UNCW economist skewers Titan’s economic impact study

by Daniel Bowden
Wednesday, November 28, 2012

On Nov. 27 at the WHQR Gallery, the Cape Fear Economic Development Council hosted a presentation on the economic impact of the cement plant Titan America has proposed to build in Castle Hayne. The presentation was a summary of an economic impact study conducted by Dr. Craig Galbraith, professor of economics at the University of North Carolina Wilmington, dissecting the original economic impact study conducted by Titan in April 2008.

Titan’s 2008 study indicated that 160 new jobs would be created by the construction of the plant, which would pyramid into 720 new jobs in New Hanover County and bring an additional $345.7 million in economic activity to the county and result in $19.5 million additional rental and dividend income.

“It didn’t smell right,” Galbraith said.

Galbraith said Titan’s study used a computer model called IMPLAN, which relied on assumptions about economic activity based on the national economy, rather than regional. In addition, the model did not take into account any dispersive or negative effects the industry could have on a region’s economy, and operated based on the assumption that all of the supplies needed to run the plant would be purchased locally.

Before explaining his own economic impact studies, Galbraith attacked the idea that more employment leads to economic growth. 

“One of the biggest misconceptions people have is that more employment helps the economy,” Galbraith said. “Often they are just shifting demand around. ... Some actually hurt the economy.”

Pollution, infrastructure congestion, commuter congestion, and activity not compatible with the long-term vision of the community were just some of the negative externalities Galbraith said lead to business activity that is bad for economic growth. Many of these could be associated with Titan, he said.

Galbraith used three different models for his own economic impact study. The first used the traditional IMPLAN model used for Titan’s 2008 economic impact study, but with updated information. This model returned an increase of 410 to 545 jobs, pyramiding from the original 160 Titan claimed.

The second model also used the IMPLAN computer model, but this time it was tweaked to recognize that much of the input required to run the Titan plant would need to be imported, and that those suppliers would be unlikely to relocate to NHC just because Titan was here. This model showed a total net increase of 366 jobs. 

“This model is more realistic, but still doesn’t include any negative externalities,” Galbraith said.

Galbraith’s third model was based on real data from an empirical study conducted in Georgia on towns with new manufacturing plants, and was designed to account for how the introduction of large manufacturing plants could repel existing establishments or other potential entrants. This study indicated that for every 160 jobs Titan created, 50 would leave, creating a net increase of 110 jobs.

“Compare that to the 720 jobs presented in 2008,” Galbraith said.

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