Forest Sector Dependence and Economic Well-Being in Kentucky: An Econometric Analysis

Kentucky's forest sector plays an important role in the state's economic development through provision of market and nonmarket goods and services as well as the employment. The forest-dependent communities are socio-economically diverse with varying poverty rate levels. An aggregate state-level analysis of the forest sector and its contribution to communities' well-being masks regional differences in how forest sector dependence is related to the economic well-being of dependent communities. In this research, we divided Kentucky into three regions based on county poverty rates and used common indicators of forest sector dependence and economic well-being to assess this relationship at regional level. We used panel data from 2010 to 2017 and ran fixed effects regression to assess this relationship. Results show that the relationship between secondary wood manufacturing, pulp and paper dependence and per capita income was negative in high-poverty counties whereas the relationship between pulp and paper dependence and per capita income was positive in medium-poverty counties. This reflects high structural difference in economies of medium-poverty counties relative to high-poverty counties. Most of the high-poverty counties are in rural areas with limited job opportunities. Policy interventions on capacity building and workforce training in high-poverty counties is necessary for sustained forest industries in these regions.