Daily Archives: July 16, 2009

Several interesting observations emerge from the data on the contribution of tobacco to state economies.
In 2000 the share of GSP accounted for by tobacco farming and manufacturing was just over 4% in North Carolina, just over 2% in Kentucky and Virginia, and slightly less than 1% in Georgia. Over the period from 1979 through 2000, the share of GSP accounted for by tobacco growing and manufacturing exceeded 0.2% in any year in just two other states—South Carolina and Tennessee. Second, as illustrated in figure 6.5, the economic contribution of tobacco to the national economy has been declining for most of the period from 1979 through 2000.
Tobacco farming contributed just over 0.1% of gross domestic product (GDP) in the early 1980s; by 2000, this was down to less than 0.03% of GDP. Tobacco manufacturing’s contribution to GDP has been somewhat more stable but has been generally declining since the early 1990s. In general, the value of tobacco manufacturing depends heavily on the price of tobacco products, as can be seen by some of the larger changes in the share of GDP accounted for by tobacco manufacturing over time. For example, the “Marlboro Friday” reductions in the prices of leading cigarette brands in 1993 contributed to a significant decline in the economic impact of tobacco manufacturing, whereas the settlement-related price increases of the late 1990s contributed to the increase in the economic impact of tobacco manufacturing at the end of the period.
Recent declines in the production of tobacco products have almost certainly led to a renewal of the downward trend in the economic impact of tobacco manufacturing on the U.S. economy. Finally, even in the states where tobacco growing and manufacturing have had a significant impact on the state economy, their importance has diminished over time. For example, in North Carolina and Kentucky, the states where tobacco has historically had the greatest economic impact, the share of GSP accounted for by tobacco growing and manufacturing fell by nearly 60% from 1979 through 1999.
Similarly, tobacco’s share of GSP in Virginia fell by more than 40% during this period. The only exception to this trend is Georgia, which experienced an increase in tobacco manufacturing’s contribution to its GSP in the early 1980s, followed by relative stability; recent trends in Georgia, however, suggest that the economic impact of tobacco is beginning to fall there as well.