of entrepreneur-led development, is a proven entrepreneurial development program designed to advance small town economies through a targeted business approach. WI REV is now underway with its inaugural cohort including:

• City of Jefferson in Waukesha County
• Latino entrepreneurs in Green County
• City of Amery in Polk County
• City of Mineral Point in Iowa County
• City of Hillsboro in Vernon County

The typical WI REV community is rural with a population of at least 1,500 but no more than 10,000, which may include an individual city/town/village, a combination of neighboring communities or a school district. Local leadership in a WI REV community is willing to invest time with their local entrepreneurs and work to establish a robust entrepreneurial ecosystem and a diverse, more resilient economy. If you are part of such a community and would like to discuss potential WI REV program participation, please contact Lisa Taylor at [email protected] .

Wisconsin REV is led by UW-Madison Division of Extension’s Community Economic Development Program in partnership with Community and Economic Development , Associates (CEDA), Compeer Financial, Southern Minnesota Initiative Foundation (SMIF), and Energizing Entrepreneurs “e2” framework.

This effort is being funded by :

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A new bi-level mathematical model for government-farmer interaction regarding food security and environmental damages of pesticides and fertilizers: : Case study of rice supply chain in Iran

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Bibliometrics & citations, view options, recommendations, designing and solving a bi-level model for rice supply chain using the evolutionary algorithms.

• A bi-level mathematical model is firstly formulated for the rice supply chain.

According to the recent gigantic development in the agricultural section, Agricultural Supply Chain (ASC) management has attracted both researchers and agronomic practitioners. In this regard, rice as one of the important agricultural ...

Toward farmer decision profiles to improve food security in Kenya

The decision-making processes of small-scale farmers are frequently ignored in discussions about food security in sub-Saharan Africa. Consequently, policies intended to improve land productivity often fail or produce ambiguous results regarding their ...

Sensitivity and uncertainty propagation in coupled models for assessing smallholder farmer food security in the Olifants River Basin, South Africa

Using family balance (i.e., combined net farm and non-farm incomes less family expenses), an output from an integrated model, which couples water resource, agronomic and socio-economic models, its sensitivity and uncertainty are evaluated for five ...

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• Agricultural supply chain
• Multiple cropping
• Bilevel optimization
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• Economic and environmental objectives
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President’s Report by Marina Bill

How to overcome shortage of skilled workers.

Dear Members, Partners, and Stakeholders,

As we navigate the complexities of the current economic landscape, it is imperative to reflect on the challenges and opportunities that shape the robotics industry today.

The year so far has been marked by significant hurdles, particularly the decline in orders that is impacting our sector around the globe. Economic uncertainties and market fluctuations have created a challenging environment for businesses and innovators within our field. Despite these obstacles, the need for robotization has never been more critical.

One of the most pressing issues we face globally is the shortage of skilled labor. Industries across various sectors are struggling to fill positions, and this gap continues to widen. Robotization presents a viable and necessary solution to this problem, enhancing productivity, efficiency, and safety in workplaces. By integrating robotics into more areas of operation, we can mitigate the impact of labor shortages and ensure sustained economic growth and stability.

Further, the World Bank predicts that GDP per capita would be almost 20 percent higher on average if female employment were increased to be the same as that of men´s.

This initiative is not just a step towards gender equality but a strategic move to diversify and enrich the workforce. By empowering women and promoting inclusivity, we can harness a broader range of perspectives and ideas, driving innovation and excellence in robotics.

In response, the International Federation of Robotics has launched its initiative "IFR's Women in Robotics: 10 Women Shaping the Future of Robotics”. Recognizing the vast potential and talent pool that women represent, this program is designed to encourage and support women in pursuing careers in robotics. We selected an initial group of 10 women – all with different backgrounds, at different career steps, and different companies around the globe – that we will give special visibility to throughout this year.

It will become an annual activity, to inspire other young women to decide to study STEM subjects. Long term, this should support all our members’ efforts to bridge the gender gap and meet the rising labor demand in our industry.

In these challenging times, our collective effort and resilience will be crucial. By focusing on innovation and inclusivity, we can develop a strong and adaptable robotics industry that meets current demands and lays the foundation for a more prosperous future for all.

