Measuring the impact of meat packing and processing facilities in nonmetropolitan counties: a difference-in-differences approach.

Meat packing and processing facilities have a prominent, yet controversial presence in rural counties of the South and the Midwest. On the one hand, attracting agricultural processing facilities is an increasingly popular strategy for rural communities since it is viewed as a good fit for agriculturally dependent regions. The industry is an important provider of entry-level opportunities for low-skilled labor and new immigrants to the country and the region (Huffman and Miranowski 1996). New facilities may provide expanded job opportunities, supplemental income for farm families, increased public revenues, and stimulus for further development in other sectors such as retail trade and services (Leistritz and Sell 2001; Drabenstott, Henry, and Mitchell 1999). On the other hand, the expansion of large-scale meat processing facilities generates concerns about the potential negative impacts on the host communities. Opponents fear environmental damage to air and water quality, the inconvenience of bilingual commerce, higher levels of crime, increased welfare loads, and heavier burdens on public services such as schools and low-income housing.

The debate over the impact of livestock packing and processing plants on their host communities is largely informed by journalistic accounts, such as in the 2001 bestseller Fast Food Nation. Eric Schlosser paints a grim picture of the effects of a new meat packing plant on Lexington, Nebraska, including a dramatic rise in the immigrant population, crime, and demand for public services like Medicaid (p. 165). Similarly, the academic research on this topic consists primarily of case study analyses. (1) These studies document a variety of social and economic consequences following the opening of large meat packing plants, generally finding that such plants are a mixed blessing for host towns. A new establishment may increase local demand for animals and feed in the region (Broadway 2000). It also provides new jobs to the community. Host communities experience growth in employment and payroll, not only in manufacturing, but also in retail and services. However, job growth tends to be concentrated in low-paying jobs. In Garden City, Kansas, per capita income and average wages in the area rose in the decade following the opening of a large packing plant, but not as much as in the rest of the state (Broadway, Stull, and Podraza 1994). The promise of economic growth is used by host communities to justify tax and other incentives offered to new plants. For example, Guymon, Oklahoma, offered Seaboard Corporation tax incentives and abatements to build a large pork processing plant. To help defer the cost, the community implemented a local option sales tax (Stull and Broadway 2004, p. 61).

A number of social problems have been documented in meat packing towns, including increased crime rates and child abuse cases, higher housing and rental prices due to shortages, and added strain on social services and the healthcare system (Broadway 1990; Broadway 1994; Broadway, Stull, and Podraza 1994; Grey 1997b; Stull and Broadway 2004). Schools in host communities are impacted by the plant through greater numbers of limited-English proficient students and unstable school enrollments reflecting high turnover rates at the plant (Grey 1997a). There are also environmental concerns regarding odor and ground and water pollution (Hackenberg 1995).

These studies examine changes in host communities before and after the opening of plants, but generally do not provide a frame of reference by comparing meat packing towns with similar communities that do not have meat packing or processing facilities. The examples reported in case studies are unique, and in fact, may be chosen because they are unique, making it more difficult to generalize their findings. They all focus on very large plants despite the fact that, except for poultry processing, the majority of meat packing and processing firms have fewer than 100 employees (U.S. Department of Commerce, Bureau of the Census 2001). (2) It is true, however, that industry concentration has increased dramatically over the past few decades (Ollinger, MacDonald, and Madison 2005; MacDonald and Ollinger 2005). Rising firm size increases the chance a community will experience adverse external effects from expansion.

Recent research generates mixed conclusions regarding what, if any, positive economic benefits a new large plant generates for its host community. In a study of new firm locations employing at least 1,000 workers between 1980 to 1989, Fox and Murray (2004) find little evidence that the presence of these large firms affects future employment or income growth in the local region. Edmiston (2004) finds positive employment spillovers from large plant locations and expansions in Georgia counties from 1984 to 1998. Firm expansions yield approximately 200 workers on net for every 100 new firm employees, whereas new locations yield a net gain of only 29 workers in the county for every 100 new firm employees. A study by Greenstone and Moretti (2003) of "million dollar plants" finds a large plant opening significantly increases growth in the host county's total wage bill. Five years after the plant's opening, they estimate that the average county wage bill for host counties is 9% higher due to the new plant. In addition, they find no evidence that the plant reduces property values or affects local government spending.

Our focus on meat packing plants is particularly useful in light of these more general studies of plant siting effects. Because the acrimony surrounding meat packing plants arguably exceeds that in other sectors, this sector could be viewed as a worst-case scenario for new plant sitings. Second, meat packing represents one of the few sectors expanding manufacturing jobs in rural areas that have otherwise faced limited opportunities for economic growth. Finally, because meat packing plants are more homogeneous than the variety of manufacturers analyzed in these previous studies, we have many similar cases to evaluate, and our results are less likely to be driven by the unique circumstances surrounding the siting of one-of-a-kind plants. Our concentration on nonmetropolitan counties in the Midwest and the South assures that the counties are of similar size and face similar economic opportunities and challenges.

We use quasi-experimental methods to assess whether the case study findings regarding the impacts of the meat packing industry on host communities apply generally to all counties. The outcome measures we use include county growth in employment, average wages, and aggregate income. (3) We also investigate how the industry affects the growth of local employment in other sectors. Finally, we examine how the industry affects growth in crime and in various types of local government spending.

Our research uses annual data on meat packing and processing facilities from the Bureau of Labor Statistics' Longitudinal Database (LDB) from 1990 to 2000. (4) We compare changes in social and economic indicators in nonmetropolitan counties with and without meat packing and processing jobs. The social and economic outcomes include changes in county employment, wages and income, as well as changes in county crime rates and local government expenditures for education, police protection, and health. The industries we consider are defined by the North American Industry Classification System. They are: meat packing plants (NAICS 311611) primarily engaged in animal slaughtering (excluding poultry); poultry processing plants (NAICS 311615), which both slaughter and process poultry; and meat processing plants (NAICS 311612), which process or preserve meat and meat byproducts from purchased meats. We also include rendering establishments (NAICS 311613) and frozen specialty food plants (NAICS 311412) in the processing category. Using the LDB, nonmetropolitan counties in 23 Midwestern and Southern states are classified into one of five categories based on whether a facility in any of these industries (a) was present continuously, (b) entered, (c) closed, (d) both entered and exited, or (e) was not present, during the period 1990-2000. (5) Establishment-level employment and wage data are aggregated to the county level and used to construct relative measures of earnings and employment in order to analyze the importance of overall size of the industry in the county. In addition, we investigate the possibility that higher-value processing facilities generate social and economic impacts that are different from those of packing facilities.