Agriculture’s Contribution to Hawaii’s Economy

There is much debate on the size and importance of agriculture in Hawaii’s economy. Estimates of agriculture’s contributions vary significantly, depending on what is defined as “agriculture” and on the methodol­ ogy used to develop those estimates. In this publication, we examine four methods of estimating agriculture’s eco­ nomic activity. First, the most common measure used historically in Hawaii has been the farmgate value of production agriculture. This has the advantage of being relatively easy to measure and readily available from statistics gathered by the state. However, it does not account for additional economic activity beyond the farm gate. Also, farmgate sales value does not provide a precise mea­ sure of the contribution of agriculture to the economy due to double-counting. For example, seeds purchased by vegetable growers are recorded as sales by the seed producers but are also reflected in the sales of the veg­ etable growers. To avoid the limitations of the farmgate value method, economists use the concept of “value added” to measure the contribution of an industry. Value added by an industry is defined as the sum of employee com­ pensation, proprietary and other property income, and indirect business taxes. Summing the value added by all industries in an economy gives us the gross state prod­ uct (GSP), a commonly accepted measure of the size of a state economy. Employment provides a third indicator for measur­ ing the contribution of an industry to the economy. And fourth, economists often use economic input-output models to provide measures of linkages of an industry to the entire economy. This publication assesses the contribution of agri­ culture to Hawaii’s economy by summarizing and com­ paring the four measures described above: farmgate sales, value added (or gross state product), employment, and linkages. Agriculture is defined to include produc­ tion agriculture, fisheries, forestry, and agricultural ser­ vices; agricultural input industries; and food and fiber processing (see Table 1).