tt::a v 1982 BUSINESS The Bureau of Business Research • ev1e-w- The University of Texas at Austin 241 Texas and Alberta: A Comparison of Regional Economies Robert L. Mansell 247 Development of the Southwest Borderlands ~iles Hansen 2S3 Mexico's Assembly Program: Implications for the United States Donald W. Baerresen 2S8 Industrial Development and an Expanding Labor Force in Brownsville Michael V. Miller 262 The Effect of Federal Policy on Interregional Migration Patricia Gober 268 Results of the Professional Baseball Players' Strike of 1981 James B. Dworkin 272 The Dynamics of the Retail Geography of Texas J. Dennis Lord 27S Airline Deregulation and Potential Urban Noise Problems John P. Bradley 278 Regulation of Automobile Insurance in the Southwest Joseph C. Samprone, Jr. 281 The Effect of Regulation on Water Service Patrick C. Mann and Paul R. LeFrancois 284 The Characteristics of Pick-Your-Own Vegetable Marketing on the Texas South Plains Claud M. Davidson and C. Judy Dai·idson 288 Index: Volume SS (1981) November -December 1981 Texas BUSINESS The Bureau of Business Research • ev1ew The l!niversityof Texas at Austin Vol. 55, No. 6, November-December 1981 Texas Business Review reports the results of research in business the social sciences, and the physical sciences in language that is underst~nd­ able to a lay audience. Our readership includes policy makers in govern­ ment, members of the business community, university faculty, and the general public. Articles focus on topics of special interest to readers both in Texas and throughout the Southwest and South. These topics include energy, inflation, manufacturing, population, labor, public policy, transporta­tion, the small business, regional economic development, and other related areas. Because Texas Business Review encourages a free exchange of ideas, opinions expressed in articles are those of individual authors and not necessarily those of the editors or the Bureau of Business Research. 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FOLD Texas and Alberta A Comparison of Regional Economies The economy of Alberta (a western province of Canada). like that of Texas. is usually symbolized by t\\·o main activities-petroleum and agriculture-and this similarity has often led to the description of Alberta as the Texas of Canada. ls such a comparison. like the oil and agriculture image of Texas. only superficial or are there more funda­mental similarities" While a comparison of two regional economies may be of interest in itself. it may also provide clues to the factors that are most prominent in determining the development, grO\\·th. and character of a regional economy. A compari­son of the Texas and Alberta economies may be of special interest because petroleum and agriculture have played key roles in the development of both. Yet the two economies are widely separated geographically. are only remotely connected by trade. and have evolved within different political and social contexts. Thus, any real economic simi­larities may be mainly attributed to similar resources and industrial patterns. Such a comparison might be viewed as a rather loose test of the importance of purely historical and structural factors in shaping a region's economy.1 Historical Development Both Texas and Alberta evolved as agricultural regions : Texas specialized in cotton and cattle and Alberta produced mainly \\·heat and cattle. The development of a broader industrial base was impaired in both regions by a similar combination of economic and political factors. 2 The main markets in the United States were in the densely populated northeastern states. and in Canada such markets were in the ~. Mansell is Associate Professor of Econo111ics. Cniversity of Calgary (Calgary. Alberta. Canada). Th e author is indebted to the Institute of Co11srn1ctire Capitalis111 and the Depart111e11t of Eco­nomics at the r.;niversity of Texas at Austi11 for generously proriding office space and access to research 111aterials. Robert L . .'ttansell eastern provinces of Quebec and Ontario. Consistent with profit-maximizing behavior. secondary and tertiary indus­tries tended to locate in these more populated areas. More importantly. the resulting additions to population, skilled labor. transportation networks. sources of supply, and mar­kets for products created opportunities for further indus­trialization. Thus. regions like Texas and Alberta , which had relatively small and widely dispersed populations and were far from these markets, were at a disadvantage in attracting industry and served primarily as a source of ra\\. materials. While it can be argued that hinterland regions do not become industrial centers in a market economy, the lack of industrial de\·elopment in Texas and Alberta during their early histories was no doubt also related to political factors. In both the l"nited States and Canada, national policies were aimed at promoting industrialization in established areas, primarily through protective tariffs for manufactured goods. As a result. regions like Texas and Alberta purchased production materials at the higher prices associated with tariff protection but sold their products in unprotected and often rnlatile markets. In addition. freight rate dis­parities. which generally discriminated against the southern states and western provinces. persisted_ Both Texas and Alberta have a history of discontent focused on tariffs. freight rates. commercial banks and monetary policy. and the distribution of manufacturing_ Even today. despite the growth and prosperity in these regions, they tend to view federal policies as being more at their expense than in their interest. Perhaps the single most important factor in shaping the Texas and Alberta economies has been petroleum. Oil was discovered in Texas as early as 1866. but the industry only came of age in 1901 when Spindletop came in . By 1930. with many additional discoveries. especially in the East Texas field , petroleum had become a major factor in the Texas economy. While petroleum was also discovered in Alberta well before the turn of the century. the industry did not begin to develop until 1947, when Leduc was '.\OVEMBER-DECEMBER 1981 discovered. By the early 1960s, the petroleum industry had emerged as the principal source of value added in the province. 3 Petroleum had a number of important and similar effects on the Texas and Alberta economies. It was a significant source of income and a stabilizing element to the agriculture-based economies; it generated a demand for a s1'ilk d labor force4 and an impetus for urbanization; and it pro\idcd an important source of government revenue that allowed a social infrastructure to develop without the need for unduly punitive taxes. The concentrated development of the petroleum industry also laid the basis for a more recent source of alienation in both Texas and Alberta in Table 1 Gross Product Location Quotients for Texas and Alberta, Selected Years Texas Alberta Sector 19S9 Rank 1978 Rank 1962* Agriculture 1.28 2 0.82 8 I.SS 2 1.28 3 1ining S.2S 1 4.20 1 4.11 1 S.44 1 Construction 0.98 6 1.33 2 1.32 3 1.77 2 0.42 9 1anufacturing 0.6S 9 0.82 9 0.41 9 Transportation, communication, 1.01 4 1.01 4 0.96 s and utilities 1.09 3 1.03 s 1.11 3 0.98 6 0.97 4 Trade Finance, insurance, 0.97 0.83 8 0.84 8 and real estate 0.89 7 s 0.88 8 0.88 7 0.91 7 0.87 6 Services Government 1.07 4 0.89 6 0.99 s 0.86 7 *The earliest year for which data on real value added by sector are available for Alberta. Sources: Texas values taken from Thomas R. Plaut, "Trends in Texas Gross State Product and Productivity, l 9SO-I 978," Texas Business Re~iew, Sep_tember-October 1980, pp. 2.s6-60, Albe.r­ta values calculated using provincial and national estimates of real gross domesh~ p~oduct (m 1971 dollars) by industry provided in the Conference Board of Canada, The Provincial Econo· mies, 1961-1979 Data (1980). Table 2 Gross Product Location Quotients for Manufacturing Industries in Texas and Alberta, 1969 and 1978 Alberta Texas 1969 Food and kindred products Textile mill products Apparel and related products Paper and allied products Printing and publishing Chemicals and allied products Petroleum and coal products Rubber and plastics products Lumber and wood products Furniture and fixtures Stone, clay, and glass Primary metals Fabricated metals Machinery, except electrical Electrical machinery Transportation equipment Instruments and related products Miscellaneous manufacturing Plaut "Trends in Texas Gross State Product and Produc- Sources: Texas values taken from '!'homas R_· se' !ember-October l 980, pp. 2S6-60; values for Al­tivity, 19S0-1978,".Te:::as B~szn~~s ~~v~=~ in ~tatistics Canada, General Review of the Manufac­berta based o~ provCmc1adl a_n., ~o~~l and Provincial Areas (Ottawa: SC, annual). turing Jndustnes of ana a. ,.a.. and gas. Location Quotients One way of summarizing the structure of a regional economy is through the use of location quotients (percentages of region­al activity occurring in a given industry or sector relative to the percentages of national activity occurring in the same industry or sector). A location quotient greater than one indicates ~n above-average specialization in TEXAS BUSINESS REVIEW that activity. while a value of less than one indicates that an activity is underrepresented in the region. The rankings of the location quotients in the two regions are very similar. although in 1978 there \\·as a larger difference. which may be attributable to below-average agricultural output in Texas in that year (see table 1 ). Further. the relative sizes of the coefficients for Texas and Alberta are fairly similar. With the exception of the mining and trade sectors. the structural change in the two economies has also been surprisingly similar. In particular. the relative importance of agriculture and government has declined considerably. while construction has increased. When gross product location quotients for each region are applied to the manufacturing sector only. both regions are seen to be heavily weighted towards two activities in­ Yolving oil and gas-chemicals and petroleum refining (see iable 2). These activities. however. are relatively more important in Texas than they are in Alberta because Alber­ ta does not have direct access to water transport.8 The in­ creasing importance of petrochemicals in Alberta mainly arises from natural gas feedstock. which is sufficiently secure and inexpensive to overcome the transportation cost disadvantage of locating at the raw material source . The influence of the petroleum and agriculture bases on the manufacturing sectors in the two regions is also evident from the above-average concentration in food and kindred products and in the fabricated metals and nonelectrical machinery acth·ities. The latter industry initially developed to serve the regional market for equipment needs in the oil and gas industry but has matured sufficiently to penetrate the rapidly expanding domestic and foreign markets. The two regions do have some differences in manufac­ turing industries with location quotients greater than one. In Texas there has been a trend toward increasing con­ centration in the clothing (apparel and related products) industry ; in Alberta, there is an above-average representa­ tion in printing and publishing and in lumber and wood products. The forestry resource base in ..\!berta is much more extensive than that in Texas. The location quotient correla­ tion coefficients in manufactur­ ing for both regions were 0.83 in particularly useful in exammmg the structural interdepen­dencies among the sectors. Measures of backward and forward linkages based on an input-output table for the regional economy are needed for this task. (Linkage reflects the ability of one industry to affect the growth of other domestic industries. The effect of an industry's purchases of materials from other domestic industries is called a back­ward linkage: the effect of that industry's sales of products to other domestic industries for their use in production is a fonrnrd linkage.) The 1972 Texas input-output transactions matrix was collapsed and made consistent with a 1971 transactions matrix for the Alberta economy for purposes of comparison. Final demand multipliers and indexes of backward and forward linkages were then computed for industries in each region. With one exception-mineral fuels (oil, gas, and coal) is below-average in Texas-the industries with the strongest backward linkages are the same in Texas and Alberta (see table 3 ). The two regions have in common four industries with the greatest forward linkages-agriculture, mineral fuels, petroleum and coal products, and chemical and chemical products. The main differences are that the con­struction and the food and beverage industries in Alberta and the paper and primary metal industries in Texas are among the six industries with the heaviest forward linkage. The most heavily linked industries in both regions are closely related to their petroleum and agriculture (and forestry) resource bases. It should be noted that the per­centage of output (or employment) accounted for by a par­ticular industry or sector may not be a very reliable indica­tor of its overall importance to a region's economy. For ex­ample. in Texas. the combination of primary petroleum and agriculture production fills a relatively small and declining proportion of total gross state product (16.3 percent in 1958 and 8.7 percent in 1978), but these sectors are the basis of many industries that account for most of the employment and output in the state. Table 3 Linkage Indexes for the Most Heavily Linked Goods-Producing Industries in Texas (1972) and Alberta (1 971 ) 1969 and 0.68 in 1978. While Index of Backward Linkages Index of Forward Linkages the two regions are very similar. some divergence has occurred Agriculture 1.316 2 1.116 4 1.570 1.147 3 over the nine-year period. Fur­ Forestry 1.110 6 1.109 5 1.017 0.744ther. in comparison to manufac­Mineral fuels 0.888 1.060 6 1.309 2 1.193 2 Food and beverage turing in Alberta. manufacturing industries 1.316 3 1.364 0.940 1.277 in Texas is more developed and Wood industries 1.249 4 1.030 0.876 0.885 has a greater diversity of relative­Paper and allied industries 1.094 1.001 1.051 6 0.787 ly important activities. Primary metal industries 0.973 0.924 1.053 5 0.930 Petroleum-and coal­ Structural Interdependencies producing industries 1.329 1.347 2 1.171 4 0.987 6 Chemical and chemical­ While location quotients are producing industries 1.211 1.146 3 1.249 3 1.012 5 Construction 1.049 1.001 0.909 suitable for comparing the rela­1.043 4 tive importance of various sec­ Source: G. C. Watkins and J. Fong, Alberta and Texas, Discussion Paper Series No. 51 (Calgary: Uni­tors within a region. they are not versity of Calgary, 1979). Industry Texas Rank Alberta Rank Texas Rank Alberta Rank '.\OVD1BER-DECB1BER 198 1 in economic performance followed the rapid escalation of producing industries in the two regions also reveals that An examination of the linkage measures for all goods­ energy prices after 197 3. This external factor increased the linkages, especially forward linkages, are generally signifi­ levels of energy-related investment within both regions, cantly smaller in Alberta than in Texas. This difference may created demand for many Texas and Alberta industries, and reflect the maturity of the Texas economy, in relation to made the two regions more attractive for industrial and that of Alberta, and the greater relative attractiveness of population migration than areas with slower growth, higher Texas as a location for manufac- Table 4 turing beca use of its larger popu­lation base (and, hence, local Measures of Economic Performance, Texas and A lberta market), direct access to water transport, and position as a Ratio of Ratio of Ratio of transshipment point . Measure Texas Texas to United States Alberta Alberta to Canada Texas to Alberta Economic Performance If industrial structure is an important factor in determining a region's economic performance, there should be many similarities between the Texas and Alberta economies (see table 4 ). A commonly used indicator of the overall standard of living is personal income per capita; Texas and Alberta are very close in this measure.9 Although the average annual growth rates of total personal income and real gross product over the 1970­1979 period have been higher in Alberta than in Texas, the positions of these two regions relative to their national econo­mies are similar. Moreover, this comparison also holds for unem­ployment rates and rates of g:-owth of employment and population. Thus both regional economies outperformed their national counterparts by similar margins in the 1 970s. No doubt Texas and Alberta performed at above-average rates for many reasons, but chief among these must he the overall importance of their energy-based industrial structures. The annual data for per capita income in the Average per capita personal income, 1970-1979 (in U.S. dollars) 5,610 0.94 5,574 1.02 1.02 Average annual growth in total personal income, 1970-1979 (in percentage) 12.9 1.24 16.2 1.18 0.80 Real gross product growth rate,* 1970-1978 (in percentage) 5.2 1.41 6.9 1.56 0.75 Average unemployment rate, 1975-1978 (in percentage) 5.4 0.74 4.3 0.57 1.26 Employment growth rate,• 1970-1978 (in percentage) 4.6 1.92 4.6 1.60 1.00 Population growth rate• (in percentage) 1960-1970 1.6 1.23 1.9 1.12 0.84 1970-1979 2.0 2.22 2.6 2.17 0.77 *Compound growth rate. Sources: Texas and U.S. personal income from Comptroller of Public Accounts, Annual Financial Report, State of Texas, November 1980; Texas real gross state product estimates (in 1972 dollars) provided by the Bureau of Business Research, University of Texas; U.S. real gross na· tional product (in 1972 dollars) from U.S. Department of Commerce, Survey of Current Business (various issues). Alberta personal income and real gross domestic product (in 1971 U.S. dollars) from Alberta Bureau of Statistics, Alberta Economic Accounts, 1979 (Edmonton: ABS, September 1980); Canadian personal income and real gross national product (in 1971 dollars) from Statistics Cana· da, National Income and Expenditure Accounts (various issues). Texas and U.S. employment and unemployment rates from U.S. Department of Commerce, Employment and Earnings, States and Areas (various issues); Alberta and Canadian employment and unemployment rates from Statistics Canada, The Labour Force (various issues). Texas and U.S. population from U.S. Department of Commerce, Bureau of the Census, Cur· rent Population Reports, Series P-25, no. 875 (January 1980); Alberta and Canadian population from Statistics Canada, Annual Estimates ofPopulation for Canada and Provinces; exchange rates used to convert Canadian dollars to U.S. dollars from Department of Finance, Economic Review, April 1980, table 91. Table 5 Per Capita Personal Income and Population Growth Rates for Texas and Alberta, 1970-1979 Per capita personal income (in U.S. dollars) Population growth• (in percentage) Year Texas Ratio of Texas to United States Alberta Ratio of Alberta to Canada Texas Ratio of Texas to United States Alberta Ratio of Alberta to Canada two regions show a dramatic 1970 3,507 0.90 2,984 1.00 shift in the mid-I 970s from a 1971 3,700 0.90 3,370 0.99 2.2 1.47 2.1 1.62 fairly constant relative income 1972 4,053 0.90 3,822 0.99 1.9 1.42 1.8 1.64 1973 4,564 0.92 4,422 1.00 1.8 2.31 2.0 1.82 position to a steadily nsrng 1974 5,048 0.93 5,364 1.00 1.7 2.36 1.9 1.27 one (see table 5). Much the same 1975 5,584 0.95 6,093 1.03 2.0 2.53 3.3 2.20 type of upward shift can be seen 1976 6,172 0.96 7,079 1.03 2.3 3.03 3.4 2.62 1977 6,908 0.98 7,193 1.04 1.8 2.25 3.4 2.83 in the growth rates for income, 1978 7,776 0.99 7,310 1.04 1.9 2.26 3.2 3.20 output, employment, and popu­1979 8,788 1.00 8,103 1.07 2.6 2.26 3.1 3.88 lation, and it is probably no *Growth is measured as the annual percentage change from year t -1 to year t. coincidence that these changes Source: See sources for table 4. 244 TEXAS BUSINESS REVIEW unemployment and energy prices. and less-secure energy supplies. While high rates of in-migration may have been primarily related to faYorable income and employment opportunities at first. the resulting population growth. through its effects on infrastructure investment and the demand for local goods and services. has further strength­ened their economic performance. In addition. because migration is typically selective in age. education. and skill lewis. recei\·ing regions tend to develop labor forces and population structures favorable to productivity and labor force participation. both of which are important determi­ nants of per capita income. Five general factors that ha\'e often been cited in the .:ontext of the Sno\1·belt-to-Sunbelt shift in the United States and the west\\·ard shift in Canada are relevant to ex­plaining the abo\·e-average economic performance of Texas and Alberta: the increasing importance of serYice-producing activities relatiYe to manufacturing. the fact that the location patterns of the service sectors tend to be less geographically concentrated. a lesser degree of unioniza­tion. regional governments that are perceived to be more farnrably disposed towards business. and lower taxes. The first factor is probably important only insofar as the more heavily industrialized areas of the Cnited States and Canada have grO\rn more slowly. thus increasing the relative economic attractiveness of Texas and . .\lberta. The other factors haw no doubt also played a role in regional eco­nomic grO\\·th: this role is difficult to quan tify. In any case. the similarity of the two regions in this respect can prob­ably be traced to a common industrial heritage. The agricul­ture and petroleum sectors have traditionally been charac­terized by capital-intensive production processes. a high degree of risk. and a large number of independent produc­ing units. Thus. historically. there was never a broad base for organized labor: instead. there was the foundation for basically rural-conserntive values characterized by rugged indh·idualism. risk taking. and entrepreneurial a\1·areness. In addition. the below-average tax levels in both regions can be traced directly to the oil and gas industry. For example. in Texas in 1979 the severance taxes on oil and gas produc­tion (much of \1·hich are ultimately paid by energy users in other regions) accounted for 18.9 percent of state tax collections: in ..