Forest Science 49(5) 2003 763 Poverty and Employment in Forest-Dependent Counties Peter Berck, Christopher Costello, Louise Fortmann, and Sandra Hoffmann ABSTRACT. One of the most controversial aspects of federal and state policies aimed at protecting old-growth ecosystems is the potential effect of job losses on local economic conditions. A fundamental question for historically forest-dependent areas is whether these policies will result in local economic stagnation and enduring pockets of poverty. This study uses monthly, multicounty time series data to estimate a vector autoregressive model of the experience of northern California counties during the 1980s and 1990s. It examines the long- run impact of changes in timber-related employment on other employment and participation in major federal poverty programs. It finds that employment base-multiplier effects of timber employment on other county employment are small and state economic conditions rather than local employment conditions are the principal driver behind local poverty. FOR. SCI. 49(5):763–777. Key Words: Forest policy, old-growth, vector autoregressive analysis. Peter Berck, Professor, Giannini Foundation of Agricultural Economics, Department of Agricultural and Resource Economics, University of California, Berkeley, Berkeley, CA 94720-3310—Phone: 510-642-7238; Fax: 510-643-8911; E-mail: pberck@uclink4.berkeley.edu. Christopher Costello, Assistant Professor, Bren School of Environmental Science and Management, University of California, Santa Barbara, Santa Barbara, Calif. 93106—Phone: (805) 893-5802; E-mail: costello@bren.ucsb.edu. Louise P. Fortmann, Rudy Grah Professor of Forestry and Sustainable Development, Department of Environmental Sciences, Policy and Management, University of California, Berkeley, Berkeley, CA 94720—(510) 642- 7018; E-mail: fortmann@nature.berkeley.edu. Sandra Hoffmann, Fellow, Resources for the Future, 1616 P St. NW, Washington, DC 20036—Phone: 202-328-5022; E-mail: hoffmann@rff.org. Acknowledgments: The authors thank Vicky Albert, Henry Brady, and the staff at the University of California at Berkeley Data Archives for advice on poverty measures; Arvis Cury and other staff of the Labor Market Information Division/Areas Services Group, California Employment Development Department, for providing monthly employment data; and Susan Winter of the USDA Forest Service; Steve Vogel of the USDA Economic Research Service; and three anonymous reviewers for helpful comments. This research was funded in part by The California Department of Forestry and Fire Protection and the Giannini Foundation of Agricultural Economics. The views expressed and errors remaining are solely those of the authors. Manuscript received Sept. 25, 2000, accepted Jan. 14, 2003. Copyright © 2003 by the Society of American Foresters T HE 1989 ANNOUNCEMENT of a federal court order protecting the northern spotted owl and President Clinton’s subsequent 1994 forest plan restricting national forest harvests marked the end of a decade-long boom and the beginning of a decade of transformation in the Pacific Northwest timber industry (Tuchmann 1995). In California, area residents and state officials have argued that sustained, if not increased, timber harvests are essential to prevent economic stagnation in forest-dependent areas of northern California, with accompanying high unemployment and poverty rates (California Senate Office of Research 1996, California Forestry Association 1994, and Vincent 1988). These debates reflect long-standing concerns over the impact of forest policy on the economic health of resource- dependent regions (Waggener 1977, Schallau 1989, Sample and LeMaster 1992, Ohman 1999, Associated Press 1999). This article uses vector autoregressive analysis to exam- ine the influence that changes in timber employment have on the economic health of forest-dependent areas in California. We use two measures of economic health: nontimber em- ployment and participation in poverty relief programs. County data are used. In California, and much of the rural United States, county governments have responsibility for local economic development policy. County supervisors were the