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Economic Research Institute Study paper


Utah State University

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Most regional policy-makers have, as one of their important policy goals, some form of maximization of regional economic activity. Obtaining maximum output, employment, and income from a state's, or region's, resource base appears to be central to many planning and policy agencies. For example, the State of Utah considered limiting the sources of coal for new electrical generation plants in the state, to in-state coal fields through legislative or administrative fiat. While such a policy was not implemented, it represents the conviction that verticle integration within a region will increase that region's economic welfare. The wide-spread use of industrial revenue bonding and provision of tax incentives to attract industry is another facet of these policies. However, the will ingness of firms to locate within a region, or to utilize resources from that region, depends primarily on the profitability of the action. Thus, to induce firms to locate requires subsidies of one form or another. In this study, the loss in profitability to energy and agricultural sectors resulting from increasing gross economic activity was examined, to determine the opportunity cost of growth in regional gross output.