\Iberra for the same year. oil and gas royal­ties accounted for 68.2 percent of total proYincial tax collections. This last comparison points out an important difference bet11·een the two regions in the distribution of economic rents bet\1·een the printe and public sectors. Texas cur­rently imposes a severance tax of 7 .5 percent of the market Yalue of natural gas produced in the state and 4 .6 percent of the market Ya!ue of state oil production (plus a small regulation tax). In 1979 these taxes amounted to just over Sl billion or 4 .99 percent of the total value of oil and gas production. In contrast. Alberta uses a royalty system in which the royalty rates rnry between old and new oil and gas and generallv increase as oil and gas prices rise (royalties are also -impose.ct on such by-products as sulfur. propane. and butanes). In 1979. total royalties amounted to about S3.3 billion or just o\'er 26 percent of the value of the \O\'E\IBER-DECE\!BER 198 1 production of oil, natural gas, and gas by-products in Alberta.10 Further. in Texas all energy tax collections go into general state revenues. whereas in Alberta, since 1976, about 70 percent of all royalty collections go into general revenues with the remainder entering a special fund. the Heritage Saving Trust Fund. This fund. which currently amounts to about S8 billion. is intended to be a revenue base for present and future policies aimed at ameliorating the unfavorable effects associated with the eventual deple­tion of the province·s oil and gas reserves. General Observations The existence of contemporary similarities between Texas and Alberta would suggest the dominant role the resource base plays in determining a region·s structure, performance. and character. These two regions have evolved in isolation from each other. and the only elements they have had in common have been their resource base in petroleum and agriculture and their origins as hinterland economies. It appears that the resource base. industrial structure. general character. and economic performance of a region may be logically connected. The resource base may determine. through the development of linkages, the basic nature of a region·s industrial structure and, given external eYents and policies. may be the critical determinant of a region·s economic performance. Thus. a region's overall economic fortunes may have little to do with many of the policies and decisions made within the region. A region·s industrial structure may contain an important evolutionary element. The most developed linkages in both regions are closely related to the agriculture and petroleum sectors. but these linkages are more highly developed in Texas than they are in Alberta. probably because Alberta has a younger economy. Industrial development in Texas then may be used to forecast the development likely to occur in . .\lben:i. The facts that both the Texas and Alberta economies grew after I9~ 3 and that energy prices rapidly escalated during this period \1·ould seem to indicate that both econo­mies are more closely tied to purely energy-related factors than is commonly believed. Future economic growth in the two regions should bear a close and positive relation to price increases for energy and to nationJl energy policies regarding the relation of domestic energy prices to world prices. In both regions this relation \1·ill probably invoh·e a continued shift of people and jobs from areas adversely affected by escalating energy prices. improved terms of trade. additional oil and gas investment (particularly in enhanced recovery schemes and. in Alberta. continued oil sands development). and greater actiYity for industries that supply energy-related goods and services. Notes 1. For example. according to some obserwrs. a rccion·s ecvnomic growth is largely determined by its industri31 stru~turc. '' luch. in turn. is determined by the region's resource base and the rebti\c case of access to internal and external inputs and markets by firms located in the region. Sec H. S. Perloff, E. S. Dunn, E. E. Lampard, and R. F. Muth, Regions, Resources and Economic Growth (Balti­111orc: Johns Hopkins Press, 1960). ~ .A detailed discussion of these factors can be found in Louis J. Rodriguez, Dynamics of Growth: An Economic Profile of Texas (Austin: Madrona Press, 1978) and in K. H. Norrie, "Some Com­111ents on Prairie Economic Alienation" in N. H. Lithwick, ed., Regional Economic Policy: The Canadian Experience (Toronto: McGraw-Hill Ryerson Ltd., 1978). 3. See Alberta Bureau of Statistics, Alberta Economic Accounts, J979 (Edmonton: ABS, 1980), table 14. For sectoral comparisons. the royalties component of oil and gas value added has been re­moved from the finance, insurance, and real estate sector and has been added to the mining sector. 4. This creation of labor demand was particularly important be­cause, in both regions, productivity gains in agriculture during this period released large numbers of people from this sector. Without the oil and gas industry to absorb these labor resources, large-scale out-migration would probably have occurred and the regions would have had less-favorable population and labor force structures. 5. Data from Texas Energy and Natural Resources Advisory Coun­cil, Texas Energy History: 1979 Update, Report No. 8008 (Austin: TENRAC, 1980) and Alberta Bureau of Statistics, Alberta Statisti­cal Review, 1979 (Edmonton: ABS, 1980). 6. Data from American Petroleum Institute, Basic Petroleum Data Book (Washington, D.C.: API, 1978) and Alberta Bureau of Statis­tics, Alberta Statistical Review, 1979 (Edmonton: ABS, I980). 7. The Alberta government owns 81 percent of the mineral rights under its territory, while the Canadian federal government retains title to 9 percent in the national parks and Indian reservations. The remaining 10 percent is owned by individuals and corporations. 8. For example, in Texas in 1978, chemicals were the largest con­tributor to manufacturing value added (16 percent of manufacturing value added), while petroleum and coal products industries ranked third (12 percent of manufacturing value added). In Alberta in the same year, these industries were ranked third (9 percent of manu­facturing value added) and sixth (7 percent of manufacturing value added). Data provided by the Bureau of Business Research, Univer­sity of Texas, and in Statistics Canada, General Review ofthe Manu­facturing Industries of Canada: National and Provincial Areas (Otta· wa: SC, annual). 9. If this measure is used to make comparisons between regions, differences in the costs of living should also be taken into account. Comparable cost of living indexes for Texas and Alberta do not exist, but most of such differences are probably taken into account by the exchange rate used to convert Canadian dollar values to U.S. dollar values. 10. Data from Comptroller of Public Accounts, Annual Financial R eport, State of Texas, November 1980, and Alberta Bureau of Statistics, Alberta Statistical Review, 19 79 (Edmonton: ABS, 1980). Research Monograph Series Bureau of Business Research P.O. Box 7459 Austin, Texas 78712 The Gross Regional Product of Texas and Its Regions Thomas R. Plaut and Mildred C. Anderson. 1981. $6.00 plus tax . The study offers quarterly estimates of Texas gross regional product from 1958 to 1979 and annual estimates from 1965 to 1977 for the 24 Texas planning regions. Accompanying the estimates are analyses of trends in the growth of output as we ll as in the structure of production. Texas Railroads: A Record of Construction and Abandonment Charles P. Zlatkovich. 1981. $7.00 plus tax . Published with the Texas State Historical Society. Previously unpublished information on railroad construction and abandonment in the state. The author offers maps of rail networks from 1860-1980, describes the development of the rail networks in Texas, and comments on the situation at present. Severance Taxes on Coal and Uranium in the Sunbelt Malcolm Gillis and Ignatius Peprah. 1981. $5.00 plus tax. The study covers recent changes in severance taxes on coal and urani· um, assesses the outlook for aggressive and passive state taxation policies, and considers the effects of such taxation on production, investment, and the environment. While the primary focus is on Sunbelt states, data from other states are presented for comparison. Economic Change along the U.S.-Mexican Border: The Case of Brownsville, Texas Michael V. Miller. Early 1982. $5.00 plus tax. The author examines the industrial development and economic change in the border city of Brownsville. The findings are likely to be applicable to other southwestern border cities as well. TEXAS BUSINESS REVIEW Development of the Southwest The borderland area between the United States and ~lexico typically has been treated as an area with problems. and in many respects this judgment has been true. It can be argued. however. that the settlement of the border region has been associated with improved economic well being­both for the migrants and for their descendants. Early History While the establishment of the present boundary be­tween the United States and Mexico had .:ritical political consequences l~lexico lost about half of its national terri­rnry to an imperialist neighbor determined to fulfill its own manifest destiny). few ~lexicans in 1848 were living in what was to become the U.S. Southwest. Of the 80.000 ~lexicans who did become instant Mexican Americans. three-fourths were concentrated well away from the border. in the upper basin of the Rio Grande. 1. Indeed. very few people lived along the border until the coming of the rail­roads in the 1880s. ~!exico had deliberately ignored its northern states for fear that their devdopment could in­duce further expansionist moves by the United States. As recently as 1900. Las Cruces and ~kAllen. which were to become standard metropolitan statistical areas (S~!SAs). did not exist. The other five borderland cities that even­tually achiewd metropolitan status had a combined popu­lation of only 60.000 persons in 1900. Matamoros. the largest city on the \!exican side of the border i.J1 that year. had only 8.34 7 inhabitants: Tijuana was a village numbering 242 residents, while \!exicali was yet to be created. The Borderlands as a Problem Region Throughout the present century the !l!exico-U.S. border­ land area has typically been regarded as beleaguered. For :\lies Hansen is Pro fessor of Eco11omics. l.:11i1·ersit_1· of Texas at Aus­tin. This research ,:·as supp.oned by the .\!exico-L.11ited States Bor· der Research Program. C11irersit_1· of Texas at ...lusti11. a11d the ...tndre11· II'. .\Jel/011 Foundation. Borderlands Niles Hansen example. :\athan Associates concluded in a 1968 study that '·Boundaries between nations are obstacles to development. This is true all over the world. and the boundary between the United States and ~!exico is no exception." Ten years later Oscar J. \lartincz argued that ''regions situated at or near borders generally develop at a slower rate than compa­rable interior areas., and that "normally no significant development occurs along boundary lines." In their applica­tion to the C.S. Department of Commerce requesting the creation of the Southwest Border Regional Commission, the gowrnors of the four U.S. states on the border with \lexico argued that ..the economic health of the region is, and has been. on the decline and constitutes a pernicious drain on the overall economies of our four states." Similar­ly. the Southwest Border Regional Commission's Economic Development Plan maintains that ·'while the economy of the border region has been struggling with its problems of slow growth and unemployment. the economies of Arizona. California. :\ew \lexico. and Texas continue to thrive and exceed the gaim made by our national economy."2 Clearly many borderland communities have pressing eco­nomic and social problems. Living conditions typical of Thi.rd World countries can readily be found on the Mexican side. while Brownsville. McAllen. and Laredo have for some ti.Jne been the three poorest SMSAs in the United States. Nevertheless. it seems superficial to blame the boundary for these phenomena: in fact the border has created a zone of attraction for people in both countries. Today some four million people live on each side in territory that was still very sparsely populated early in the present century. :\o one compelled these people to move to the borderlands. Whatever the problems encountered there. most migrants have apparently felt that this region offered them greater opportunity than did their places of origin. Demographic Change About 90 percent of the total population living in the U.S. counties bordering on Mexico reside in seven SMSAs. :\OVD!BER-DECD!BER 198 1 During the 1960s, population growth rates in these areas tended to decrease from west to east (see table I). The rate of growth in both San Diego and Tucson was well over twice the natio11al rate; in Las Cruces, Laredo, and El Paso it was about the same as the national rate; McAllen's popu­lation remained virtually unchanged, while Brownsville had a loss of 7 percent. All four Texas metropolitan areas had net out-migration during the 1960s. During the 1970s, every borderland SMSA grew more rapidly than it had in the previous decade, and, with the exception of San Diego, the increase in each case was dramatic. El Paso, which had the lowest 1970-1980 border­land growth rate, grew at over three times the correspond­ing national rate of 10.8 percent. McAllen's growth rate of 54 percent was five times that of the nation, and Tucson and Brownsville grew almost as rapidly. Of the 279 SMSAs that were officially defined as of 1980, McAllen ranked eleventh in growth during the 1970s, Tucson ranked fifteenth, and Brownsville eighteenth. Largely because of population decentralization in favor of the South and West, the border states have been growing much more rapidly than the United States as a whole. The 1970-1 980 growth rate in Tucson was about the same as that for Arizona, which was the second-ranking state (Nevada ranked first) in growth rate during the 1970s. Each of the other borderland SMSAs had a growth rate well above that for its own state. In addition to net in-migration, high birthrates also have contributed to population growth in the U.S. borderlands. Between 1970 and 1975 birthrates fell substantially in the United States and in every borderland metropolitan area ex­cept Brownsville (see table 2). Nevertheless, in 1975 the birthrate in every borderland metropolitan area exceeded the corresponding national rate of 14.8 for each thousand population. The San Diego and Tucson rates did not differ Table 1 Population Change in Borderland Metropolitan Areas and Border States, 1960-1970 and 1970-1980 Population change (in percentage) 225,299 Area 1960-1970 1970-1980 Population, 1980 (in thousands) San Diego, Calif. Tucson, Ariz. 31.4 32.4 36.8 51.2 1,857 532 Las Cruces, N.M. El Paso, Tex. Laredo, Tex. McAllen, Tex. Brownsville, Tex. 16.4 14.4 12.5 0.3 -7.l 37.6 33.4 36.0 54.2 48.3 96 479 99 280 208 California Arizona New Mexico Texas 27.l 36.3 6.9 16.9 17.7 52.9 27.4 26.4 23,517 2,714 1,295 14,153 United States 13.4 10.8 Sources: For column l, U.S. Department of Commerce, Bureau of the Census, County and City Data Book, 1977 (Washington D.C.: Government Printing Office, 1978), pp. 2 , 318, 548, 558: 568, 578, and. 588. ~or columns 2 and 3, preliminary 1980 Cen­ sus of Popula!lon es!lmates. much from the national rate, but those in Laredo, McAllen, and Brownsville were about twice that for the country as a whole. Differences in birthrates along the border have been directly associated with the proportion of Hispanics in the local population. The remarkable growth that oc­curred during the 1970s in the largely Hispanic borderland SMSAs of Texas, however, was primarily a consequence of a reversal from net out-migration during the 1960s to rapid net in-migration during the 1970s. The precise magnitude of this phenomenon will only be known when data from the 1980 census become available. The U.S. borderlands as a whole, however, are already a vigorously expanding zone of attraction. Income Growth The national rate of increase of earned income (labor and proprietors income only) between 1971 and 1978 was 95 percent, a figure exceeded in every borderland metro­politan area. The comparable increases were I03 percent in Tucson and Las Cruces, 109 percent in El Paso, 114 per­cent in San Diego and Laredo, 143 percent in Brownsville, and 149 percent in McAllen. Manufacturing Decentralization Manufacturing has played a relatively small part in the borderland economy in comparison to its contribution to the national economy. While this sector has been relatively stagnant nationally, however, it has been growing in the borderlands. In both 1971 and 197 8, manufacturing accounted for slightly over one-fourth of income earned nationally. In the borderlands, the proportion of total income accounted for by this sector in 1971 ranged from 4.2 percent in Las Table 2 Birthrate, 1970 and 1975, and Hispanic Proportion of Borderland Metropolitan Areas, 1970 Birthrate (per Hispanic thousand population) population, 1970 Area 1970 1975 (in percentage) San Diego 18.l 14.9 12.8 Tucson 19.l 16.4 23.6 Las Cruces 23.2 19.3 50.8 El Paso 26.0 21.6 56.9 Laredo 33.l 27.2 85.6 McAllen 32.0 28.6 79.l Brownsville 28.8 27 .l 76.2 4.5 United States 18.4 14.8 Sources: For columns l and 2, U.S. Department of Commerce, Bureau of the Census, County and City Data Book, 1977 (Wash­ington , D.C.: Government Printing Office, 1978), pp. 3, 319, 549, 559, 569, 579, 589, 600, 624, 708, and 756. For column 3, U.S. Department of Commerce, Bureau of the Census, County and City Data Book, 1972 (Washington, D.C.: Government Printing Office, 1973), pp. 319, 549, 559, 569, and 579. TEXAS BUSINESS REVIEW Cru.:es to 16.: percent in El Paso. In 1978. it ranged from 5.7 percent in Laredo to 18.3 percent in Brownsvilk. Between 191 J and 19 78. the relatiw importance of manufacturing increased in every borderland S'.\lSA except El Paso. whid1 in 19-8 ranked just behind Brownsville in local importance of manufacturing income. Particularly noteworthy gains were made in Tucson lfrom 7 .8 percent in 1971 to 10.5 percent in 1978). Las Cruces l4.: percent to 8.5 percent). '.\L:..\llen l 7.4 percent to JO..+ percent). and Brownsville {10.9 percent to 18 .3 percent). In the past. manufacturing activity in th<' relatively remote borderland area has been limited by the costs of uansporting raw materials and finisht>d goods. 'llore recent­ ly . however. new technologies have reduced the importance oi transport costs. and cheap labor has become a major .:onsideration be.::ause of increasing international compt>ti­ tion. 'llanuiacturing has bt>en decentralizing \\ ithin th<' Cnited States from the \"ortheast and Great Lakes states­ the traditional industrial heartland-in favor of the Sou th and \\"est and. on a \\·orld seal<'. from th<' older industrial nations to the newly industrializing .::ountries. including "lexico. 3 The dynamics of industrial de.::entralization .::an be ex­ plained in large part by the related concepts of produ.::t liie cycles and spatial industrial filtering. A produ.::t life .:ycle may be divided somewhat arbitrarily into three phases: early. growth. and mature. In the early phase. scientiiic and engineering skills are criti.:: al. Be.::aus<' of the relatively short produ.::tion runs associated \\·ith a changing technology. capital outlays are relatiwly low: product>rs depend instead on external e.::onomies and subcontracting. In the growth phase. the capital-to-labor ratio is increased by mass production. 'llanagement skills are vital in this phase. Finally. in the mature phase there is little technologi­ cal innovation: the product is manufactured in long. routine produ.::tion runs. Cheap. low-skill labor be.::omes the key human input. but capital intensity may remain high because large amounts of specialized equipment often can be used. In order to remain competitiw. corporations may respond to .:hangiJ1g needs-corresponding to differing phases of the product cycle-by changing the geographic location of pro­ duction. Thus. corporations increasingly manufacture many produ.::ts in multiple branch plants in different locations. The lower an area is in the skill and wage hierar.::hy. the older an industry or product tends to be when it arriws and the slower its national rate of growth. While amenities conducive to the location of diwrsitied production have been a factor in attracting iJ1dustry to some pans of the l:.s. borderlands lParticularly San Diego and Tucson). the principal cause of manufacturing growth in the region has been cheap labor. Between 1969 and 1976. manufacturing employment in the united States declined from :o.3 million to 19.0 million workers: at the same time. it gre\\. from 139.419 to 165.:24 workers lor by 19.4 percent) in the Southwest Border Regional Com­mission counties.4 The Texas portion accounted for 69 percent of the total borderland increase. The number of produ.::tion workers in the borderland area rose from 34.675 in 1969 to 52.370 in 1976. In 1978. average weekly \OYD!BER-DECDIBER 1981 earnings in manufacturing in the United States was S249: in Texas it was S 243. 5 In El Paso. the corresponding figure was Sl79: in Laredo. S!55 : in McAllen. SIS!: and in Browns\·ilJe. SI 5 7. Under these circumstances. one may ask why manufac­turing growth has not been even more rapid in the C.S. borderlands. For one thing. many manufa.::turing activiti.:s are not attracted solely by the pn~sence of cheap labor. On balance. the Texas borderlands in particular does net ha\·e the total package of advantages offered by oth.:r locations. especially where relatively sophisticated activities are involved. Perhaps an even more important constraint on the manufacturing growth potential of the U.S. border­lands is the fact that firms in search ot cheap !Jbor can go just beyond the border into 'llexico. where wages are COE­siderably lower than are those on the U.S. side. Mexico's Border Industry: Consequences for the U.S. Borderlands The principal vehicle for manufacturing expansion in 'llexico has been the 111aq11iiadora (assembly plant) pro­gram. Begun in the middle 1960s and formaliud in the early 1970s. the program allO\\"S the temporary importation into 'llexico of foreign materials for local assembly. with the rnndition that the final produ.::ts be exported. The program was specifically designed to take advantage of li.S. tariff items 806 and 807. which permit foreign-based sub­sidiaries of C.S. firms to assemble products whose com­ponents were originally made in the linitt'd States and ther. to C'xport the products to the Lnitcd States \\"ith duties iJnposed only on the value added. The ad\·antages of the program for C.S . ..:orporations are the low cost ot 'll exican labor. the fa.::t that only labor inputs are subject to tariffs. and the proximity of 'llexican border cities. In 1980. for example. the cost of labor in Ciudad Juarez was Sl.33 an hour. including all fringe benefits Jnd taxes...