Academic journal article Journal of Economics and Economic Education Research

The Buy Local Initiative and Its Effectiveness in a Small Island Economy: Evidence from the Pacific Island of Guam

Academic journal article Journal of Economics and Economic Education Research

The Buy Local Initiative and Its Effectiveness in a Small Island Economy: Evidence from the Pacific Island of Guam

Article excerpt

INTRODUCTION

"Buying local" can truly be a positive contributor to an economy, especially for a small island economy like Guam, a territory of the United States located in the Western Pacific Region. The resulting positive contribution to the local economy increases with the amount that local consumers buy from local businesses, since it is these businesses that provide the majority of local employment, pay taxes to the local government and give back to our larger island community. The University of Guam-Pacific Center for Economic Initiatives director, Dr. Anita Borja Enriquez, makes this point (Marianas Variety, October 20, 2011):

"you make the decision to 'Buy Local' when you buy products that are sold locally instead of ordering them 100 percent from off-island; by hiring Guam residents first before off-island hires; and by using Guam-based businesses instead of 'outsourcing work ' off-island."

THE BUY LOCAL INITIATIVE IN GUAM

The Buy Local initiative in Guam, also known as the "Local Guam Movement ... Think, Support, Buy", was established in 2010 as a collaborative effort by the University of Guam-Pacific Center for Economic Initiatives, Guam Chamber of Commerce (including the Guam Young Professionals) and the Guam Economic Development Authority (http://www.buylocalguam.org). It ...

 "is a targeted marketing education campaign that promotes the
 economic benefits of supporting Guam-based businesses and
 organizations and Guam-based hiring. It is intended to motivate
 Guam consumers, businesses, and other organizations to keep the
 dollars circulating in Guam and shift spending by at least 10%
 towards Guam-based businesses. It will also promote providing more
 jobs for Guam's residents. The resulting benefits are more dollars
 for our local tax base to support public health care, safety, and
 education; roads and water systems; public parks; reduced
 carbon-footprint; and better balance of trade. It aims to motivate
 Guam consumers, businesses and other organizations to keep the
 dollars circulating in Guam and shift spending by at least 10
 percent to Guam-based businesses."

Since then, events and activities have taken place to educate local residents about the idea behind the Buy Local initiative and to promote the initiative (see examples in Appendix A). Local companies and organizations worked with University of Guam-Pacific Center for Economic Initiative, Guam Chamber of Commerce, Guam Young Professionals, Guam Economic Development Authority, Guam Preservation Trust, Hagatna Restoration and Redevelopment Authority of the Department of Chamorro Affairs, Guam Humanities Council and Local First! Guam to sponsor many of these Buy Local activities and events.

ECONOMIC BENEFITS FROM A BUY LOCAL INITIATIVE

A common way to measure how much local spending stays and circulates (or multiplies) in the local economy is to use the concept of spending multiplier. The spending multiplier captures the process of spending an additional $1 "in the first round" and how this $1 leads to subsequent rounds of spending in that, each additional $1 spent in the local economy becomes income to some local businesses and their employees, from which they would spend in the next round, thus becoming income to some other local business and their employees, from which they would spend in the next round, and so on. In the end, each additional dollar spent generates an amount greater than the dollar spent "in the first round". Hence, each additional dollar spent "in the first round" is multiplied. If we know what the spending multiplier is that applies to Guam's economy, we could estimate the resulting total spending on the local economy and then extrapolate the implications for additional tax revenues from Gross Receipts Tax and additional jobs created.

The Buy Local initiative website (http://www.buylocalguam.org) lists the following as Top Reasons to Think, Support and Buy Local:

* More money for Guam. …

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