Best regards

Marina Bill

IERA Award 2024: Realtime Robotics Awarded for Optimization Tool

World Bank Predicts 20% Economic Boost by Closing Gender Gap

U.S. Companies Invest Heavily in Robots - IFR Preliminary Results

AI-equipped Robots Help Logistics Industry to Fight Labor Shortages

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Preventing suicide among youth in juvenile detention

By Implementation Research Institute (IRI) | July 1, 2024

Translational Science Benefits

Suicide is the second leading cause of death among 10- to 25-year-olds. 1 Suicidal behaviors are three to four times more likely among youths in the juvenile legal system 2–5 than among their peers outside the system. Fifty percent of youths in juvenile detention experience suicidal ideation. 6 Because of social and structural factors, including racism, 7 Black youths are disproportionately represented in detention. 8 Thus, placement in detention is an event that puts youths at high risk for suicidal behavior and that disproportionately affects Black youths. The Zero Suicide model is the national strategy for suicide prevention in healthcare. 9,10 The core clinical elements include IDENTIFY (i.e., evidence-based suicide screening and risk assessment), ENGAGE (i.e., appropriate pathways of care), TREAT (i.e., evidence-based suicide intervention), and TRANSITION (i.e., care coordination). We seek to develop a Zero Suicide model for juvenile detention to support youth at-risk for suicide and to ensure that existing disparities in mental health care for Black youths are not worsened. 11

This is an ongoing research program that began in March 2018. We have completed three projects with a fourth underway, all concerned with identifying and preventing suicidality among youths in juvenile detention. In the first project, we used quality improvement methods to develop a feasible, acceptable, and appropriate suicide prevention plan for a single, large juvenile detention center. 12 In this plan, behavioral health clinicians inside the juvenile detention center screen all youth for mental health needs, including suicidality. The clinicians then provide appropriate health services; one example is the Stanley and Brown Safety Planning Intervention, 13 which is a brief suicide prevention intervention that supports coping in times of crises.

The second project studied statewide efforts to prevent suicide in juvenile detention, with the primary goal to learn more about the quality of suicide prevention. 14 Within this study we also sought to identify barriers and facilitators to suicide prevention implementation. To get this information, we interviewed 80% of detention center leaders and staff in one state. We learned that suicide prevention practice adoption is high, but the quality of implementation in line with national guidelines is low.  A primary concern with respect to suicide prevention implementation barriers was the lack of behavioral health support available in juvenile detention centers. 15 Only half of juvenile detention centers had any amount of behavioral health support.

In project 3 we sought to understand suicide prevention barriers and facilitators with input from centers with varying levels of support from behavioral health clinicians. 16 We learned that leadership support of suicide prevention is key in supporting implementation efforts across centers. The findings also suggest that training frontline supervisors to better support frontline staff in the delivery of suicide prevention may improve intervention sustainability for centers without behavioral health clinicians. 16

We are now conducting project 4. Project 4 is a 5-year National Institute of Mental Health (NIMH) career development award that aims to use community-based participatory methods to develop a Zero Suicide prevention model for juvenile detention (K23MH129321). In this project, we will work with young Black youth connected to the juvenile-legal system to understand their preferences for suicide prevention, develop a model for suicide prevention that incorporates the lessons learned from all four projects, and then pilot the model in two detention centers. The final output of the current project is a manualized Zero Suicide model that is primed for implementation and sustainment in juvenile detention centers.

Significance

Through the development of our Zero Suicide model, we hope to increase the adoption and implementation of evidence-based suicide prevention in juvenile detention centers. As that occurs, we expect that 1) fewer suicidal youth will be detained because center staff will better understand the harms associated with detaining those youth and seek alternative placement and 2) fewer youth will experience suicidality when detained.

Our work is informed by community-based participatory research designs. As such, in each project, we have aimed to center the needs of Black youth who are, due to structural racism, overrepresented in juvenile detention. We have sought to include community voices throughout our research program. By developing a model that centers the needs of Black youth specifically, we are explicitly focusing on equity.

Demonstrated benefits are those that have been observed and are verifiable.

Potential benefits are those logically expected with moderate to high confidence.

We aim to develop culturally appropriate suicide prevention practices. potential.

The Zero Suicide model will be a service for individuals in juvenile detention. potential.

The Zero Suicide model aims to reduce youth suicidality. potential.

The Zero Suicide model aims to connect youth to mental health care delivery for those who need help. potential.

The Zero Suicide model aims to increase the quality of suicide prevention practices in juvenile detention. potential.

By reducing youth suicidality, we hope to improve life expectancy. potential.

The Zero Suicide model will take a public health approach to mental health, making considerations for universal, indicated, and intensive mental health services. potential.

By reducing suicidality among youth, we hope to increase the life expectancy of youth, which will benefit society financially by having these young people in our economy longer. potential.

We have published several papers that guide suicide prevention in juvenile detention. demonstrated.