\!though there are lower-wage areas in other parts oi the world. the differ­ence frequently is more than oftset by the presenc·e of well­deYeloped infrastructure and otha ex ternal c-conomies in the U.S.-'llexico borderlands. the lower costs of shipping machinery and materials to fort'ign pbnts Jnd ot importing finished or nearly tinished goods. and the' fact that C.S. managers can live in th<" Cnited States Jnd still work abroad. Initially . most 111aq11i/adoras were small J!lJ used :on­verted old buildings and little capital. Over thr' !"ast dccaJe. however. the trend has steadily fo.vored grc'ater capital intensity and the use ot large new piants in modern indus­trial parks. By 1978. '.\lexico was .. predominant among the several .::ountries participating in labor-intcnsiw sub­contracting for the Lnited States market both in terms ot growth and in terms of the absolu!C' value-added by off­shore processers. " 6 In that year. 111aq11 i/adr>ras provided .Mexico some 95 .000 jobs and S713 million in value added. which represented over 70 percent of th<" total value added in this type of production in all ot Latin Americ·a. Onl\ tourism and petroleum sales provide more foreign exchang~ to Mexico. At present, more than 130,000 workers are expenditures are made in the United States, while 40 estimated to be employed in maquiladoras. percent to 75 percent of the expenditures of borderland From the perspective of the United States as a whole, Mexican families are spent in the United States. "If the lower production costs in the Mexican border industry overall balance of transactions remains positive for Mexico mean lower prices for U.S. consumers. Nevertheless, U.S. it is thanks to the large waves of tourists who come fro~ labor unions, which oppose the maquiladora program on the interior of the United States, and thanks to the superior the ground that it takes jobs from domestic workers, want purchasing power of the North Americans."8 Congress to remove the tariff advantages enjoyed by U.S. In 1978 the proportion of local income accounted for corporations operating abroad. ln fact, there is little evi­by retail trade was higher than the U.S. proportion of 10 dence that runaway plants would have been established in percent in every borderland metropolitan area but one (see the United States if they had not been lured to Mexico. table 3). The exception, Las Cruces, is separated from the Some of the products now assembled in maquiladoras border by El Paso. The share of income derived from retail would be dropped altogether if they had to be produced trade in Laredo was more than twice that for the United with higher-cost, and sometimes less efficient, U.S. labor. 7 States. This share was also at least 20 percent above the Other corporations would probably move their operations national norm in El Paso (12.0 percent), Tucson (12.5 to other labor-surplus countries if the advantages of locat­percent), Brownsville (14.8 percent), and McAllen (15.4 ing on the border were curtailed. The proximity of Mexi­percent). co's border cities creates balance of payments and indirect In contrast, the higher-order services represented by employment advantages for the United States that would finance, insurance, and real estate play a relatively small not occur if these plants were located in more distant role in borderland metropolitan areas. In both 1971 and countries. Maquiladoras use more U.S. materials and 1978, the share of income accounted for by this sector in machinery because of the relatively low transportation each of the seven areas was less than the national norm. costs involved, and maquiladora workers spend a significant part of their earnings in the United States. The Effect of Federal Government Activities Retail Trade In the past, federal government activities were respon­sible for much of the borderland growth. San Diego became While competition from across the border has tended to a major naval base during World War I and a major center inhibit the growth of manufacturing in the U.S. border­of the aircraft industry during the 1920s, largely because of lands, the retail trade sector has flourished because of the its favorable climate. With two of its basic activities geared many Mexicans who shop on the U.S. side. A French stu­to defense operations, the local economy took off during dent of the borderlands has pointed out that most U.S. World War II. After that war all segments of San Diego's Table 3 Labor and Proprietors Income in Selected Sectors of Borderland Met ropolitan Areas, 1971 and 1978 (In thousands of dollars) Manufacturing Retail trade Finance, insurance, and real estate Federal civilian Federal military Area Income Percentage of total Income Percentage of total Income Percentage of total Income Percentage of total Income Percentage of total Total income San Diego 1971 . 1978 692,300 1,498,398 14.8 14.9 505,560 1,099,463 10.7 11.0 218,309 569,524 4 .7 5.7 348,989 684,691 7.4 6.8 795,568 1,228,322 17.0 12.2 4,684,513 10,040,372 Tucson 1971 1978 85,038 226,029 7.8 10.2 142,146 276,452 13.0 12.5 55,895 106,404 5.1 4 .8 53,106 108,779 4 .9 4.9 74,093 88,400 6.8 4.0 1,090,590 2,213,069 Las Cruces 1971 1978 8,298 33,895 4.2 8.5 18,719 37,304 9.6 9.4 5,863 9,478 3.0 2.4 56,660 85,858 28.9 21.6 16,105 16,590 8.2 4.2 195,852 397,284 El Paso 1971 1978 157,156 323,157 16.2 15.9 113,250 243,550 11.7 12.0 42,413 96,348 4.4 4.8 81,333 142,843 8.4 7.0 123,559 199,281 12.7 9.8 971,067 2,028,344 Laredo 1971 1978 6,118 17,301 4.3 5.7 28,737 62,080 20.1 20 .4 5,368 13,476 3.8 4.4 12,930 13,370 9.0 4.4 20,733 655 14.5 0.2 142,072 304,590 McAllen 1971 1978 20,964 73,499 7.4 10.4 48,689 108,944 17 .2 15.4 9,542 23,613 3.4 3.3 14,138 30,815 5.0 4 .4 1,674 2, 179 0.6 0.3 282,838 705,387 Brownsville 1971 1978 29,050 119,068 10.9 18.3 42,311 96,056 1 5.9 14.8 12,287 33,099 4.6 5.1 12,561 18,461 4.7 2.8 1,9 12 2,473 0.7 0.4 266,696 650,021 United States 1971 1978 178,262,000 345,771,000 26.4 26.2 73,461,000 131 ,687,000 10.9 10.0 37,55 1,000 76,207,000 5.6 5.8 30,467,000 52,685,000 4.5 4.0 14,961,000 19,847,000 2.2 1.5 676, 132,000 l,318,75C,000 Sources: U.S. Department of Commerce, Bureau of Economic Analysis, Local A rea Personal Income 1971-1 976 (Washington, D.C. : BEA, 1978), vol. 7, PP· 1, 22(;28(/• 116, 134, and 200, and vol. 9, p. 10; U.S. Department of Commerce, Bureau of Economic Analysis, Local Area Personal Income 1973-1 978 (Washington, D ..: ov· ernment Printing Office, 1980), vol. 7, pp. 3, 9, 12, 62, 72, 82, and 115, and vol. 9, p. 9. TEXAS BUSINESS REVIEW economy continued to record steady gains. and the Korean War further accd<'rated growth. The major component in El Paso's large gov<'rnment sector has been Fort Bliss. Once the largest cavalry post in the nation. it is now the head­quarters of the U.S. Army .\ir Defense Center. as well as a training center for the U.S. Army and the West German Air Force. Important air bases have also been located in Tucson. Laredo. and Del Rio. and various types of military activity can be found near the border between San Diego and western Arizona. Federal ci\·ilian employment directly related to military research fueled much of the growth of the Las Cruces metropolitan area, where the White Sands .\!issile Range is located. In 1971 . the proportion of total local income accounted for by the federal .:ivilian sector exceeded the national figure oi 4.5 percent in all borderland metropolitan areas. ranging from 4.7 pcr.:ent in Brownsville to 28.9 percent in Las Cruces. At the same time. the federal military share of income in the nation was 2.2 per.::ent. In the borderlands only .\!c.\llen and Brownsville were below this level. Between 197 l and 1978. the relative importance of iederal civilian and military income declined in the United States. but the corresponding declines in most of the bor­ derlands were even greater. For example. the share of in­ come accounted for by the federal civilian sector dropped from 28.9 percent to 21.6 percent in Las Cruces. from 9.0 percent to 4.4 percent in Laredo. from 4. 7 percent to 2.9 percent in Brownsville, and from 8.4 percent to 7.0 percent in El Paso. The military share declined from 17.0 percent to 12 .2 percent in San Diego. from 6.8 percent to 4.0 per.:ent in Tucson. from 8.2 percent to 4.2 percent in Las Cruces. from 1:2.7 percent to 9.8 percent in El Paso. and from 14.5 percent to 0.:2 percent in Laredo. where an air base was closed. _.\t present. the Laredo. McAllen, and Brownsville metro­politan areas are less dependent on federal income than is the tnited States as a whole. The other borderland metro­politan areas continue to be relatively dependent on iederal income. but this dependence has declined substantially in recent years. In other words. federal activities have had relatively little to do with the remarkable growth of the borderlands during the past decade. Personal Income Variations in a Bicultural Setting Per capita income in six of the seven areas is less than it is ior the nation lsee table 4 ). The level in San Diego. the most populous of the borderland S.\ISAs. is above the na­ tional average. and the 1971-1 978 growth rates were higher than the corresponding national rate in four other areas. In 1978. per capita income consistently declined fro!11 San Diego in the west to .\kAllen in the east. The propor­ tion of non-Hispanics in the local population follows a similar pattern. In an earlier study. I reported that among all cities along the U.S. border with Mexico that had a population of 25 .000 or greater in 1975. there was a highly significant inverse relation between per capita income and the percentage of the population of Hispanic origin.9 Such factors as education, discrimination, and degree of com­petition from Mexican workers would need to be investi­gated in detail to find why this association exists. In addi­tion cross-sectional data do not reflect the dynamic factors involved in the changing social and economic status of Mexican Americans. Recent evidence suggests that the Mexican-American population has been advancing in educational attainment and earnings in relation to the rest of the population. 10 Survey evidence from the Texas borderlands indicates that many .\1exican Americans, especially younger people, are willing to leave the region to take advantage of eco­nomic and other opportunities elsewhere. 11 In fact, many young Mexican Americans who acquire skills and training in the borderlands do leave for high-paying jobs in Dallas, Houston, Beaumont, Los Angeles, and other distant cities. One observer concludes that Hispanics who successfully make this transition are replaced in the borderlands by per­sons who enter "illegally from Mexico and Central America. And no one here-no one in Washington or anywhere else­knows what to do about it.',i2 The pace of per capita income growth in the U.S. bor­derlands would no doubt be more rapid were it not for the proximity of Mexican nationals willing to work -whether legally (green carders) or on an undocumented basis-for wages that are low by U.S. standards. Nevertheless, Mexican­American organizations generally oppose strict measures to curtail the influx of undocumented Mexican workers, part­ly because of a shared culture and partly because the ha­rassment of .\lexicans inevitably leads to the harassment of some !11exi.:an Americans. (Mexican-American labor leaders have at times been ambivalent in this regard, but what they mainly object to is the use of Mexican workers as strike breakers.) Another dynamic factor that needs to be considered is the temporal settlement pattern of the borderlands. Anglo settlement of the borderlands has tended to run counter to the general westward movement of the national population. Even in 1900. San Diego, with 17.700 inhabitants, was the largest U.S. city on the Mexican border. By 1970, San Diego had a considerably larger non-Hispanic population than did all of the other borderland SMSAs combined (see Table 4 Per Capita Personal Income in Borderland Metropol itan Areas Per capita income Percentage change (in dollars) from Area 1971 1978 1971 to 1978 San Diego 4,410 7,947 80.2 Tucson 3,991 6,973 74.7 Las Cruces 2,953 5,675 92.2 El Paso 3,201 5,639 76.2 Laredo 2,260 4,529 100.4 McAllen 2,045 4,323 111.4 Brownsville 2,436 5,024 106.2 United States 4,132 7,840 89.7 Source: See table 3. XOVEMBER-DECEMBER198 1 table 5). Tucson had a non-Hispanic population of 269,000, that in the contiguous Las Cruces and El Paso areas was 189,000, and that in the three eastern areas together was only 81,000. In 1970, the four Texas areas accounted for nearly two-thirds of the entire borderland metropolitan Hispanic population. In each of the Texas areas, over half of the His­panic population was in the foreign-stock category, that is, first-generation or second-generation Americans. Thus, these relatively poor areas have relatively close ties to Mexi­co, and their past remoteness from major economic cen­ters-socially and economically, as well as geographically­hindered their integration into the U.S. economy as a whole. It is tempting to speculate that per capita incomes in the borderlands as a whole will come closer to the na­tional average as non-Hispanic settlement in the more easterly areas increases. Every effort will have to be made to ensure that Mexican Americans share fully in the eco­nomic progress of the region. Conclusion In relation to the United States as a whole, the sou th­western borderland area has had more than its share of social and economic problems. Static analyses that merely compare the U.S. borderlands to the nation, however, fail to capture the positive role that this region has played in improving the economic well-being of people, especially when one cunsidPrs their alternative opportunities. Migrants to this re!ativeiy recently settled area have come volun­tarily, presumably with reasonable expectations of improv­ing the.ir economic statuses. Today, the populations of the California and Arizona borderlands typically enjoy living standards comparable to those in the rest of the United Stztes. The metropolitan areas of the eastern borderlands, with their largely Hispanic populations, have not fared as well, although most of the Mexicans who have become bor­derland Mexican Americans have probably experienced higher living standards than would have been the case had Table 5 Hispanic, Foreign-Stock Hispanic, and Non-Hispanic Populations in Borderland Metropolitan Areas, 1970 (In thousands) Foreign-Stock Area Hispanic Hispanic* Non-Hispanic San Diego Tucson 174 83 65 30 1,184 269 Las Cruces 35 14 34 El Paso 204 11 6 155 Laredo 62 33 10 McAllen 144 7 5 38 Brownsville 107 54 33 *This category includes the foreign-born population and the native population of foreign or mixed parentage. Source: U.S. Department of Commerce, Bureau of the Census, County and City Data Book, 1972 (Washington, D.C.: Govern­ment Printing Office, 1973), pp. 318, 319, 548, 549, 558, 559, 568, 569, 578, and 579. they stayed in Mexico. Moreover, the borderlands has served as a staging area for many Mexican Americans who have sought better economic opportunities in other parts of the United States. In recent years the most rapid economic gains in the borderlands have been made in the metropoli­tan areas of Texas. The Mexican-U.S. border region is a meeting place, a transition zone between two great civilizations. Some critics have emphasized the dependency status of the Mexican side, while others have emphasized the threat that the Mexican side represents to workers on the U.S. side. In contrast, I share Victor Urquidi's view of relations between Mexico and the United States: "The only area where there is perhaps a balanced mutual dependence is along the 2,000 miles of the fairly open U.S.-Mexican border. A way of life has developed there that benefits inhabitants and businesses on both sides of the border."13 Notes 1. Richard L. Nostrand, "Mexican Americans Circa 1950," Annals of the Association of American Geographers 65 (September 1975): 378-90. 2. Robert R. Nathan Associates, Industrial and Employment Poten­tial of the United States-Mexican Border (Washington, D.C. : De­partment of Commerce, 1968), p. 1; Oscar J. Martinez, Border Boom Town: Ciudad Juarez since 1848 (Austin: University of Texas Press, 1978), p. 5; Governors of California, Arizona, New Mexico, and Texas, "Application for Designation as a Title V Regional Action Planning Commission," submitted to the U.S. Department of Commerce, July 1976 , p. 1; and Southwest Border Regional Commission, Economic Development Plan (Tucson: Southwest Border Regional Commission, January 1980), p. 111-7. 3. Helmut Fuhrer, "The Industrialisation of the Third World," OECD Observer, no. 102 (January 1980): 24-28. 4. Niles Hansen, The Border Economy: R egional Development in the Southwest (Austin: University of Texas Press, 1981), pp. 170­ 72. 5. U.S. Department of Commerce, Bureau of the Census, Statistical Abstract of the United States, 1979 (Washington, D:C.: Government Printing Office, 1979), p. 422. 6. J.R. Newton and F. Balli, "Mexican In-Bond Industry," Seminar on North-South Complementary Intra-Industry Trade, Director's Report, United Nations Conference on Trade and Development, El Colegio de Mexico, Mexico City, July 16-20, 1979, pp. 21-24. 7. Thomas J. Murray, "American Boom in Mexico," Dun 's Review 112 (October 1978): 119-27. 8. Jean Revel-Mouroz, "Economic frontaliere et organisation de J'espace: Reflexions apartir de I' exemple de la frontiere Mexique­Etats-Unis," Cahiers des Ameriques Latines, no. 18 (1979): 15. 9. Hansen, The Border Economy, pp. 142-45. 10. Ibid., pp. 131-142. 11. Niles Hansen and William C. Gruben, "The Influence of Relative Wages and Assisted Migration on Locational Preferences: Mexican Americans in South Texas," Social Science Quarterly 52 (June 1971): 103-14. 12. James M. Perry, "Poor Texas Area I'aces Sharp Federal Aid Cuts, Sees Many as Justified," Wall Street Journal, March 26, 1981 , p. 16. 13. Victor L. Urquidi, "A Mexican Perspective," in U.S. Policies toward Mexico: Perceptions and Perspectives, Richard D. Erb and Stanley R. Ross, eds. (Washington, D.C.: American Enterpnse Ins ti tu te for Public Policy Research, 1979), p. 27. TEXAS BUSINESS REVIEW Mexico's Assembly Program Implications for the United States Recently U.S. manufacturers have been showing new and widespread interest in conducting their assembly opera­tions under Mexico's assembly program. Mexico, in com­parison with the twenty-three other countries that offer similar programs, has two principal advantages for the U.S. manufacturer. First, Mexico is close to the United States and provides, generally, easy communication and low-cost transportation linking a U.S. manufacturer's assembly plant with head­quarters, principal sources of supply, and domestic factories and markets. Second, increasing economic and political interdependence between Mexico and the United States has made U.S. manufacturers more aware of Mexico's assembly program. Many U.S. manufacturers who want to operate in foreign countries with low labor costs are apprehensive about the likely increase of restrictions on manufactured imports to protect and stimulate U.S. domestic employ­ment. It is believed, however, that these increased restric­tions would not be applied to imports from Mexico because of special conditions between the two countries. Currently Mexico's labor force is about 40 percent unemployed. With the present population of 70 million ex­pected to double by the year 2002, Mexico's severe unem­ployment problem could easily become untenable-leading to political and social changes inimical to the security and well-being of the United States. Mexico's unemployment problem could be further exacerbated with expanded en­forcement of U.S. immigration laws. The present, and largely ineffective, enforcement of these laws provides Mexico with a demographic safety valve that permits mil­lions of Mexicans to live and work illegally in the United States. Should industrial unemployment continue to rise in the United States, attention might focus on better im­migration control and, consequently. this safety valve for Mexico might be closed. For reasons of self-interest , the United States cannot remain aloof to Mexico's internal employment problems. Donald W. Baenesen is Professor of Business, Laredo State UniVer­sit;•. Donald W. Baerresen As an alternative to accepting, at least tacitly, large-scale employment of Mexican citizens north of the border, the United States could encourage expanded employment of Mexicans in Mexico through policies that support the assembly program and other forms of Mexican economic development. The discovery of extensive hydrocarbon deposits in Mexico was announced in 1976. Since then, the United States has become increasingly dependent upon Mexico for petroleum as an alternative to Middle East sources. 1 If fu­ture U.S. trade policies with Mexico take this fact into con­sideration. ~1exico's assembly program is less likely to be harmed by new trade measures imposed to protect U.S . employment. Beginnings of the Assembly Program Mexico's assembly program began with certain changes in Mexican laws in 1965, and the first assembly operations under the program were recorded in 1966.2 The Mexican government devised the program to provide job opportuni­ties in the northern border cities in response to unemploy­ment problems that were severely aggravated there when the United States abruptly stopped the bracero program. 3 The assembly program is designed to entice manufac­turers (mainly from the United States, although some other foreign and Mexican manufacturers operate assembly plants) to assemble in Mexico products for the United States and other foreign markets. Provisions of the assem­bly program permit manufacturers to import equipment and materials into Mexico free of duty if the resulting products and, eventually, the equipment are exported from Mexico.4 This program, like assembly programs in other countries, harmonizes with tariff items 806.30 and 807 .00 of the U.S. tariff schedules. These provisions, in general terms, permit certain U.S. products to be processed or assembled abroad and then returned to the United States duty free except for taxation of the value added abroad. 