1. The Impact of Agri-Business Processing Firms on the Local Economy Mary Carey Teagasc Rural Economy and Development Programme School of Economics, UCD Supervisors: Prof. Cathal O’Donoghue, Rural Economy Research Centre, Teagasc; Prof. Aisling Reynolds-Feighan, School of Economics, University College Dublin

2. Outline 1. Introduction 2. Research objective 3. Literature 4. Overview of agri-business processing firms (location, settlement type, firm size, ownership) 5. Economic linkages (inputs, labour, outputs) 6. Conclusion 7. Next steps

3. Introduction Strength of economic linkages between sectors – construction v. manufacturing Bio-sector and its impact on the economy - low import dependence, high local multiplier & low levels of profit repatriation (Riordan, 2012) Geographical Spread of the sector highlights significance of the location of agri-business processing firms (Carey & O’Donoghue, 2014) – high LQ in Border region

4. Research Objective 1. Provide an overview of the Irish agri-business processing sector Processing sector includes dairy processing, beef processing, other meat processing, poultry processing, functional ingredients preparation, sea food processing and other consumer foods. 2. Understand the economic linkages of the agri-business processing sector Origin of firm and destination of inputs (upstream purchases), outputs (downstream purchases) and employment flows.

5. Literature Net income theories – reduce leakage of income and attract external income (Persky et al., 1993) Degree of ‘Local Economic Integration’ (Courtney et al., 2008) Sectoral Characteristic - the construction sector is considered to be better integrated than the manufacturing sector (Williams, 1994). Organisational Characteristics – firm size, ownership and age (Courtney et al., 2008). Locational (or contextual) Characteristics - settlement type/hierarchy and proximity to urban centres

6. Overview of agri-business processing firms Teagasc Survey (2014) contains an array of information including: characteristics of the firm (location, number of employees, turnover, year of establishment, ownership etc.), inputs (labour, raw material, transport, water, energy, communication, others across the 6 zones) and outputs sold across 6 zones (A -> F).

7. Location of surveyed processing firms Geo-reference by Electoral District (ED). ED with agri-business processing firms are highlighted in red. Table 1: Regional distribution of surveyed processing firms Number of firms Percentage Border3113.8 West167.1 Midland114.9 Mid-East2611.6 South-East3214.3 South-West5625.0 Mid-West2410.7 Dublin2812.5 Total224100 Map by Mary Carey © Ordnance Survey of Ireland and Teagasc

8. Location by settlement type Census 2011 data used to define the types of settlement based on the population of the Electoral Divisions (ED). Open countryside or village (less than 1,599 people); small towns (1600-4999 people), medium towns (5000-9999 people) and large towns (greater than 10,000 people and the 5 main cities. 50 per cent of agri-business processing firms are located in very rural EDs Table 2: Processing firms by settlement type Village Small Town Med Town Large Town CityTotal Number of firms 11117302145224 Percentage49.67.613.49.420.1100 Cumulative49.657.170.579.9100

9. Firm size and ownership by settlement type Table 3: Percentage of firm by size by settlement type Village Small Town Med Town Large Town CityTotal Micro34.241.216.733.335.632.6 SME51.452.966.752.446.752.7 Large14.45.916.714.317.814.7 Firm ownership 94 per cent of agri-business firms are Irish owned The 5 main cities have the highest percentage of foreign owned agri- business firms. Firm size by number of employees 32.6 per cent micro (less than 10 employees) 52.7 per cent SME (10 to 250 employees) 14.7 per cent large (more than 250 employees) Table 5: Percentage of firm ownership by settlement type Village Small Town Med Town Large Town CityTotal Irish94.6100.090.0100.088.993.8 Foreign5.40.010.00.011.16.3 Number of firms 11117302145224

10. Economic linkages of processing firms Teagasc Survey (2014) 224 processing firms reported the distribution of the firm’s inputs (labour and non-labour inputs) and outputs (customers & industry) across 6 zones (A-F). Zone A: less than 10km Zone B: between 10-20km Zone C: between 21-40km Zone D: NUTS 3 region Zone E: elsewhere in the ROI Zone F: international 1.Labour (distance employees travel) 2.Non-labour inputs (raw materials, transport, water, energy, communication, other) 3.Outputs (spatial distribution of customers)

11. Non-labour inputs by zone Zone and Distance Band Non-Labour Input ABCDEF 0-9km 10- 20km 21- 40km Region Rest of ROI Imports Raw Materials 16.38.610.914.727.023.0 Transport 37.817.015.310.317.13.9 Water 75.611.74.87.90.0 Energy 43.88.216.810.918.81.5 Communication 31.05.212.416.431.63.4 Other 28.615.018.017.311.59.6 Average 38.911.013.012.917.66.9 Cumulative Share 38.949.862.975.893.4100 Note: rows sum to 100 and may not sum exactly to 100 due to rounding effects Origin of non-labour inputs Almost 40 per cent are sourced within 10km Almost 76 per cent are sourced within the region Less than 7 per cent sourced internationally Import (from outside the ROI) is higher for raw materials

12. Labour inputs by zone and by settlement type Distance Travelled to Work by Zone and Distance Band Labour ABCDEF 0-9km 10- 20km 21- 40km Region Rest of ROI Imports Village 72.517.56.81.50.61.1 Small town 84.510.74.70.0 Med town 71.317.87.12.21.50.2 Large town 84.413.42.00.10.0 Cities 70.224.14.40.90.2 Average 74.017.85.81.20.6 Cumulative share 74.091.897.698.899.4100 Note: rows sum to 1 and may not sum exactly to 1 due to rounding. Labour costs accounts for 26 per cent of overall total inputs in the agri-business sector. 92 per cent of agri- business’ employees travel less than 20kms. Settlement type (village to city) does not seem to impact the distance travelled by agri-business’ employees.

13. Outputs - Location of customers Zone and Distance Band Output by Settlement type ABCDEF 0-9km 10- 20km 21- 40km Region Rest of ROI Exports Village 10.79.710.512.932.11.1 Small town 32.119.914.98.37.70.0 Med town 17.66.27.313.628.70.2 Large town 45.911.218.210.22.60.0 Cities 46.123.06.45.99.30.2 W. Average 23.812.810.311.022.40.6 Cum. 23.836.646.957.980.3100 Note: rows sum to 1 and may not sum exactly to 1 due to rounding. Relatively high heterogeneity on main market for output depending on settlement type The agri-business firms in the open countryside and villages have lowest percentage within zone A and highest exports. Agri-business firms in cities reliance on zone A finding contrary to what the literature would suggest.

14. Conclusions Importance for rural Ireland - 50 per cent of agri-business processing firms are located in the open countryside/village. Agri-business processing firms in villages and the open countryside have a higher propensity to export and are less reliant on the local market to sell their produce. Regional significance - 76 per cent of non-labour inputs are sourced within the NUTS3 region and only 7 per cent are imported. Domestic ownership - 94 per cent of agri-business processing firms are Irish owned. Commuting patterns are relatively short - over 90 per cent of employees travelling less than 20km to work in an agri-business processing firm.

15. Next steps Appropriate modelling technique when dealing with shares…. Fractional multinomial/mixed logit? Estimate regional coefficient which measures the strength of ‘regional economic integration’ Regional coefficient inserted into the Spatial Input-Output table generated by applying Cross-Industry Location Quotient (CILQ) to the national I-O tables.

16. Thank you! Mary.Carey@ucdconnect.ie or Mary.Carey@teagasc.ie