We hope that our Zero Suicide model will become the new standard for suicide prevention in juvenile detention and will be adopted by county and state agencies that oversee juvenile detention facilities. potential.

This research has clinical, community, economic, and policy implications. The framework for these implications was derived from the Translational Science Benefits Model created by the Institute of Clinical & Translational Sciences at Washington University in St. Louis.

We hope to adapt existing suicide prevention programs to ensure they meet the needs of Black youth, thereby improving the effectiveness of those interventions and ultimately saving lives.

The ultimate goal of our work is to minimize the number of youth who have mental health concerns from entering juvenile detention, and to prevent mental health concerns from developing among those who do. Our Zero Suicide model will support juvenile detention centers in do just that.

All youth deserve an opportunity to see adulthood. We hope that our program will increase the life expectancies of youth in juvenile-legal systems, ultimately making this world a better place for all.

While there are standards for suicide prevention for juvenile detention, we want them to be enhanced. We hope this work will help with this.

References Arrow Down

• Heron M. Deaths: Leading Causes for 2016.
• Abram KM, Choe JY, Washburn JJ, Teplin LA, King DC, Dulcan MK. Suicidal Ideation and Behaviors Among Youth in Juvenile Detention. J Am Acad Child Adolesc Psychiatry . 2008;47(3):291-300.
• Livanou M, Furtado V, Winsper C, Silvester A, Singh SP. Prevalence of Mental Disorders and Symptoms Among Incarcerated Youth: A Meta-Analysis of 30 Studies. Int J Forensic Ment Health . 2019;18(4):400-414.
• Hayes LM. Juvenile Suicide in Confinement—Findings from the First National Survey. Suicide Life Threat Behav . 2009;39(4):353-363.
• Wasserman GA, McReynolds LS. Suicide Risk at Juvenile Justice Intake. Suicide Life Threat Behav . 2006;36(2):239-249.
• Esposito CL, Clum GA. Social support and problem-solving as moderators of the relationship between childhood abuse and suicidality: Applications to a delinquent population. J Trauma Stress . 2002;15(2):137-146.
• Rovner J. Racial Disparities in Youth Commitments and Arrests. The Sentencing Project. Published April 1, 2016. Accessed May 29, 2024. https://www.sentencingproject.org/reports/racial-disparities-in-youth-commitments-and-arrests/
• State detention rates by race/ethnicity, 2019 | Office of Juvenile Justice and Delinquency Prevention. Accessed May 29, 2024.
• Office of the Surgeon General (US), National Action Alliance for Suicide Prevention (US). 2012 National Strategy for Suicide Prevention: Goals and Objectives for Action: A Report of the U.S. Surgeon General and of the National Action Alliance for Suicide Prevention . US Department of Health & Human Services (US); 2012. Accessed May 29, 2024. http://www.ncbi.nlm.nih.gov/books/NBK109917/
• Richards JE, Simon GE, Boggs JM, et al. An implementation evaluation of “Zero Suicide” using normalization process theory to support high-quality care for patients at risk of suicide. Implement Res Pract . 2021;2:26334895211011769. doi:10.1177/26334895211011769
• Alegria M, Vallas M, Pumariega A. Racial and Ethnic Disparities in Pediatric Mental Health. Child Adolesc Psychiatr Clin N Am . 2010;19(4):759-774.
• Rudd BN, George JM, Snyder S, et al. Harnessing Quality Improvement and Implementation Science to Support the Implementation of Suicide Prevention Practices in Juvenile Detention. Psychotherapy . 2022;59(2):150-156.
• Home. Stanley-Brown Safety Planning Intervention. Accessed May 29, 2024. https://suicidesafetyplan.com/
• Rudd BN, Witzig J, Goff CN, et al. A Statewide Evaluation of the Implementation of Evidence-Based Suicide Prevention Guidelines in Juvenile Detention Centers. Psychiatr Serv Wash DC . Published online February 19, 2024:appips20220490.
• Rudd BN. Protecting the most vulnerable: Suicide prevention in the justice system. Symposium presented at: 55th annual meeting of the Association for Behavioral and Cognitive Therapies; November 2021; Virtual.
• Rudd BN, Stern DH, Potter EN, Goff CN. The zero suicide model for juvenile detention: Leadership, training, and staff attitudes matter. Presented at: November 18, 2021.
• Luke DA, Sarli CC, Suiter AM, et al. The Translational Science Benefits Model: A New Framework for Assessing the Health and Societal Benefits of Clinical and Translational Sciences. Clin Transl Sci . 2018;11(1):77-84.