5 NOVEMBER-DECEMBER 1981 A distinguishing feature of Mexico's assembly program is the twin plant concept. Since the United States and Mexico share a 2,000-mile border, it is feasible and often advanta­geous for a company to conduct a complete manufacturing operation by having two factories (twin plants) in one bor­der area. Typically, the labor-intensive portions of a twin plant operation occur in an assembly plant in a Mexican border city, where wage rates are much lower than in the United States. Those portions of the overall operation that are capital intensive, and for which special U.S. tariff ad­vantages are not available, are conducted in a plant in an adjoining U.S. border city. One manager and a single staff of workers can daily direct and provide the support func­tions for both plants. Although the two plants are located in different countries, they may be separated by only a few blocks. boring U.S. cities. Thus, some of the strongest supporters of Mexico's assembly program are the chambers of com­merce, merchants' associations, and similar organizations of the U.S. cities that border Mexico. These cities promote their own industrial development and, with equal fervor, also promote Mexico's assembly program in their neighbor­ing Mexican communities. Much of the information pro­vided to manufacturers about the assembly program comes from such U.S. sources. Growth of Mexico's Assembly Program During its twenty-five years of existence, Mexico's assembly program has increased its shares of total U.S. imports to 14 percent of the total value imported under Typically, the labor-intensive portions of a twin plant operation occur in Mexico, while the capital-intensive portions are conducted in the United States. Economic benefits from Mexico's assembly program accrue to the neighboring U.S. border cities in many ways. These cities provide transportation, warehousing, customs brokerage, insurance, and financial services related to the movement, storage, and control of both the components destined for the Mexican assembly plants and the returning assembled products. The retail purchases of the Mexican assembly plant workers and their families are often of major importance to the economies of U.S. border cities. It has been roughly estimated that from 40 percent to 70 percent of the salaries of these workers are spent in neigh-item 806.30 in 1980 and 16 percent of total value imported under 807 .00 (see table I). By 1980, the total value of these imports from Mexico was over $2.3 billion, one-third of the total value that year of all imports from Mexico by the United States, excluding petroleum. In 1980 the United States imported from all countries $14.6 billion in goods under items 806.30 and 807 .00, almost 6 percent of the total value of all U.S. imports. Import duties were assessed on half of the total value of the products entering the United States from Mexico under item 807.00 in 1980. The other half was not taxed because Table 1 U.S. Imports from Mexico and All Countries under Tariff Items 806.30 and 807.00, 1966, 1969, and 1980 1966 1969 1980 Tariff item Total value (in millions of U.S. dollars) Percentage dutiable Percentage not dutiable Total value (in millions of U.S. dollars) Percentage dutiable Percentage not dutiable Total value (in millions of U.S. dollars) Percentage dutiable Percentage not dutiable 806.30 Mexico 0.5 40 60 4 .8 56 44 65.l 31 69 All countries 63.2 46 54 158.8 46 54 464.3 54 46 Mexico as a percentage of all countries 0.8 3.0 14.0 807 .00 Mexico All countries Mexico as a 7.0 889.8 49 87 51 13 145.2 1,649.0 34 79 66 21 2,281.4 14,126.6 50 74 50 26 percentage of all countries 0.8 8.8 16.1 Sources: For 1966 and 1969 data see Donald W. Baerresen, The Border Industrialization Progra~ of Mexico (Lexington, Mass.: Lexington Books, 1973); 1980 data from U.S. Department of Commerce, Bureau of the Census. 254 TEXAS BUSINESS REVIEW it consisted oi the \·alue of the components of U.S. origin. By contrast. only :6 percent of the total value of item 807 .00 imports from all countries in J980 \1·as exempt from duties. This difference indicates that the products assembled in \!exico contained a much higher proportion of C.S. components thJn did the \\·eighted average of the products that 11·ere assem bled in all other locations. This higher proportion results from \!exico ·s nearness to the rnited States. Since assembling European and Asian com­ponents in \!exico \\·ould mean addition3J transportation costs. C.S. components are more likely to be assembled in \!exi.:o than in countries farther from the Lnited States. ..\!so. \!exico. unlike some of the other countries 11ith Table 2 Locations of Assembly Plants in Mexico 1971 1980 !exican city and state umber Number Number of earby U.S. city and state) of plants of plants employees Tijuana and Rosarito, Baja California SS 120 12,346 (San Diego, California) Ensenada, Baja California 6 2SS (San Diego, California) Tecate, Baja California 13 22 666 Mexicali, Baja California S4 78 7,166 (Calexico, California) La Paz, Baja California 0 s 177 San Luis, Rio Colorado, Sonora 6 2 376 (Yuma, Arizona) ogales, Sonora 30 S8 12,963 (Nogales and Tucson, Arizona) Agua Prieta, Sonora lS 22 4 ,6S4 (Douglas, Arizona) Ciudad Juarez, Chihuahua• 41 117 39,129 (El Paso, Texas) Chihuahua, Chihuahua 0 14 6,SOO Ciudad Acuna, Coahuila 2 13 2 ,924 (Del Rio, Texas) Piedras Negras, Coahuilat 6 18 2,60S (Eagle Pass, Texas) Nuevo Laredo, Tamaulipas 14 14 2,4SS (Laredo, Texas) Reynosa, Tamaulipas 3 17 S,339 (McAllen, Texas) Matamoros, Tamaulipas 34 so 1S,222 (Brownsville, Texas) Total 274 SS6 112,777 *Includes Nuevas Casa Grandes, Chihuahua. tincludes Allende, Morelos, and Zaragosa in Coahuila. Sources: For 1971 data see Donald W. Baerresen, The Border In­dustrialization Program of Mexico (Lexington, Mass.: Lexington Books, 1973), table 2-1; for 1980 see Re~resentaci6n de la Secretaria de Patrimonio y Fomento lndustnal, uevo Laredo, Tamps.. Mexico, 1981. similar assembly programs, does not produce many of the more technologically sophisticated components that are assembled abroad for the C.S. market. Using the sum of the dutiable values of U.S. imports from \!exico under tariff items 806.30 and 807 .00 as a base. 11·e find that about S1.16 billion was injected into \lexico·s economy in 1980 as a result of the assembly program. This figure equals approximately 9 percent of the \·alue of all of \fexico·s other exports and 31 percent oi the value of all of \lexico·s other exports excluding crude petroleum. The economic effect of this assembly activity is particu­larly eYident in \lexico's northern border cities. where most of the assembly plants are located (see table :2). In spite of the \lexican go\·ernment's desire to haYe more assembly plants in the interior. foreign manufacturers have not Yentured far from the border. One reason may be the preference of the American supervisors and technicians. who work in the assembly plants in Mexico. to maintain their families and homes in the United States. Conditions for operating an assembly plant in Mexico can vary markedly among locations. Some of the differing conditions on the \lexican side are wage rates: the availabil­ity of supeTYisory. technical. and clerical" orkers; land and building costs: the role of unions: the attitude of local goYernment officials: border-crossing times and costs: climate: local taxes. transportation (or drayage) costs: the aYailabi..lity of machine shops and repair services; and the quality and aYailability of 11·ater. electricity. and tele­phone serYices. Similarly. the Yarious C. S. border cities offer differing conditions. including the attitude of local C.S. customs officials (mainly the import specialists) toward processing the entry of assembled products. Industrial parks. found in most \lexican border cities and in the city of Chihuahua. customarily offer induce­ments to assembly operations. Often the managers and staffs of these parks assist ne\1· assembly operations by securing permits. proYiding buildings built to specifications. arranging for transportation and utilities, performing con­tract assembly 11·ork on a trial basis. and securing and test­ing applicants for production line. clerical. and technical employment. In most of the C.S. border cities. industrial parks complement the Mexican assembly operations by proYiding warehouses. offices. and manufacturing facilities where the twin plant concept is employed. U.S. foreign trade zones are also important for certain kinds of assembly activities. The first of these duty-free en­claves on the border was started in \lc.-.\llen. Texas. and now new zones are beginning in BrownsYille and El Paso. Texas, and Nogales. Arizona. The location of a \lexican assembly plant is often in­fluenced by the distance between the assembly plant and the U.S. home office. Many apparel assembly plants are located in the cities of Baja California. \!e:-.:ico. near the Los Angeles sportswear industry. Also in Baja California are plants that assemble products for electronics companies based in California. Opposite the Texas border. Mexican assembly plants generally belong to manufacturing com­panies that have their principal factories and headquarters '.\OVE\IBER-DECE\!BER 1981 in the midwestern and eastern portions of the United States. Labor Conditions Labor costs also influence the selection of a particular location in Mexico (see table 3). Eighty-seven economic zones in Mexico have their own schedules of minimum wages for unskilled and skilled workers. Each zone has a minimum wage commission made up of representatives of labor and management. Cost of living, general economic conditions, and company needs are considered in setting wages. Until 1976, minimum wage rates were set for two years ; since then, because of increasing Mexican inflation, the wage rates have been set annually. Minimum wage rates for unskilled labor are generally applicable to assembly workers in Mexico. From the 1970-1971 period through 1981 these wage rates increased between 290 percent and 406 percent (in Mexican pesos) in the economic zones where most of the assembly plants are located ; the dollar cost of these wage rates over the same period increased between 110 percent and 172 percent. (The lower increases in the dollar costs result from the 8 5 percent devaluation of the Mexican peso in 1976 .) The Mexican government intends to reduce and even­tually to eliminate the differences in the minimum wage rates among the economic zones that border the United States. Thus, the wage rate incentive will become standard­ized along the border, with lower rates obtainable only in the interior. In this way, the Mexican government will encourage increased employment away from the border areas. Representative total daily labor costs of an assembly worker in Mexico include the minimum wages and all related required benefits provided by employers as well as the relevant U.S. import taxes that are levied on representa­tive electronic and apparel products (see table 4). The total labor cost for each worker in 1981 for a representative electronic product assembled in Mexico and imported into Table 3 Minimum Daily Wages of Unskilled Labor On U.S. dollars) State City 1970-1971 1981 Percentage increase Baja California Tijuana, Rosarito, Ensenada, Tecate, and Mexicali 4.31 Sonora San Luis Rio Colorado 4.31 Sonora Nogales and Agua Prieta 3.16 Chihuahua Ciudad Juarez 3.38 Chihuahua Coahuila Ciudad Acuna and Piedras Negras 2.82 Tamaulipas Matamoros, Nuevo Laredo, and Reynosa 3.19 Sources: See table 2. 9.04 9.04 8.61 9.04 7.32 7.32 8.61 110 110 172 167 160 170 the United States ranges from $14.49 to $17.90 a day, depending upon location. By comparison, the average daily total labor cost for an electronics production worker in the United States was $68.37 in January 1981. For a represen­tative apparel product assembled in Mexico and imported into the United States, the total daily labor cost for each worker in 1981 is between $18.45 and $22. 78. In the United States during January 1981 the average daily total cost for a production worker in the apparel industry was $52.16.6 Aside from total labor costs, other attractions entice U.S. manufacturers to conduct their labor-intensive opera­tions in Mexico. Mexico's high unemployment rate, rapidly expanding labor force , and lack of unemployment benefits result in a much wider range of choice for selecting un­skilled workers than is available in the United States. About 80 percent of the assembly workers in Mexico are women, usually between the ages of 18 and 26. Most of these workers seem to have greater manual dexterity, are more productive on routine operations, and are more docile than their counterparts in the United States.7 Mexico's assembly Table 4 Daily Total Labor Costs for an Unskilled Worker,* 1981 (In U.S. dollars) By industry Electronics Apparel State (10 percent (40 percent City duty)t duty).. Baja California Tijuana, Rosarito, Ensenada, Tecate, and Mexicali 17.90 22.78 Sonora San Luis Rio Colorado 17.90 22.78 Sonora Nogales and Agua Prieta 17.05 21.70 Chihuahua Ciudad Juarez 17.90 22.78 Chihuahua 14.49 18.45 Coahuila Ciudad Acuna and Piedras Negras 14.49 18.45 Tamaulipas Matamoros, Nuevo Laredo, and Reynosa 17.05 21.70 *Measured as the total annual labor cost of the employer divided by the number of days actually worked a year plus the related U.S. import duty. The total burden includes the minimum wage, all of the employee benefits and taxes required by Mexi­can law, and a 5.7 percent absenteeism allowance. For a de­tailed description of the burden see Los Dos Laredos to Date, Secretaria de Patrimonio y Formento Industrial, Nuevo Lare­do, Tamp., Mexico, 1981. tU.S. import duty rates normally applied to the kinds of electronic products that are assembled in Mexico range between 5 percent and 1 5 percent ad valorem. **The U.S. import duty rate for many of the apparel products assembled in Mexico is about 42.5 percent when there is orna­mentation; otherwise, the effective duty rates on apparel prod­ucts average about 38 percent. Many such duty rates are actu­ally determined on the basis of an ad valorem charge (such as 32 percent) plus a specific charge according to weight (such as 25 cents a pound}. Source: Tariff Schedules of the United States Annotated (1976) (Washington, D.C.: International Trade Commission, 1975). TEXAS BUSINESS REVIEW program hJs proYided the first opportunity for most of these \\·omen to ,,·ork outside of their homes. and many families are dependent upon the incomes of these women. Outlook Changes in minimum ,,·age rates in .\lexico follow the pace of internal inflation. \\"h.i<:h b\" the end of 1980 \\·as in­creasing at an annuJl rate of ab;ut 30 percent.8 Without an offsetting deYaluation of the \lexican peso. the total doll3r cost of labor in \lexico could rise as rapidly as the .\lexican inflation. thereby causing the assembly program to lose much of its appeal to L' .S. manufacturers. Their interest. and likely their investments. might then shift toward more distant countries with similar programs but lo\1·er and more stable wage rates. .\lexico may be Jble to sustain high rates of domestic inflation for some time \\"ithout haYing the bal3nc·e of pay­ ment pressures that \1·ould normally force major deYalua­ tions. The necessity of su.:h a deYaluation could be fore­ stalled by expanding foreign exchange revenues from petro­ leum exports. Thus. the success of .\lexico·s petroleum deYdopment could indire.:tly retard dewlopment of the assembly program. \\"hen LS. business planners eYaluate different countries as potential locations for assembling products for the U.S. market. they must carefully consider the future accessi­ bility to that market for each country...\n attempt to in­ crease protection of FS. manufacturing jobs could reduce foreign access to the L'.S. market by increasing import quotas. eliminating tariff items 806 ..30 and so; .00. or raising import duty rates. If the LS. were to increase import quotas. \lexican im­ ports would probably be treated favorably. \!exican costs. in dollars. would rise substantially without seriously jeopar­ dizing the assembly program . .\!exican assembly a.:tiYity could be stimulated if the present U.S. quota rnles were altered to exempt imported products containing LS. .::om­ ponents and to increase the restricti\·eness for completely foreign-made competing products. .\lexico·s assembly program could suffer. howeYer. if l.S. tariff items 806 ..30 and 807 .00 11·ere rernked. LS. labor unions. the principal advocates of this .:hange. claim that aYailability of these tariff proYisions encourages ex­portation of C.S. jobs. Proponents of the proYisions rnn­tend that they permit U.S. manufacturers to produ.:e com­ponents domestically. for later assembly abroad. to com­pete with products .::ompletely manufactured in foreign countries. Increasing U.S. import duty rates would probably harm .\lexico's assembly program less than it would harm most similar programs in other .:ountries. If items 806.30 and 807 .00 were retained . increased duty rates would encourage more extensive foreign assembly of L:.s. components and would make assembly operations closer to the United States relatively more profitable. Therefore. raising U.S. import duty rates might shift assembly operations away from European and Asian countries toward the United 9 States and .\!exico. '.\O\'E.\!BER-DECE.\!BER 1981 In various industries. low-cost har.d labor can profitably substitute for machinery in n;ass assembly operations. Technological and stylistic changes in the manufacture of some products have been too rapid to permit profitable returns from the capital investments required to automate the assembly pro.:esses...\s a consequence . .\lexico's assem­bly program and comparable programs in other countries haYe benefited. If the pace of these changes should slacken. howewr. automation of assembly actiYities may become economically feasible. Programmable industrial robots may be profitably em­ployed in many routine assembly operations. even when the routines change frequently. Furthermore. the trend tO\\·ard electronic miniaturization may eventually require fully automated assembly processes when workers. even with powerful mi.:roscopes. will become unable to assemble the tiny ne\,. products manually . In spite of the possibility of such developments. the profit incentiYe for conducting many kinds of assembly operations in countries with low labor .:osts should .:on­tinue for many years. The primary obstacle to this con­tinuance wou!d !le increased import restrictions on foreign assembled prod11cts. If the l"nited States seeks further to restrict entry of such products. the method and related conditions of restriction \\·ill probably be designed to exempt assembled products from Mexico. Therefore. the LS. market will likely remain accessible to products from .\1exico ·s :isse m bly program. Notes l. The \·aJue oi L".S. imports of \le.,ican crude petroleum rose from 53 21 million in 197 5 to SS .9 billion in 1980. Jccording to the C .S. Department of C0;;1merce. 2. Former!\·. the Jssembly program ,,·as officially called the Border Industrialization Program: inform3.lly. it has also been known as the maquila progra;;i. t\\in plant progr:im . and in-bond assembly pro­gram. 3. The bracero pr0gram ,,·as begun in 1951 to allo\1 \lexicans to enter the Cnited States legally as seasonal agricultural \\·orkers. \\.ith termination of this program in 1964. tens of thousands of \lexican workers and theiI families \\·ere stranded in \lexico 's northern bor­der cities. 4. Exceptions per::1it entry into the \kxican m:>.rket of products that are assembled unJer \kxico's asse1l'bly ;1rcp am; Donald \\·. Baerresen. ed .. .\Jexicc's .--ts1e•11hly Progrc111. ~,mierence proceedin~s 0 (Laredo: Institute for lnternationa! Trade. Luedo State Cniversity. I 979) 5. For a full explanation of the use of these tariff ikms sec Don1.ld \\'. Baerresen. ed .. L"11ited States Tari_(( Items 806.30 a11J 807. conference proceedin~s (Laredo: Institute for International Trade. Laredo State L"niYersity. 1980). 6. U.S. Department of Commerce. Bureau of Labor Statistics . 7. for descriptions of productivity rates. selection processes. and training methods of assembly workers in \lexico. see Baerresen. ed .. .\fexico 's Assembly Program. 8. "Examen de la situaci6n econ6mica de \kxico." Ba11amex 57 (February 1981). table 10. 9. For a broader discussion of this possibility. see Donald \\" Baer­resen. "Unemployment and \!exico 's Border Industrialization Pro­gram." /11teramerica11 Economic Affairs 29 (September 1975): 79­ 80. -:_5 7 Industrial Development and an Expanding Labor Force in Brownsville Michael V. Miller Although long characterized by extreme poverty, little growth potential, and high rates of out-migration, Browns­ville experienced a spectacular boom over the last decade. The city grew from 50,000 to 80,000 residents with rapid industrialization as the motive force. The immediate area attracted and retained more than one hundred industrial firms between 1967 and 1978, and approximately 8,000 manufacturing and 5,600 nonmanufacturing jobs were generated. 1 The key to Brownsville's growth has been its proximity to Matamoros, the Mexican city of 270,000 directly across the Rio Grande, and the initial catalyst was the border industrialization program begun in 1967 by the Mexican government.2 By 1979, forty-two U.S. firms had estab­lished plants in Matamoros; the majority of these (including such corporations as Bendix, Singer, Sunbeam, and Zenith) were involved in the assembly of electronic components and goods. With a standard wage in 1979 of about $6.00 a day, Matamoros maquiladoras 3 (assembly plants) generally operated around the clock and employed approximately 15,000 workers (an estimated 90 percent were women). Thirty of these firms had much smaller plants, so-called twin plants, in Brownsville, which typically staged parts and materials across the border to Matamoros, received as­sembled products, and then packaged and shipped such goods to interior U.S. distribution points. Aside from twin plants, the border industrialization pro­gram stimulated Brownsville's economic growth in two other important ways. As a consequence of the commercial trading advantages of Brownsville over Matamoros, wages Michael V. Miller is Instructor of Sociology, University of Texas at San Antonio. For more detailed discussion of Brownsville indus­trialization and its implications for the labor force see Michael V. Miller, Economic Growth and Change along the U.S.