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Economic Effects of Biofuel Production on States and Rural Communities


  • Parcell, Joseph L.
  • Westhoff, Patrick C.


This study summarizes research on farm-, local-, regional-, and macro-level economic effects of ethanol production. Given current production levels, the ethanol production industry annually employees approximately 3,500 workers, pays out nearly $132 million in worker salaries, generates over $110 million in local taxes, and takes in some $2 billion in government incentive payments. Projections for a 60 million gallon per year ethanol plant indicate an annual increase in corn usage of 21 million bushels, a one-time capitalization of $75 million, an increase in local corn prices between $0.06/bushel and $0.12/bushel, a 54 direct and 210 indirect jobs created, and increase in local tax revenues of $1.2 million, a decrease in federal commodity program outlays of $30 million, and an increase in ethanol production incentives (federal only) of around $30.5 million.

Suggested Citation

  • Parcell, Joseph L. & Westhoff, Patrick C., 2006. "Economic Effects of Biofuel Production on States and Rural Communities," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(02), August.
  • Handle: RePEc:ags:joaaec:43774

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    References listed on IDEAS

    1. Swenson, David A., 2005. "Model Economic Analyses: An Economic Impact Assessment of an Ethanol Production Facility in Iowa," Staff General Research Papers Archive 12226, Iowa State University, Department of Economics.
    2. Gardner, Bruce L., 2003. "Fuel Ethanol Subsidies And Farm Price Support: Boon Or Boondoggle?," Working Papers 28599, University of Maryland, Department of Agricultural and Resource Economics.
    3. Outlaw, Joe L. & Anderson, David P. & Klose, Steven L. & Richardson, James W. & Herbst, Brian K. & Waller, Mark L. & Raulston, J. Marc & Sneary, Shannon L. & Gill, Robert Chope, II, 2003. "An Economic Examination of Potential Ethanol Production in Texas," Working Papers 42707, Texas A&M University, Agricultural and Food Policy Center.
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    Cited by:

    1. Kalim Shah & Jorge Rivera, 2013. "Do industry associations influence corporate environmentalism in developing countries? Evidence from Trinidad and Tobago," Policy Sciences, Springer;Society of Policy Sciences, vol. 46(1), pages 39-62, March.
    2. Westbrook, Jessica & Barter, Garrett E. & Manley, Dawn K. & West, Todd H., 2014. "A parametric analysis of future ethanol use in the light-duty transportation sector: Can the US meet its Renewable Fuel Standard goals without an enforcement mechanism?," Energy Policy, Elsevier, vol. 65(C), pages 419-431.
    3. Guerrero, Bridget L. & Johnson, Jeffrey W. & Amosson, Stephen H. & Johnson, Phillip N. & Segarra, Eduardo & Surles, James, 2011. "Ethanol Production in the Southern High Plains of Texas: Impacts on the Economy and Scarce Water Resources," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 41(1).
    4. Ji, Xi & Long, Xianling, 2016. "A review of the ecological and socioeconomic effects of biofuel and energy policy recommendations," Renewable and Sustainable Energy Reviews, Elsevier, vol. 61(C), pages 41-52.

    More about this item


    biofuel; ethanol; local economy; government subsidies; Community/Rural/Urban Development; Resource /Energy Economics and Policy; O13; Q40; Q42; R10;

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General


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