-Mexican Border: The Case of Brownsville, Texas (Austin: Bureau ofBusiness Research, Un iversity of Texas, forthcoming). This project is part ofTAES Project H-3286 and USDA-CSRS Regional Project NC-128. The author gratefully acknowledges the assistance of William P. Kuvlesky, James H. Copp, Miguel A. Torres, Robert Lee Maril, and Norman E. Binder. from employment resulting from the border industrializa­tion program have generally been spent in Brownsville, thereby enhancing trade and the creation of jobs. More im­portantly, however, the program has opened the area to corporate surveillance. Many corporations, which initially observed the region because of interest in the industrializa­tion program, have decided to locate branches in Browns­ville after discovering they could enjoy many benefits there (such as a large surplus labor pool, low wage rates, and the relative absence of effective unions) without paying the possible costs (such as customs problems and labor strife) involved in a cross-border operation. Still others, prevented by federal regulations from participating in the program, found they could also profit by locating near the border. Recent Brownsville development has included a diversi­fied mix of light and heavy industries. The bulk of light­industry employment is provided by clothing, seafood processing, and electronics assembly plants. Other light­industry products include swimming pool equipment, rubber seals, heaters, furniture, sandpaper, compression bottle tops, stuffed toys, corrugated boxes, collapsible bleachers, drill bits, and shopping bags. Heavy industry is primarily concentrated at the Port of Brownsville (six miles northeast of the city) and consists of an array of metal fabrication, boat building, ship dismantling, and petro­chemical firms. The port area now employs approximately five thousand workers. The largest employer is Marathon LeTourneau, a manufacturer of offshore oil well platforms that started in 1971 and has a work force of about fourteen hundred at peak production periods. Industrialization has caused growth in other sectors of the local economy. Banking and real estate interests have boomed. Between 1970 and 1977, approximately seven thousand housing units were built ; much of this 50 percent increase consisted of upper-middle class homes and apart­ments. Three country clubs were developed in or near the city. Before 1970 almost all retail activity was located in the central business district; during the 1970s, eight shop­ping centers (including two regional shopping malls) were constructed. National retail corporations have also entered TEXAS BUSINESS REVIEW the area: five motel complexes were built and many depart­ment store chains and fast-food franchises started opera­tions in the community after 1970. In all. prospects for future growth seem bright. Browns­ville has been established as a center for the generation of profit over the past decade. Serious infrastructural limita­tions of the late 1970s (such as electrical service. water availability and transmission, and sewage treatment) have recently been addressed, and facility upgrading and expan­sion should permit growth to continue. The promise of growth extends beyond reliance on the unstable presence of the border industrialization program. Although the program Jed to the corporate discovery of Brownsville. local indus­trialization has attracted more than flight-prone multina­tionals. \foreover. the recent discovery of extensive oil reserws in Mexico portends the potential growth in the local binational economy. since Bro\vnsYille may become a significant oil import and refining center. Distribution of Income and Poverty Brownsville historically has been one of the poorest cities in the nation. and it continues to be so despite recent economic development. Extreme income differences persist between Mexican Americans (who account for three­ fourths of all households and almost 85 percent of all indi­ viduals) and Anglo Americans in the city. Although the relative gap between local and national in­ comes declined somewhat over the decade. the absolute gap rose markedly. For 19 7 8. median family income was just under S!0,500, or 60 percent of the national median of SI 7.640.4 Mexican-American incomes were found to be sig­ nificantly less than those of Anglo Americans: half of all \lexican-American households had incomes of less than 58.000, while two-thirds of Anglo-American households made more than SJ 5,000. Per capita differences in income distribution were even greater because of proportionately larger !\lexican-American household sizes. Recent in-migrants (those entering the city during the 1970s) had incomes much higher than average Brownsville incomes and. thus. were the primary force behind the gen­ eral income improvement. Anglo-American in-migrants (60 percent of all Anglo adults in the city) had a median house­ hold income of 520.000. On the other hand. in-migrants of \lexican ethnicity (28 percent of all !\!exican-American adults in the city) had a median income of about SJ0.500. In-migrants directly from Mexico had the lowest median income (58.000). whereas Mexican Americans from other places in Texas or the United States reported a median in­ come of SI 1.500. Poverty continued to be extreme. In 1978. 31 percent of all families and 3 7 percent of all individuals had incomes below federal poverty thresholds. Although these rates were lower than those in 1970. the absolute magnitude of pov­ erty actually increased: the overall number of poor people within the city rose by approximately 25 percent during the 1970s. Poverty was almost exclusively a Mexican­ American phenomenon: 45 percent of all .Mexican­ "iOVD!BER-DECD!BER 198 1 Americans were poor. while only about I percent of all Anglos were below the poverty threshold. Labor Considerations Although Brownsville had a high rate of job creation during the 1970s. local unemployment grew faster than job creation. In 1970 Brownsville joblessness stood at 7 per­cent. and by 1979 the official rate was almost 11 percent. Given the growth of the labor force during the 1970s, more than twice as many unemployed people lived in the city in 1979 than in 1970. Thus, both relatively and absolutely, rapid industrialization has not reduced unemployment, and the U.S. Department of Labor's earlier designation of Brownsville as an area of persistent unemployment con­tinues to be applicable. Local adult unemployment. like poverty. is a \Iexican-American phenomenon and hits !\1exican-American women particularly hard. Mexican Participation in the Work Force Nonresident \!exicans. primarily those living in Mata­moros. make up a significant share of workers in the Brownsville area. In 1979. legal commuters amounted to a minimum of 5.000 workers. about 20 percent of all locally employed people. 5 This figure. of course, fails to incorpo­rate members of the shadow work force of undocumented aliens. Therefore. no precise quantitative statement about nonresident \lexican workers in the area is possible. Nevertheless. the participation of both legal and undocu­mented commuters is extensive. Undocumented aliens com­monly work in the secondary labor market-in construction, restaurants. motels. and private households. as well as in electronics. garment assembly, and seafood-processing plants. \lost .:Jerks and stockers in downtown stores are commuters. \lost of the trade within the central business district is with \lexican shoppers. and commuters are reput­edly hired because of their greater command of trade Span­ish. Estimates of commuter involvement in labor-intensive industries typically range from 50 percent to 70 percent within any given plant. Eagerness to work hard and with few complaints about the prevailing wage (minimum wage) are generally cited as the major factors behind the high rate of employment for commuters in such industries. Nor are they limited to just trade and light industry. A key adminis­trator at the Port of Brownsville. for example. estimated that as many as 80 percent of the workers within port in­dustries are Mexican commuters: '·the work is hot. grueling. and heavy and attracts those who want to make money... Occupational Structure The number of jobs held by residents increased approxi­mately 60 percent between 1970 and 1979. Growth was particularly acute within certain white-collar and blue-collar categories. The number of residents holding professional and technical positions or managerial and administrative positions increased by well over 100 percent. local persons 25 9 with operative positions more than doubled, and craft workers increased by almost 90 percent. The expansion in the latter two categories reflects the high rate of industriali­zation over the decade. Among employed residents, the majority of Mexican Americans were in blue-collar occupa­tions, whereas most Anglo Americans occupied white-collar jobs. Operative work accounted for a plurality of Mexican Americans. Conversely, well over half of all Anglo workers held professional and managerial positions, and Jess than 10 percent were involved in craft and operative work. Data show, however, that higher-status jobs, both white collar and blue collar, went in a significant degree to recent in-migrants from other places in the United States and Texas. Anglo in-migrants, in particular, came to be clus­tered in managerial and profes­sional positions. Many of these primarily because operative work, like retail sales, includes a high proportion of working wives whose incomes supple­ment those of their husbands. Among the remaining cate­gories, farm workers (although there were relatively few), general laborers, and transport equipment operators had exceptionally high poverty rates. Local work continued to be characterized by low pay (see table 2). Wages for retail sales and clerical positions tended to be low. Operative and other labor positions fared poorly also. The minimum wage was generally the highest starting wage, and wages typically increased little even with experience and tenure on the job. Unskilled workers could hope for, at best, the minimum wage with no promise for future raises. Among janitors, the 1978 median was $6,440 Table 1 Anglo Americans were managers Poverty and Unemployment by Occupational Category in transferred to the Brownsville- the Resident Mexican-American Labor Force in Brownsville, 1979 Matamoros area by their corpo­ rations. Mexican Americans: Wages, Poverty, and Unemployment As noted, the job market by 1979 remained exceptionally tight for Mexican Americans despite Brownsville's high rate of economic growth. Most local occupational groups were char­acterized by significant surpluses of workers relative to available job slots (see table I). Although farm workers and general labor­ers had the highest rates of unemployment, operative work accounted for a plurality of the unemployed. Many of these unemployed operatives were women involved in the seafood­processing industry-an industry providing seasonal, and often only sporadic, employment. In 1979, fully one-fourth of the local Mexican-American la­bor force headed or coheaded households without income suf­ficient to raise them above poverty thresholds. Most white­collar categories contained poor workers, but not to the extent blue-collar categories did. Crafts, a category consisting of the skilled trades, had a poverty rate of approximately 30 percent. Operative positions, although Poverty rate (percentage of category) Occupational category Currently employed Employed and unemployed Unemployment rate Professionals Managers and administrators Sales workers Clerical workers Craftspeople Operatives Transportation operatives Laborers Farm workers Service workers Percentage of all Mexican-American workers Occupation Sales Retail clerks Clerical Secretaries (experienced) File clerks Keypunch operators (experienced) Crafts Carpenters Electricians Painters Welders Operatives and other laborers General labor (seafood) Janitors Stitchers (garment assembly) Unskilled labor 0.0 0.0 7.9 9.1 16.6 14.3 7.7 13.8 29.5 29.2 25.6 28.2 57.1 57.1 60.0 61.5 100.0 100.0 26.9 27.6 21.0 25.2 Wage range 1.50 to 3.00 (hourly) 550 to 750 (monthly) 400 to 550 (monthly) 450 to 550 (monthly) 3.50 to 5.50 (hourly) 4.50 to 5.50 (hourly) 3.50 to 5.00 (hourly) 3.00 to 6.00 (hourly) 2.65 to 3.00 (hourly) 2.65 to 3.20 (hourly) 2.65 to 3.40 (hourly) 2 .65 (hourly) 0.0 0.0 14.3 13.3 10.4 I 1.6 0.0 23.1 80.0 10.3 12.s• Median yearly income* *Almost 25 percent of the unemployed did not report specific occupations. Since these cases probably involved semiskilled or unskilled labor, blue-collar categories are probably underestimated. Source: Pan American University and Texas A&M University Brownsville Survey (1979). Table 2 Prevailing Wage Levels for Selected Occupations in Brownsville, 1978 (In dollars) 7,500 9,000 8,000 6,440 6,600 generally lower paying than craft *Based on reported incomes for individuals who were not unemployed for prolonged periods during jobs, had a slightly lower pover­1978. For some occupations, the number of workers surveyed was too small to compute a reliable median yearly income. ty rate than did the crafts- Source: Texas Employment Commission and the Brownsville Survey (1979). TEXAS BUSINESS REVIEW (S3.10 an hour at full employment throughout the year). Stitchers and sewers at garment assembly plants had a slightly higher median than did janitors. Generally, stitchers and sewers were guaranteed the minimum wage but were paid by piece rate after several weeks on the j~b. The pre­vailing range of productivity was between the minimum wage and 53.40 an hour: failure to produce sufficiently at the minimum wage was grounds for termination. Seafood processing tended to pay the minimum wage and was often made more unpleasant by exceptionally poor working conditions and uneven hours. The skilled trades also pro­\ided low returns to Brownsville workers. Data suggest that electricians were generally the highest paid craft group, al­though they typically earned only S9.000 in 1978. Local Status of Organized Labor Relatively few unions are found in the Brownsville area. l'nionization efforts have largely failed. The most impor­tant recent blow against the local labor movement was struck by Brownsville's largest industrial employer. Mara­thon LeToumeau. A steelworker local (USWA) had been established at the plant in the mid-l 970s after hard struggle. In July 1977 the contract expired. and '.11arathon did not renegotiate. claiming the union was not backed by a majority. The union called a strike in which approximately two-thirds of the work force participated. Within thirty days. nonetheless. the strikers were either back on the job or their jobs had been filled by people willing to work at current wages and conditions. Marathon continued to press its claim. and the union was forced to file \\·ith the '\ational Labor Relations Board for a recognition election: an all-out publicity campaign waged by Mara­thon preceded the union's decertifica­tion in December 1978. According to those familiar with the local develop­ment process. labor efficacy has been an important selling point in attracting corporations to the area. Wages are a major managerial concern. but perhaps more important is the desire of man­agement to set the rules of work unilaterally. Corporate interest in Brownsville reportedly picked up significantly after the demise of the steelworker local. Current labor legislation. high un­employment. job insecurity. and the fact that many industrial jobs require workers from the secondary labor market constitute general constraints against unionization. Several addition­al factors are important. hO\\·ever. For one. labor consciousness tends to be low in the area. Industrialization is a recent phenomenon. and many within the labor force have rural origins. Labor unity is further undermined by the international composition of the work force. Although unionism is extensive in Mexico, the status of Mexican workers north of the border is frequently tenuous, and their commitments to American labor tend to be short term. Finally, Mexican commuters constitute an important labor source in the event of a strike. Indeed, they have often served as a strike-breaking force. The knowledge among local workers that they can and will be replaced if they walk out obviously subverts labor militancy. Notes l. '"Gro\\ th Profile." mimeographed (Brownsville: Chamber of Commerce. 1978). 2. As of 1976. approximately 68.000 \1exican frontier residents \\ere employed in some four hundred plants operating under the border industrialization program. Ciudad Juarez. Nogales. \lexicali. Tijuana. and \latamoros are the primary centers of program involve­ment. 3 . .\!aq11i/adora. the term for a plant in the border industrialization program. is derived from 111aq11i/a. the payment of grain provided by the farmer to the miller for milling services. 4. Survey data in this report were derived from a 2 percent random sample of Brownsville households conducted in 1979 by the author and by '>orman E. Binder under support from Texas A&M univer­sity and Pan American l'niversity-Brownsvi.lle. A more detailed account of the survey data can be found in \lichael V. \tiller, Economic GroH·th and Change along the C.S.-.\!exican Border: The Case of Bro1rnsJJille. Texas (Austin: Bureau of Business Re­search. l'niversity of Texas. forthcoming). 5. This figure is a minimum because many commuters are reported to curtail crossing activities when checks are being conducted. out of fear that their cards may be suspended or grom rnetted (a practice initiated in the late 1960s to distinguish documented commuters from resident aliens). '\OVDIBER-DECD1BER J981 The Effect of Federal Policy on Interregional Migration Patricia Gober Changing migration patterns in recent years-with the South emerging as a magnet for migrants and with people moving away from metropolitan centers and toward non­metropolitan areas-require a reanalysis of the government's role in population redistribution. The traditional concern with overconcentration in large metropolitan areas and population decline in small towns and rural areas will change to an emphasis on metropolitan decline and the ac­commodation of rapid growth in nonmetropolitan com­munities. In addition, traditional views of migration as a labor market mechanism do not explain the growing num­bers of retired migrants and of people who claim to be moving for a better quality of life. The United States does not have, nor has it ever had, a conscious comprehensive national migration policy. Federal activity, however, does affect population redistribution and migration. One can even go so far as to say that all policy has territorial implications and, therefore, affects where people live. The most obvious types of federal policy that affect migration are in urban and regional development, but defense spending, transportation, energy, and environmen­tal policies also affect population movements. Population policy can be defined as direct or indirect government ac­tion that affects the size, rate of growth, composition, or distribution of population. Naturally, migration policy re­lates primarily to population distribution, but size, growth, and composition policies may also affect migration. The enormous scope of migration-related policy is made even more complex by the problem of scale: migration can be interregional, intraregional, or local. A policy that pro­motes decentralization on one scale may well lead to great- Patricia Gober is Associate Professor of Geography at Arizona State University. This article is adapted from the author's longer study entitled "Federal Policy, Migration, and the Changing Geog· raphy of the U.S. Population" in George H. Hoffman, ed., Federal­ism and Regional Development: Case Studies on the Experience in the United States and the Federal Republic of Germany (Austin: University of Texas Press, 1981). ©1981, University of Texas Press. er concentration on another scale. For example, growth strategies in distressed regions may be designed to reduce inequalities in income and welfare but may actually, at least in the short run, concentrate growth in a few areas with high potential. Population redistribution can be divided into three lev­els: regional movements, such as Sunbelt migration; intra- The United States does not have, nor has it ever had, a comprehensive national migration policy. regional movements, such as the recent trend for migrants to move from metropolitan to nonmetropolitan areas; and local movements, such as those from the central city to a suburb. The three levels do overlap: urban policy, for exam­ple, has regional as well as intrametropolitan consequences. Definitional Issues in Migration Policy An idealized population policy includes awareness of a problem, goal formulation, goal adoption, choice of appro­priate instruments to meet goals, and an evaluation or monitoring procedure.1 Except for the nineteenth century goal of settling the continent, the U.S. government has never had clear and consistent objectives regarding popula­tion distribution or migration patterns. Without a norma­tive view of what the distribution of population should look like, the federal government commonly follows a TEXAS BUSINESS REVIEW problem-specific approach-for example, it may respond to useless for policy formulation. A hopeful sign, however, is excessive out-migration from distressed areas or central l:'rban America in the Eighties. the report of the Panel on cities. As a result. programs do not include goals about a Policies and Prospects for Metropolitan and Nonmetropoli­desirable pattern of population distribution or a desirable tan America. which sets forth some general goals for the organization of interregional and intraregional migration. distribution of the national population. At the very least, hen when goals are stated. they can be so general as to be we are provided with concrete preferences about how Table 1 Components of Population Change in the United States, 1960-1977 (In thousands) Net change Natural increase Net migration Census region State 1960-1970 1970-1977 1960-1970 1970-1977 1960-1970 1970-1977 ew England 1,338 394 1,022 338 316 37 Maine 24 91 94 39 69 S2 New Hampshire 131 111 62 33 69 78 Vermont SS 39 40 20 lS 18 Massachussets S41 93 466 143 74 SI Rhode Island 90 IS 78 24 13 39 Connecticut 497 76 282 98 214 22 Mid-Atlantic 3,034 -17S 2,976 l,OS7 S9 -1,232 ew York 1,458 -318 l,S09 SSS -SI 873 New Jersey I, I 01 IS8 614 234 488 76 Pennsylvania 47S -16 8S3 267 -378 283 East orth Central 4,028 791 4,180 1,988 -I S3 -1,197 Ohio 946 44 1,072 S07 -126 464 Indiana S31 13S S48 281 16 146 Illinois 1,033 132 1,076 Sl4 43 382 1ichigan I ,OS2 248 l,02S 49S 27 247 Wisconsin 466 233 461 191 4 42 West orth Central 930 SS7 l ,S29 6S7 -S99 100 1innesota 391 169 417 179 -2S 11 Iowa 68 S4 2SO 97 -183 43 1issouri 3S8 123 3SS IS6 2 33 orth Dakota IS 36 80 34 94 South Dakota 14 23 81 33 94 11 ebraska 72 76 14S 67 73 10 Kansas 70 77 201 90 -130 13 South Atlantic 4,700 3,627 3,367 l ,S27 1,332 2,100 Delaware 102 34 64 29 38 s 1aryland 822 21S 437 17S 38S 42 Virginia 682 483 S40 2SO 141 233 West Virginia -1 16 11 s 149 66 -26S 49 orth Carolina S26 441 620 299 -94 142 South Carolina 208 285 3S7 187 -149 98 Georgia 646 460 S96 316 SI 144 Florida 1,838 1,661 Sll 183 1,326 1,478 South Central 3,l 2S 3,409 3,46S 2,0S9 -740 1,3s1 Kentucky 181 238 208 166 -1 S3 72 Tennessee 3S7 373 402 196 -4S 178 Alabama 177 24S 410 196 -233 49 Mississippi 39 172 306 160 -26S 13 Arkansas 137 221 208 193 -71 128 Louisiana 386 277 Sl6 2S7 -130 19 Oklahoma 238 2Sl 217 119 13 133 Texas 1,617 1,623 1,471 871 146 760 Mountain 1,429 1,741 1,122 7S6 307 98S Montana 20 67 78 39 S8 27 Idaho 46 144 88 6S -42 79 Wyoming 2 74 42 26 -39 49 Colorado 4S3 409 238 160 213 249 ew 1exico 6S 173 19S 99 -130 74 Arizona 470 S20 243 163 228 3S8 Utah 169 209 180 167 -11 42 evada 203 14S 60 36 144 108 Pacific Washington Oregon California S,328 SS6 323 4,236 2,683 24S 28S l ,92S 2,780 307 164 2,123 1,487 160 94 1,107 2,S47 249 1S9 2,113 1,196 8S 191 817 Alaska 76 !OS 60 42 16 62 Hawaii 137 12S 127 84 11 40 Source: U.S. Department of Commerce, Bureau of the Census, "Preliminary Intercensal Estimates of States and Components of Population Change, 1960 to 1970," Current Population Reports, Series P-2S, no. 460, June 1971. :\OVDIBER-DECEMBER 1981 Figure 1 Per Capita Defense Contract Expenditures by State, 1977 $4 50-$599 10.tJAtl $600 AND ABOVE • Source: U.S. Department of Defense, Office of the Secretary, Prime Contracts by State, 1977. Figu re 2 Ratio of Spending to Taxes by State, 1976 80-.94 ff/J .95-1.09 Ntll 1.10-1.24 1\11%\i&fl 1.25 AND ABOVE • Source: National Journal (Washington, D.C.: Government Research Corporation, July 2, 1977). population should be distribut­ed and what role the federal gov­ernment should play, whether or not one agrees with the specific recommendations. Migration and Federal Policy Interregional Scale The most well publicized of rece nt migration trends is the southward migration of popula­tion. This trend began several decades ago but did not attract widespread attention until re­cently. Before 1970 all regions grew in population, although some grew faster than others. In the large northern states (New York, Pennsylvania, Ohio, and Illinois), natural increase com­pensated for net out-migration so that population growth, al­though small, was still in a posi­tive direction. Th us the northern regions (New England, Mid­Atlantic, East North Central, and West North Central) had some population growth during the I960s in spite of net out­migration or very small net in­migration. In the Sunbelt, growth was highly localized and concen­trated in Florida, Texas, Califor­nia, Colorado, and Arizona (see table 1). During the I 970s the fertility rate declined to the point that natural increase no longer compensated for net out­migration in the North. More­over, migration into the Sun­belt broadened so that all states in the South Atlantic and South Central regions had net in-migration dming the 1970s. A similar situation occurred in the West where in-migration was occurring in other Mountain and Pacific Coast states besides Ari­zona, Colorado, and California. The role of the federal government in stimulating these trends is difficult to assess. While regional redistribution would almost certainly have occurred anyway, federal activity promot­ed prevailing trends. The territo- TEXAS BUSINESS REVIEW rial bias assodated \\·ith federal spending is perhaps the most publiciud form of intervention into the redistributive 2 process. Federal expenditures include defense contracts. payrolls to military and nonmilitary personnel. highway and se\\·er programs. \\·elfare (\ledicaid. aid to families with dependent children. food stamps. supplemental security in­come. grants to states of social service programs. and un­employment compensation). federal retirement programs. and the maintenance of public lands. Defense spending varies regionally and the distribution of federal defense monies has occurred without concern for its consequences for regional development or its effect on population distribution or migration trends. During 19 77 Government activity in retirement benefits also affects migration and population distribution. Generous benefits by-the federal retirement system and increasingly stringent regulations over private pension plans in the Pension Re­form Act of 1974 have made retired persons more financial­ly secure. As more retired people have had the financial means to migrate. they have sought locations with milder climates. This fact reflects a relaxation of the traditional as­sociation between jobs and migration patterns. As the population ages and as retired people become more finan­cially secure. migration to the Sunbelt will be encouraged. Federal policy governing the number and origin of for­eign immigrants has also affected the regional balance of Federal policies on spending, retirement, and immigration are not meant to deal u1ith migration directly, but they do have territorial consequences. the Pacific region was most favorably affected by defense contract spending: all states in the region. except Oregon. received large amounts of federal defense expenditures (see figure 1). The South also fared well in the allocation of de­fense dollars. The biggest regional loser was the East North Central region (Ohio. Michigan. Illinois. Indiana. and Wis­consin) with a state average of federal defense monies of S15 3 per capita. When state variations in the ratio of spending to taxes (the amount of money spent for every dollar of tax money paid) are compared. the largest outflows can be seen in the \lid-Atlantic and East :'forth Central regions. \\·h.ich togeth­er had a net loss of more than SJ0 billion (see figure 2). The East '.\orth Central states were particularly disadvan­taged by the pattern of federal spending; they received in federal spending only 70 percent of what they collected in taxes. The main benefactors of geographically biased federal spending were the South Atlantic. South Central. \!oun­tain. and Pacific states. In the South. \!aryland and Virginia benefited because of their proximity to Washington. D.C. . but other states in the region (Georgia. South Carolina. Kentucky. Tennessee. Alabama. and Mississippi) were also farnred by federal spending. These generalizations about the role of federal spending in regional development and migration trends must be qual­ified for several reasons. First. expenditures are organized according to the location of the headquarters of those re­ceiving f~mds and may not reflect the location where 'the activity is actually conducted and where the effect is felt. Second. different kinds of spending have different multi­plier effects. For example. investments in highways, con­struction. and defense probably stimulate more jobs (and. therefore. migration attraction) than expenditures in wel­ fare. population growth. Although foreign immigrants are not interregional movers in the usual sense. they are regional in­rnigrants and are part of population gro\\·th. In 1980 over 800.000 persons were granted legal resident status. more than 20 percent of the total population growth for the year. The Select Commission on Immigration and Refugee Policy estimates that a disproportionate share of migrants settle in the Sunbelt. Immigration. then. leads to popula­tion growth in a direction consistent with the redistribution of the national population. The commission has recom­mended that immigration ceilings be raised from the cur­rent 270.000 to 350.000. \\·ith an additional 100.000 for the next five years to relieve the current backlog of re­quests. If accepted. this recommendation will promote population grO\\·th and in-migration in the Sunbelt. Another provocative immigration issue is the resettle­ment of lndo-Ch.inese refugees. The commission estimates that there were 444.555 lndo-Ch.inese refugees living in the United States in 1980: 40 percent of them resided in either Texas or California. and secondary migration trends indi­cate that they are increasing their concentration in these two states. Traditional resettlement policy stressed the dis­persal of refugees so that their effect on any one pbce would be minimized. \!any refugees. ho'' e\·er. prefer to li\·e in strong ethnic communities. As a result. the commission has recommended that refugee clustering be encouraged and that mechanisms should be developed to settle ethnic groups of similar backgrounds in the same areJs. This policy would encourage lndo-Ch.inese to settle in California and Texas and Cubans to locate in Florida. The net result \\·ill be in-migration to large. rapidly gro\\ ing Sunbelt states. Government action that benefits the South and West is hardly designed for that purpose. Federal spending. retire­ment. and immigration policies are not meant to deal ,,.ith migration directly, but. in fact. they do ha\e territorial con­ ~OVDIBER-DECEMBER 1981 sequences. When the rapid population growth and econom­ic growth were occurring in the Northeast and Midwest, these consequences were overlooked, but times have changed; the possibility that federal dollars favor the fastest-growing areas has become a source of discontent or, at least, concern in the North. Subregional Scale After years of decline, America's nonmetropolitan areas have recently grown rapidly in population, largely as a result of positive rates of net migration (see table 2). In the 1970s the largest declines occurred in large metropoli­tan areas. Substantial growth in large metropolitan areas of the Northeast and North Central regions in the 1960s changed to declines or very slow growth during the 1970s. Although small metropolitan areas continued to grow dur­ing the 1970s, nonmetropolitan areas accounted for most of the population increase. In the South and West, however, growth during the 1970s was predominantly metropolitan, although nonmetropolitan areas also increased. Residential preference surveys show that a majority of 3 Americans want to live in small towns and rural areas. People list clean air and water, good environments for chil­ dren, and freedom from such perceived urban ills as conges­ tion and crime as their reasons for preferring these areas. With increased incomes and leisure, a growing number of people appear to be realizing these preferences. The federal interstate highway system has made non­metropolitan areas more accessible to national markets and improved their industrial and recreational desirability. On a smaller scale, freeways have relaxed the need to locate near jobs and have promoted residential development beyond the official margins of standard metropolitan statistical areas (SMSAs) into adjacent nonmetropolitan areas. Those who prefer a nonmetropolitan residence usually want to locate within commuting distance of central cities. Im­proved transportation, created largely through federal ef­fort, has allowed people to achieve both a nonmetropolitan residence and a metropolitan workplace. Federal housing and taxation policy has also traditional­ly favored new construction at the urban periphery. As inner-city land becomes increasingly expensive and scarce, new construction reaches ever farther out, often crossing legal metropolitan boundaries. Improvements in the federal retirement system or fed­erally induced improvements in private pension plans en­able retired persons to live in places where they can produc­tively use their increased leisure. In northern Michigan, for example, many retired persons have transformed long-time vacation homes into year-round residences and have, thus, stimulated service activity and created regional multiplier effects. Potential increases in the minimum age for receiving Social Security benefits would retard this type of retire­ment migration into nonmetropolitan areas. Federal energy policy favoring greater self-sufficiency and emphasizing coal production has also contributed to the evolution of boom towns. Although rapid in-migration associated with energy exploitation is initially welcomed as a symbol of prosperity and a welcome relief from selective out-migration, its consequences frequently disrupt the so­cial and political balance of the community. At this time, not much is known about the mechanisms that underlie in-migration into nonmetropolitan areas, much less about their policy ramifications. Nonmetropoli­tan growth and in-migration do appear to entail a new set Table 2 Components of Population Change in Regions by Metropolitan Area Status, 1960-1975 (In thousands) Net change Natural increase Net migration Area 1960-1970 1970-1975 1960-1970 1970-1975 1960-1970 1970-1975 Region United States Large metropolitan Other metropolitan Non metropolitan 2,399 1,221 968 211 1,952 285 969 698 2,046 804 750 492 1,456 539 576 341 354 417 218 -281 496 -254 393 357 Northeast 438 79 397 218 41 -139 Large metropolitan 262 -73 236 123 26 -196 Other metropolitan Nonmetropolitan North Central Large metropolitan Other metropolitan Nonmetropolitan South Large metropolitan Other metropolitan Nonmetropolitan West Large metropolitan Other metropolitan Nonmetropolitan 125 51 497 254 201 43 785 347 377 61 679 357 266 56 59 93 217 4 95 118 1,079 260 506 312 578 94 309 175 112 49 567 249 188 130 700 152 312 236 385 168 139 78 63 32 391 171 140 81 554 124 267 163 294 122 106 66 13 2 68 6 13 87 86 195 65 -174 293 189 126 -22 4 61 -175 -167 -45 37 525 136 239 150 284 -28 203 109 Note: Large metropolitan areas are those having 1.5 million inhabitants or more in 1970. Source: U.S. Department of Commerce, Bureau of the Census, "Estimates of the Population of Counties and Metropolitan Areas: July 1, 1974 and 1975," Current Population Reports, Series P-2 5, no. 709, September 1977. TEXAS BUSINESS REVIEW of policy questions. While a rich literature deals with the rural in-migrant's adjustment to urban life, very little is known about the psychological and social problems of mov­ing from metropolitan areas into small communities. Public attitude surveys have been geared primarily to assessing people's willingness to stimulate growth in small communi­ties and to control growth in large metropolitan areas. The emphasis is now shifting to a concern with what people think about aiding declining metropolitan areas and slowing unorderly growth in nonmetropolitan communities. Recommendations of the President's Commission for a National Agenda for the Eighties are potentially very sig­ nificant for population redistribution . both in metropoli­ tan areas and on a regional scale. The commission argues that population decline in metropolitan areas is a reflection of the transformation of our society into a postindustrial era. Large cities have had and will continue to have an ero­ sion in their roles as manufacturing centers. and the com­ m1ss1on believes that they will come to perform largely service and other consumer-oriented functions in the future. This latter role requires smaller concentrations of people, and the commission recommends that the federal government aid metropolitan areas to adjust to their smaller sizes and changed functions rather than help them maintain artificially high populations and manufacturing tasks that they are no longer well suited to undertake efficiently. The commission strongly favors policies that directly aid people rather than the places where they live. Job training and relocation assistance, therefore, would take precedence over area development programs to alleviate problems of excessive out-migration from metropolitan areas. The com­ mission argues that it is better to prepare people for inevit­ able readjustments in the geography of economic activity than it is to stimulate artificially economic activity where they now live. Policy Consequences of Migration Migration affects the regional balance of population and population characteristics, which in turn affects federal, regional. and local policies. Migration and policy can best. then, be regarded as interdependent processes. The most obvious consequence of migration-induced regional shifts in population will be the reapportionment of congressional representation after the 1980 census. The Constitution provides that representatives are apportioned among states according to the population and that each state must have at least one representative. The Mid­ Atlantic and East North Central regions will be major losers in representation in the next Congress. while representation of the South and the West will increase by seventeen seats. To the extent that members of Congress represent the paro­ chial interests of their constituents. balance of power will noticeably shift in the direction of the Sunbelt. Individual states will also redefine congressional dis­ tricts on the basis of the 1980 census. All of the twenty-five districts with the biggest declines in population between 1970 and 1980 have Democratic representatives, and twenty-two of these districts are central-city districts. Among the twenty-five districts with the most rapid growth during the period, fifteen are controlled by Republicans, and all are located in the Sunbelt. The net result of state redistricting will almost certainly be to the disadvantage of the Democrats and central cities and in favor of suburban and nonmetropolitan areas and Republicans. A related issue involves federal programs (such as reve­nue sharing) that use population as one input in funding formulas. Program support may decrease for regions or communities without population gains or population stabil­ity. Declining regions that need aid the most may very well lose federal support, making it more difficult for them to prevent future out-migration. Retirement migration is a factor in both Sunbelt and nonmetropolitan migration, and the changing distribution of the elderly potentially has enormous implications for the regions and communities involved. Older persons affect politics at their destinations by electing representatives who are responsive to their needs. High voter registration and high turnout among elderly persons make them a potent political force. The effect is accentuated by the growing trend for elderly persons to concentrate in retirement com­munities. Sun City, Arizona (in the Phoenix metropolitan area). is an example of a community of elderly people whose political clout is recognized by local politicians and those interested in the political process. In 1977 the popu­lation of Sun City was 43 ,000, a seemingly small propor­tion of the total county population of almost 1.3 million. Virtually the entire population of Sun City, however, is of voting age and. more importantly. falls into age and socio­economic categories in which the propensity to vote is very high. In the county as a whole only around 900,000 per­sons are of voting age , and many of them are young adults and minority members who tend not to vote. The effect of 43.000 spatially concentrated elderly persons is obviously great. Sun City residents play an important role in deter­mining the character of local. state. and national representa­tion and. indirectly, affect the kinds of decisions that are supported by those representatives. Notes !. George Demko. ·'Population Redistribution and \ligration Policy in the L1.S. Crban Context." in Crba11 Derelop111e11t i11 the C.S. and Hungary (Budapest: Publishing House of the Hungarian Academy of Sciences. 1978). 2. Barry S. Rundquist et al.. "The Impact of Defense Cutbacks on Employment and \ligration." in Pop11latio11 Distribution and Polin·, ed. Sara \I. \lazie (\\ ashington, D.C.: Government Printin~ Offi~e. 1972): "The Second War between the States." Business h'e;k, ...\pril 17. 1976. pp. 92-98; and Horace Sutton, "Sunbelt vs. F rostbelt: ...\ Second Civil War0 " Saturday Review. April 15. 1978, pp. 28-37 . 3. James J. Zuiches and Glenn V. Fuguitt. "Residential Preferences: Implications for Population Redistribution in Nonmetropolitan Areas." in Pop11latio11 Distribution and Policy. ed. Sara \1. \lazie: and Glenn V. Fuguitt and James J. Zuiciles. "Residential Prefer­ences and Population Distribution." De111ography 12 (1975): 491-504. NOVEMBER-DECEMBER 198 1 Results of the Professional Baseball Players' Strike of 1981 James B. Dworkin Strikes and lockouts in baseball are not new or unusual. Baseball's first strike occurred in 1912. Referred to as the "Ty Cobb" strike, this first walkout involved all players on the Detroit team. Cobb's teammates struck in sympathy for their star after he was suspended by American League Pres­ident Ban Johnson for charging into the stands and attack­ing a heckling fan. Fortunately , the suspension was lifted after just one game, in which Detroit fielded a team of strikebreakers and lost to Philadelphia by the score of 24-2. Other baseball strikes took place in 1972 and 1980, with a 1976 lockout in between. Strikes were narrowly avoided by last-minute actions on the part of one or both sides in 1946 and, again, in 1980. The baseball strike of 1981 can, there­fore, be thought of as a typical mode of conflict resolution for baseball owners and players. This strike, however, was different from its predecessors in several ways. Just about everyone knew that it was com­ing and knew well in advance, for the issue that precipitated the strike had surfaced as early as January of 1980, eigh­teen months before the strike began. Even with this early warning, the parties could not resolve their differences amicably. A second difference from previous strikes was that the 1981 action was the first midseason walkout. Previous actions either had involved preseason games or had forced the cancellation of games at the start of the championship season. For example, in 1972 the players struck for the first thirteen days of the season and forced the cancellation of eighty-six games. A third important difference was the length of the 1981 strike. During the prime summer months of June, July, and August, major league baseball was not played for fifty-eight days. The strike forced the cancellation of 714 regularly scheduled games. In early August, just when many observ­ers were ready to write off the 1981 season as lost, a settle­ment was reached and the "second season" began with the James B. Dworkin is Visiting Associate Professor ofIndustrial Rela­tions, University ofMinnesota. 268 All-Star game in Cleveland on August 9, 1981. Why did it take so long to resolve this dispute? The issue that precipitated the baseball strike of 1981 was compensation for teams losing free agents. Club owners demanded a professional baseball player to compensate for each free agent lost, while the players' union was content with the compensation clause first negotiated in 1976, which provided for compensation in the form of a single amateur draft choice. The notion of compensation for teams losing free agents is relatively new in baseball. Indeed, from the late 1800s through 1975, free agents did not exist in professional baseball. In a 1975 arbitration decision, however, Peter Seitz ruled that baseball players could only be reserved to their teams for one additional season after their contracts had expired and not into perpetuity as the club owners had argued. This arbitration loss and subsequent legal setbacks forced the club owners to agree to a revamped six-year free agent system in the 197 6 collective bargaining contract. In that agreement the two sides agreed to the idea of compensation in principle. Teams losing free agents were to be awarded one amateur draft choice from the acquiring club. These amateur draft picks, however, were rather meager substitutes for experienced players. In fact, only one of these draft choices picked in the past five years as compensation for a lost free agent is currently on a major league roster. The experience with the new free agent system during the years 1977 to 198 1 convinced the owners that a more stringent compensation formula was necessary in order to ensure teams against losses of their better players. For their part, the players and their union were extremely pleased with the increased mobility, higher salaries, and greater bar­gaining power that had come out of the 1976 arrangement and were wary of any attempts to change this system. The Bargaining Bargaining over a revised compensation formula for teams losing free agents began in 1979. The free agent sys- TEXAS BUSINESS REVIEW tern in the 1976 basic agreement was subject to renegotia­tion when that contract t>xpired on December 31, 1979. When th<> renegotiation process began. the players wanted to keep the sam<> compensation formula with the number of years required to become a free agent being reduced from six to four. The owners wanted a professional player as compensation for a team that had lost a premier free agent, in addition to the amateur draft choice agreed to in 1976. In their plan a team signing a premier free agent would freeze fifteen to eighteen players on its roster, and the player's former club would then be allowed to choose one of the remaining roster players as compensation for refusing to provide any financial data to back up their pub­lic claims of financial problems caused by the free agent system negotiated in 1976. William Lubbers, NLRB general counsel, seemed to agree with the players on the issue of the unfair labor practice. Both sides agreed to postpone temporarily the strike dead­line because Judge Henry Werker was to decide on the NLRB's motion for an injunction to halt the strike pending unfair labor practice proceedings. The owners strongly op­posed the injunction, which, if granted, would have post­poned both the owners' implementation of their free agent compensation plan and the players' right to strike for yet The agreement between the ott'ners and the players provided for additional compensation of a professional ballplayer for teams losing ranking free agents. their loss. Heated bargaining over this issue led to a one­week strike by players during the 1980 exhibition season. Both sides agreed to return to the bargaining table to try to resolve the issue but set a new strike deadlint> of May 22. 1980. As the new deadline approached. all issues except free agent compensation had been resolved, yet a strike seemed almost certain over this single issue. The parties managed , however, to save the season by extending the 1976 free agency provisions for one additional season and by estab­lishing a joint study committee to review the compensation issue. The 1980 basic agreement was explicit on how this con­flict over free agent compensation was to be handled. If the study committee could not come up with a compromise proposal acceptable to both sides. the owners were free to implement their own compensation proposal. The players had three choices if the owners adopted this strategy: they could accept the owners' plan, they could live under the owners' plan for one season and reserve the right to strike after that experimental period had expired. or they could choose immediately to reopen negotiations owr the compensation issue and set a strike deadline for no later than June l, 1981. The players decided to pursue the last of these three options. In the interim·. both sides prepared for a strike. Player representatives warned their teammates to save their money. and the owners purchased strike insurance that guaranteed each team about SS0.000 for each game can­celled. While several proposals were discussed in the early part of 1981. the parties never approached a settlement on the compensation issue. Few meetings were held, and as the strike deadline-May 29, 1981-approached, the players initiated unfair labor practice proceedings with the National Labor Relations Board (NLRB). They claimed the owners had failed to bargain in good faith over compensation by another year. On June 10, 1981, Judge Werker denied the request for an injunction that the players and the NLRB had sought. thus paving the way for the strike to begin. The judge believed that there was no evidence to show that the owners had committed an unfair labor practice. The only alternati\es left to the players were to accept the owners' compensation plan or to begin their strike action within forty-eight hours of the judge's decision. The strike began on June 12 with neither side giving any indications that it was willing to make further concessions. A rather lengthy strike was anticipated given the polarized positions of the parties and the fact that the owners had built up their strike insurance funds. On the thirteenth day of the strike. the 153-date deductible on the owners' SSO million in strike insurance ran out and each team began collecting SS0.000 for each cancelled game. (This strike insurance was to last through August 8, 1981.) The um­pires' association filed suit to try to prevent payment of the strike insurance. but their efforts were of no avail. With no apparent progress in the negotiations, the owners met on July 9 to discuss the status of the talks. At about the same time, several owners and Bowie Kuhn, the commissioner oi baseball, were testifying in NLRB hearings on the players' charge of unfair labor practices. As the strike entered its fifth week. federal mediator Kenneth Moffett proposed a settlement of the compensation issue. The players announced acceptance of the mediator's pro­posal while Raymond Grebey, chief negotiator for the owners and head of their Player Relations Committee. de­nounced the proposal as being unfair to baseball. Grebey also accused Marvin Miller, executive director of the Major League Baseball Players Association. of being the sourct> of Moffett's proposal. a charge that was vehemently denied by both Miller and .Moffett. On July 15 Secretary of Labor Raymond Donovan en­ tered the stalled negotiations to impress both sides with the ~OVEMBER-DECEMBER 1981 .::69 importance of reaching a speedy resolution to the compen­sation issue that had already caused a strike of thirty-four days. A few days later Donovan summoned the parties to Washington for further talks in the hope that this new en­vironment would foster a compromise. The club owners met for a second time in New York on July 28 to be briefed by Grebey on the progress of the negotiations. At this meeting the owners apparently charged Grebey with making one last-ditch effort to save the season. At the same time in Chicago, Miller met with the twenty-six player representatives to discuss recent bargaining events. Several players had been critical of the union, and this meeting was geared to quiet their concerns. A settlement finally was reached and announced by Moffett in the early morning of July 31 ; marathon talks between Miller and Grebey had proven successful. The season resumed on August 9, the day after the owners' strike insurance ended. The Outcome The agreement reached between the Major League Base­ball Players Association and the Major League Clubs-Player Relations Committee provided for additional compensation of a professional baseball player (in addition to the amateur draft choice) for teams losing ranking free agents, those in the top 30 percent of their position groups. There are five position groups: catchers; starting pitchers; relief pitchers; first basemen, outfielders, and designated hitters; and short­stops, second basemen, and third basemen. Ranking players are divided into two types: type A includes those in the top 20 percent of all players in the league in a position group and type B includes those that rank between the twentieth and thirtieth percentile. Player standings within these groupings are determined through a rather complex formula that takes into account as many as seven performance sta­tistics over the previous two-year period. The compensation to a team losing a type A player is an amateur draft choice plus one selection from a pool of pro­ fessional players contributed to by all clubs. Depending on whether they have signed a type A free agent or not, clubs arc allowed to protect either twenty-four or twenty-six players on their roster; the remaining players go into the pool and may be selected as compensation. A maximum of eight type A free agents will require professional compensa­ tion in 1981; in 1982 and 1983 the number will increase to nine. The team losing a type A free agent can then choose one player from the pool. Since the chosen player is not necessarily from the roster of the acquiring club, the play­ ers' concern that free agent compensation not be punitive has been resolved. The compensation for type B free agents is two amateur draft choices. Compensation for nonranking free agents. is one amateur draft choice, unless the player is selected by fewer than four teams in the reentry draft. In the latter case no compensation will be required. The teams also agreed to set up an industry fund from which to make payments to teams losing players from the pool. The agreement specified that a one-time payment of $150,000 be made to teams losing a player from the pool. As many as five teams are allowed to stay out of the free agent bidding for a period of three years. These excluded clubs will not contribute to the player pool but could conceivably lose players through free agency. While compensation for teams losing free agents was the issue that precipitated the strike, several other issues had to be dealt with before the strike could end. The most crucial of these disputed issues were resolved by crediting players with major league service time for the period of the strike, thus enabling several players to become free agents at the conclusion of the 1981 season, and extending the basic agreement for a year, making the new expiration date De­cember 31 , 1984. In addition the players' organization dropped all pending NLRB charges against the owners. The minimum player's salary for 1984 was set at $40,000, and the owners were allowed to adopt a split season for the 1981 season only. The All-Star game was played on August 9, 1981, after a ten-day training season to allow players to get back into shape. The regular season resumed on August 10. The Effects of the Strike Since the early days of baseball, club owners had been in the enviable positions of having market monopolies (one team in each league for each city), antitrust law exemp­tion, and market monopsony powers, in that each club had the exclusive right to bargain with any player on its roster. Baseball players, unlike other employees in the United States, were not free .to choose the employer with whom they could strike the best bargain. Bargaining power fa­vored the owners and thus allowed them to limit player mobility and hold salaries to levels in some cases far below what a player's services would be worth to a particular team . Baseball players attempted to revolt against this situa­tion on several occasions, but each attempt was of no avail until they hired Marvin Miller. Under Miller's leadership, the players have been successful in partially rectifying the unfavorable position they had found themselves in for nearly a hundred years. While the players' gains are too numerous to discuss here, one of the most significant was the free agent system implemented in the 1976 basic agreement, which granted the players a limited right to change employers at certain specific times in their careers. The players were careful not to weaken this system by agreeing to a stringent compensa­tion formula that would have neutralized their newly won powers. Instead, the compensation for teams losing free agents was an amateur draft choice. All one needs to do to realize the importance of this compensation issue is to com­pare player mobility in baseball with that in football, bas­ketball, and hockey. In each of these other sports, a nego­tiated free agent system has essentially been nullified either by an extremely harsh compensation penalty for teams signing free agents or by the uncertainty of not knowing what compensation award league officials will make should the two involved teams fail to resolve the matter bilaterally. TEXAS BUSINESS REVIEW For instance. in football. where compensation can be as high as two first-round draft choices. player mobility through the free agent system is Yirtua!ly nonexistent. Be­fore the end of the 1980-1981 basketball season. the uncer­tainty that surrounded Commissioner Larry O'Brien's compensation decisions kd most teams to refrain from actiw bidding in the free agent market. After the 1980­198 1 season. basketball switched to a much more liberal first-refusal procedure. The limited free agent system. howeYer. has worked for the professional baseball players. T earns haYe not been con­ cerned with punitiYe compensation. and seYeral hundred ballplayers haH~ S\\itched teams as salaries haYe skyrocket­ ed. A player does not need to be.:ome a free agent to bene­ fit from this. In many cases. the mere threat of free agency and the loss of a star player will spur a team into offering long-term contracts with high salaries. The added bargaining power and mobility of the base ball players has iorced the club owners to share more of their wealth with the players. a situation with which the owners were un.:omfortable. to say the least. As salaries escalated and as more and more players switched teams. the owners decided to try to fight back in the 1980 negotiations. While their pu bli.: stakments indi­ cated that their new compensation proposal was intended to restore a competitiYe balance to baseball. the real intent was to recapture some of their former bargaining power oYer the players. Only in the past five years haYe player salaries begun to approach what economists refer to as their marginal rer c>­ 1111e prod11crs. their contributions to their teams. The own­ ers' attempt to stiffen the free agent .:ompensation formula can. thus, be vie\\·ed as a direct attempt to regain control OYer their player assets. The issue of free agent compensation may not sound crucial but. in fact. may be the most important issue de­ cided by the parties in recent years. The players have en­ joyed their newly won freedoms, espedally the bargaining po\1·er, mobility. and higher salaries brought through free agency. Any attempt by the owners to .:urtail these powers would most certainly be met with the utmost resistance. The owners belieYed they had been on a losing streak to :\larvin ~liller for a long time and wanted to rewrse the trend. Their strategy for doing so was to reYamp the com­ pensation formula to dampen appetites for signing free agents by requiring harsh penalties. In the final settlement. neither side can really be declared the \1·inner. The O\\·ners did win profession:il compensation in some cases, yet the players avoided any direct punitive connotations through the pool concept. The players were neYer too worried about compensation for star players anyway. To get a ranking player. a team should be willing to pay the price and also lose the twenty-fifth player on its roster. Without professional compensation for type B and nonranking players. these players can still mon rather freely from team to team. The strike cost many players money. yet it also taught them a lesson in union solidarity. The strike was also costly to the clubs. e\-en taking into account the insurance bene­fits they received. Both sides ran the risk of offending the fans. who ultimately determine the financial position of both clubs and players. !-.lost fans were uninformed about the major issue that precipitated this strike and were only interested in seeing the season resume. The protracted walkout, coupled with daily newspaper reports of Marvin /'.filler. Raymond Gre­bey. and :\LRB hearings instead of box scores and game analyses. must have dampened the average fan's enthusiasm for the game. In fact. attendance figures tend to bear out this dampening of enthusiasm. Average per game atten­dance for the prestrike period in 1981 was 20,865 in the American League and 21.015 in the National League. Post­strike a\·erage pa game attendance declined to 17,7 5 1 and 19.034 in the two leagues. For the entire 1981 season, a\·erage per game attendance was 19 ,366 in the American League and 20.070 in the National League. These figures are lower than those for the 1980 season, when average per game attendan.:e was 20.269 in the American League and 22 ,83 7 in the :\ational League. By next year. with labor peace assured for quite some time. base ball will probably equal its record-breaking popularity of recent times. Any major fan boycott of the game because of the 1981 strike is unlikely: in fact. free agency has probably been good for baseball in many ways. The interest ..:reared in the off-season by the free agent market whets the appetite for the opening of the season. Trying to figure out who will sign where and for how much has be..:ome as much a part of the average fan's repertoire as batting averages. home runs. and the like. League figure s, in fact. do show a rapid gain in game attendance since the inception of free agency. \\'hile free agency may not have caused higher attendance (another plausible explanation might be that people are increasing their leisure activities and expenditures in general). it certainly must rank high among the leading contenders as explanatory factors. The results of the baseball strike will undoubtedly in­fluence the negotiations scheduled to follow the end of the 1981 foot\:1311 season. The parties are facing issues similar to the one that .:aused the baseball strike. On the one hand. football owners seem to be united in their stand to main­tain stri.:t -:ompensation for teams losing free agents, and in this sport su-:h compensation is viewed as directly punitive. The foot ball players. on the other hand. have taken note of the great gains made in base ball and do seem to be solidly behind their union for the first time. If the two sides in football haw learned anything from the baseball strike. it may be that if you ..:an hold out long enough you can usual­ly get the other side to compromise. The base ball strike of 1981 was a .:lassie confrontation between labor and management OYer a fundamental issue of the division of power between two parties. That this issue and strike re..:eived such widespread coverage and in­terest is just another indication of the important role that baseball plays in ..\merican life. If another such strike were to occur. the fan and both sides can take solace in the fa..:t that the parties could again work to solve their probkms through collectiw bargaining. Out of such conflict. an a.:­ceptable compromise is usually forthcoming. :\OVD!BER-DECDIBER 1981 The Dynamics of the Retail Geography of Texas J. Dennis Lord Retail trade contributes to a region's economy in a variety of ways. In the private sector, retailing provides in­come to store proprietors and employees, and their salaries filter through the area's economy. Within the public sector, retail trade generates property tax and sales tax revenues for local governments. Thus, a community suffers an eco­nomic and fiscal Joss when residents make retail purchases in other communities. While a particular area may have both an inflow and an outflow of retail dollars, the critical issue is the balance between inflow and outflow. The Retail Leakage Phenomenon Making retail purchases outside the local community is known as outshopping or retail leakage. Several studies have investigated the causes of outshopping as well as the type of consumers who do this most frequently .1 Since the most important reason for outshopping is the desire for a greater selection of merchandise, smaller communities relatively close to larger towns or cities are most vulnerable to the loss of retail dollars. Thus, the geography of town size and spacing should be an important factor in retail leakage . Development of a Retail Leakage Index In the present study, net inflow and outflow counties were identified through an index measure based on the notion that the income of a county's residents should be a good indicator of what the actual retail sales in that county would be if the county were a closed retail trade system (that is, if there were no retail trade flows into or out of the county). Even if a county were not a closed system but had equal inflow and outflow, the income of county residents would also be a good indicator of county retail sales. Retail sales of each Texas county were computed as a percentage of the total effective buying income of its J. Dennis Lord is Associate Professor of Geography, University of North Carolina at Charlotte. residents. Data on retail sales and effective buying income were for 1979.2 Variation in this percentage or ratio in­dicates the net inflow or outflow of retail dollars. The ratio of retail sales to the county's effective buying income was adjusted for the per capita income level of the county's residents.3 Since the short-run consumption function tends to be nonlinear, retail sales decline as a percentage of income when the per capita income level increases. The retail leakage index is, then, the difference between the actual and expected ratio of retail sales to effective buying income. The leakage index values are the deviation, in the number of percentage points, between actual retail sales as a percentage of effective buying income and the expected sales as a percentage of effective buying income. Counties with positive values have a net inflow of retail dollars, while those with negative values have a net outflow. Since the index expresses the difference between the actual and expected ratio of retail sales to effective buying income, it is an indicator of the relative magnitude of the net inflow or outflow and not the absolute dollar volume. Retail Leakage Patterns of Texas Counties One would expect counties with large urban centers to have retail trade hinterlands encompassing several surround­ing counties. Retail purchases made by visitors and tourists should also cause these counties to have a significant net inflow of retail trade. Of the twenty-seven Texas counties with metropolitan cores, twenty-one had values greater than+. l 0 (see table l ). Only Bell County, of the twenty-seven, had a negative retail leakage index value. Two types of counties had very large positive values on the leakage index, thus indicating that the inflow of retail dollars was relatively large in compari­son to the retail expenditure capacity of county residents. One type included isolated metropolitan centers surround­ed by counties with predominantly small towns or rural populations. These larger centers attract residents of the hinterland because of the size and variety of their retail facilities. Examples include such counties as Potter (Arna- TEXAS BUSINESS REVIEW rillo), Gregg (Longview). Victoria (Victoria), Ector (Odes­sa), Smith (Tyler). Lubbock (Lubbock). and Tom Green (San Angelo). The regional retail trade roie of Amarillo and Potter County was especially obvious in that retail sales as a percentage of effective buying income was some forty-six percentage points higher than would be expected in a closed system. In fact. retail sales were 97 percent as large as the effective buying income of Potter County resi­dents. A second group of metropolitan core counties not only attracted consumer dollars from adjacent counties but also drew inflows of dollars from Mexico. These counties in­cluded Webb (Laredo). Hidalgo (McAllen-Pharr-Edinburg), and Cameron (Brownsville-Harlingen-San Benito). Webb had the largest index value of any metropolitan county as well as the fourth largest value among the 254 Texas counties. Retail sales were fifty-one percentage points higher than would be expected from the purchasing power of Webb County residents, largely as a consequence of the heavy traffic of Mexican nationals who cross the border to purchase retail goods in Laredo. Somewhat surprising was the relatively small positive index value for Bexar County (San Antonio). The large military population in the county probably does most of its retail spending at facilities on the military installations. which are excluded from the retail trade statistics. Although the index values for the extremely large metro­politan counties of Harris. Dallas, and Tarrant were not as large as those for some other metropolitan core counties. they nevertheless indicate a significant inflow. If the retail Table 1 Retail Leakage Index Values for Metropolitan Core Counties Retail leakage Metropolitan area Core county index• Abilene Taylor +.1844 Amarillo Potter +.4665 Austin Travis +.1295 Beaumont-Port Arthur-Orange Jefferson +.1453 Brownsville-Harlingen-San Benito Cameron +.1300 Bryan-College Station Brazos +.0567 Corpus Christi Nueces +.l 545 Dallas-Fort Worth Dallas +.1439 Tarrant +.1282 El Paso El Paso +.0528 Galveston-Texas City Galveston +.0323 Houston Harris +.1653 Killeen-Temple Bell -.0139 Laredo Webb + .51 14 Longview-Marshall Gregg +.3894 Lubbock Lubbock +.2070 McAllen-Pharr-Edinburg Hidalgo +.2524 Midland Midland +.1879 Odessa Ector +.2748 San Angelo Tom Green +.1956 San Antonio Bexar +.0076 Sherman-Denison Grayson +.0667 Texarkana Bowie + .1 548 Tyler Smith +.2085 Victoria Victoria +.3050 Waco McLennan +.1436 Wichita Falls Wichita +.1661 *Indicates percentage point deviation of actual sales from that ex­pected in a closed system. The value +.1844 is to be interpreted as an 18.44 percentage points deviation, for example. NOVEMBER-DECEMBER 1981 inflows were expressed in absolute dollars, the figures would no doubt exceed those of most other Texas counties. The leakage index is most sensitive for counties with small populations and total income where the inflow of retail dollars can have a greater impact on the ratio of retail sales to effective buying income. Since the metropolitan core counties exhibit a net in­flow of retail trade. one would expect many of the adjacent A community sujjers economic and fiscal losses u:hen residents make retail purchases in other communities. counties to exhibit a net outflow with a negative leakage index value. This pattern was found to be especially true of those counties surrounding such metropolitan areas as Austin. San Antonio, Amarillo, Abilene, Tyler, and Long­view. In the case of Austin (Travis County), all seven of the adjacent counties had negative index values and prob­ably had a loss of sales to Austin (see table 2). Seven of the nine counties adjacent to Potter County (Amarillo) also had negative index values. While the above pattern was repeated for many other metropolitan and adjacent counties. some adjacent counties also had index values that suggested a net inflow. An example is Hale County, adjacent to Lubbock. Its retail sales as a percentage of effective buying income was fourteen percentage points Table 2 Indexes of Counties Adjacent to Selected Inflow Counties Inflow county Adjacent counties Retail leakage index Travis {Austin) Williamson -.0931 Lee -.1479 Bastrop -.1270 Caldwell -.0888 Hays -.0178 Blanco -.0588 Burnet -.0566 Potter {Amarillo) Carson -.1551 Armstrong -.3526 Swisher -.1425 Castro -.0023 Deaf Smith + .0491 Oldham -.2371 Moore +.0956 Hutchison -.0683 Taylor {Abilene) Hartley Jones -.2879 -.0756 Shackelford +.0074 Callahan -.2315 Coleman -.1110 Runnels -.0786 Nolan +.2710 Fisher -.2468 ~73 higher than expected. Although this county might lose some dollars to Lubbock, it may replace this loss with inflow from less populated counties in the area. Four categories of counties have net inflows. The first group is an unusual one containing Concho and Waller counties. These two counties had the largest positive index values of all Texas counties, but an unusually large per­centage of total retail sales was accounted for by auto­mobile dealers. Approximately 23 percent of Texas retail sales were automotive; in both Concho and Waller counties, automobile sales accounted for approximately 65 percent of total retail trade. Concho County has such a small popu­lation that a single automobile dealer could inflate the retail sales of the county relative to its effective buying income. A second group of counties with net inflows of retail trade is made up of the metropolitan core counties dis­cussed earlier. A third group includes nonmetropolitan counties that are relatively isolated geographically and apparently act as significant central places for a fairly large hinterland. Examples of such counties were Dallam, Sutton, Polk, Titus, and Hemphill. The last group con­sists of counties located adjacent to a metropolitan core county. Examples were Martin, Hale, Terry, Coke, and Liberty counties. Some of the major losers in the leakage process not only were close to large urban centers, but also did not have a sufficient population base to provide the threshold re­quirements for some high-order goods (see table 3). Implications In sixty-eight counties retail sales as a percentage of effective buying income was at least ten percentage points Table 3 Counties with Net Outflow in Retail Trade County Retail leakage index Borden -.5659 McMullen -.5317 San Jacinto -.4121 Throckmorton -.4024 Jeff Davis -.3967 Menard -.3943 Hudspeth -.3854 Kenedy -.3773 Glasscock -.3757 Armstrong -.3526 Edwards -.3323 Zapata -.3286 Schleicher -.3188 Newton -.3180 Coryell -.3056 Bandera -.3025 Kent -.2961 Duval -.2936 Upton -.2883 Hartley -.2879 Clay -.2862 Lynn -.2843 Zavala -.2806 Crosby -.2697 Roberts -.2696 higher than would be expected in a closed system. In thirty­one counties the deviation was more than twenty percent­age points higher than expected. Some sixty-nine counties had ratios that were more than ten percentage points lower than expected. For thirty-six counties the negative devia­tion was more than twenty percentage points. What absolute dollar volume levels of net sales inflow or outflow are involved in these leakage patterns? Further­more, what do these volumes of inflows or outflows trans­late into in terms of tax revenue gains or losses to local governments? Two counties, one with a net inflow and one with a net outflow, were selected to demonstrate the eco­nomic and fiscal effect of the flows. Lubbock County (Lubbock) is a metropolitan core county with a large net inflow. Actual retail sales were $1 ,134,430,000 or 70.6 percent of the county's effective buying income. One would have expected sales to be $801,776,510 or 49 .9 percent of the county's effective buying income if the county were a closed system or had a balanced net inflow/outflow situation. The net inflow was estimated to be $332,654,000. Certainly this retail volume must support a commercial tax base that is beneficial to the county. One county clearly in the retail shadow of Lubbock is Lynn. Actual retail sales in Lynn County were $16,249,000 or 24.7 percent of its effective buying income. The expected sales figure was $34,936,441 or 53.1 percent of the county's effective buying income. The estimated net outflow was $18,687 ,441. Given the relatively small popu­lation and economic base of Lynn County, this amount of retail sales loss translates into significant losses in property taxes and potential sales tax revenues. This example illustrates the extent to which a small community's dollars leak out to nearby larger communities, which offer a greater variety of retail services. Many small communities simply do not have the population or buying power to support certain retail facilities, and consumers are forced to go elsewhere to purchase goods. These com­munities need to continue searching for ways to keep local dollars home, but the task remains quite difficult. Notes l. See Danny N. Bellinger and Elizabeth C. Hirschman, "Geographic Generalizability: An Experiment with Outshopper Models," Review of Business and Economic Research 13 (Spring 1979): 70-79; William R. Darden, "Intermarket Patronage: A Psychographic Study of Consumer Outshoppers," Journal of Marketing 36 (October 1972): 50-54; John Hiltner and Bruce W. Smith, "Outshopping to a Nearby Metropolitan Center," Proceedings of the Association of American Geographers 8 (April 1976): 92-95; N. G. Papadopoulas, "Consumer Outshopping Research: Review and Extension," Journal of Retailing 56 (Winter 1980): 41-58. 2. "Survey of Buying Power," Sales and Management Magazine, July 28, 1980. 3. The ratio of actual retail sales to effective buying income of the county was regressed against per capita effective buying income. The regression coefficient was negative and statistically significant, thus supporting the notion of a nonproportional short-run consump­tion function. The regression equation is used to obtain an expected ratio of retail sales to effective buying income. The retail leakage index is the difference between the actual and expected ratio. TEXAS BUSINESS REVIEW Airline Deregulation and Potential Urban Noise Problems _.\.irline deregulation has significantly increased the num­ber of airline routes and the number of flights to and from airports serving large urban areas. especially in such growing areas as the Sunbelt. Where the increased traffic is near residential neighborhoods. the emironmental effect of air­craft noise presents new problems for local governments and airport proprietors. As the federal go\·ernment has reduced its control of route entry. noise abatement has become more of a concern for municipalities. Develop­ments in the Dallas-Fort Worth area since enactment of the Airline Deregulation Act of 1978 illustrate the kind of problem that many cities may soon face. Love Field and the Dallas-Fort Worth Regional Airport Love Field is located in a densely populated area about seven miles from the downtown Dallas business district. By the early 1960s. the use of Love Field as a hub for trunk carriers in interstate air transportation had developed into a major controversy. partly because of its inner-city loca­tion. In addition, Fort Worth, about thirty miles west of Dallas. competed for air traffic and federal airport funds. Fort Worth interests complained that most of the major routes operated through Love Field and that Fort Worth passengers often had to travel to Dallas for the most desir­able flights. The Civil Aeronautics Board (CAB) began investigating airports in the region in 196 ~. and two years later ordered that airline service to Dallas and Fort Worth should be through a single regional airport. The order stipu­lated that if the cities were unable to agree on the location fo r the regional airport, the board would choose the site. 1 The CAB, an independent regulatory commission, controls entry into air service markets through issuing John P. Bradley is Associate Professor of Political Science . .\"ortlz Texas State C11i1·ersitL ~OVDIBER-DECEMBER 1981 John P. Bradley certificates for each route and approves proposed fares. Its control over routes may include designating particular air­ports. The Federal Aviation Administration (FAA) is responsible for safety at airports and in the air. Although the C.\B issued the order for a new regional airport. the FAA "·as vitally interested in the matter. "iajeeb E. Halaby, FAA administrator during the early 1 960s. had urged the designation of a single regional airport as part of the presi­dent"s policy for a modern national air transportation sys­tem. which intended to concentrate air carrier operations in regional airports separate from general aviation airports. l\oise would. thus, be reduced by having large commercial jets Oy over less-populated areas. and safety would be enhanced by the separation of commercial from general aviation aircraft. The Dallas-Fort Worth Regional Airport (D/FW) \\·as to become a symbol of progress towards the national air transportation system. 2 Dallas and Fort Worth ag1eed on a location for a regional airport midway between the two cities and, in 1968, adopted a Concurrent Bond Ordinance to implement its construction. The ordinance included a provision for phasing out certificated air carrier service at Love Field in Dallas and \leacham Field in Fort Worth. After the regional airport opened in 1974. all interstate carriers operating from Love Field transferred to the new facility. but Southwest ..\irlines, an intrastate carrier certificated by the Texas Aeronautics Commission rather than the CAB , won court decisions allowing it to operate at Love Field. The Effect of Airline Deregulation on the Dallas-Fort Worth Area One of the top priorities of the administration of Presi­dent Jimmy Carter was deregulating the airline industry. Congressional committees had considered such legislation before Carter's election, and there was a general consensus. ~75 at least among economists, that greater efficiency and lower fares would result from less economic regulation. Southwest Airlines, with its low fares unregulated by the CAB, was cited as evidence of the advantages that would come with deregulation.3 The Airline Deregulation Act, passed in October 1978, provided for gradual deregulation by the CAB. The law included an amendment, promoted in the House by Majori­ty Leader Jim Wright of Fort Worth, that was designed to prevent the CAB from certificating interstate service from Love Field or Meacham Field. One section of the bill called on the CAB to foster service at satellite airports when such service would be consistent with the plans of local authorities.4 Nevertheless, the CAB subsequently The CAB decision to permit interstate flights at Love Field raises further questions about urban noise levels. authorized an interstate route from Love Field, notwith­standing opposition from Dallas, Fort Worth, and the Regional Airport Board. The basis for the restoration of interstate airline service at Love Field was the section of the act known as the Automatic Market Entry Program , which was designed to promote competition. The program is open not only to CAB-certificated carriers, but also to intrastate carriers operating more than 100 million available seat-miles in the preceding calendar year. Eligible carriers, which included Southwest Airlines, could apply during the first thirty days of calendar years 1979, 1980, and 1981 for a certificate for nonstop service between any one pair of points in inter­state or overseas air transportation. On January 25, 1979, Southwest Airlines applied under this section of the law for a route from Love Field to New Orleans. On March 1, the CAB granted a number of certifi­cates but delayed action on Southwest's application be­cause of controversy about using Love Field for interstate flights. After inviting all persons opposing Southwest's application to file objections, the board assigned the case to an administrative law judge for hearings and an initial decision. The law judge concluded that the statutory provi­sion concerning service at satellite airports did not prohibit an interstate flight from Love Field. Other objections to Southwest's application came from residents of areas near Love Field who were concerned about the adverse effects on the environment of additional flights. In addition, the Department of Transportation and the FAA criticized the decision of the CAB's Bureau of Domestic Aviation that there would be no major environ­mental effect from Southwest's proposed six daily round trips because the bureau had not considered future noise and other environmental consequences. The judge agreed that the cumulative effect should be considered and also noted that the Council of Environmental Quality had recently issued regulations concerning the need for en­vironmental impact statements that included consideration of whether the effects were likely to be highly contro­versial. He noted that there was bitter opposition to inter­state flights from many residents of neighborhoods between downtown Dallas and Love Field and recommended that a temporary certificate be granted but that the case remain open for further proceedings on the environmental issue. Notwithstanding this recommendation, the CAB finally held that awarding automatic market entry certificates is virtually a ministerial act. The board stated that Congress mandated that automatic market entry applications be gra nted and that, therefore, the action did not come under the terms of the National Environmental Policy Act.5 With one member dissenting, the CAB granted Southwest's application on September 28, 1979. On the same day, for the first time in several years a scheduled interstate flight of a large commercial jet took off from Love Field , this one bound for New Orleans. The dissenter from the CAB decision noted that the board had an obligation to be concerned with persons and property on the ground and called it " mere sophistry" to argue that the board lacked the power to deny an automatic market entry award. Following the decision in the New Orleans case, Con­gressman Jim Wright of Fort Worth tried to block inter­state air traffic to Love Field by amending a bill pending in Congress to prohibit interstate operations at satellite airports within twenty miles of major regional airports when the operators of both airports determined that the satellite airports should be closed to interstate service, notwithstanding any automatic market entry provision of the Airline Deregulation Act. Wright's remarks made it clear that the amendment was necessary because of the recent "unfortunate ruling" by the CAB and that the amendment declared "that Congress does not intend to authorize passenger commercial traffic in interstate com­merce to come into Love Field, Texas. " 6 Although the Wright amendment was passed by the House of Representatives without opposition, some sena­tors (including Senator Russell Long of Louisiana, who favored the Love Field-New Orleans route) opposed it. As finally approved in February 1980, the amendment pro­hibited commercial passenger service between Love Field and one or more points outside of Texas (other than a limited number of charter flights each month and com­muter airline service) with two exceptions: an airline pro­viding service to a point outside of Texas on November 1, 1 979, could continue to provide that service, and flights between Love Field and one or more points within the states of Louisiana, Arkansas, Oklahoma, and New Mexico could be provided by an air carrier that did not provide through service or ticketing with another carrier to any point beyond those states. Southwest Airlines does not issue tickets or transfer baggage for other airlines, a prac- TEXAS BUSINESS REVIEW tice (known as interlining) that most airlines perform. Some interpretations of the Love Field amendment held that the major D/FW carriers would not be eligible to use Love Field because of the interlining prohibition. but Texas International Airlines. a D/FW carrier. filed notice on July 30. 1980. with the CAB of its intent to inaugurate inter­state service at Love Field. Southwest Airlines ~pposed the airport notice on the grounds that Texas International participated in interlining. but in August I980 the CAB approved Texas International's airport notice and con­cluded that the interlining restrictions in the Love Field amendment apply only to a carrier's Love Field service and not to service elsewhere on a carrier's system. 7 Texas International began some service from Love Field in Sep­tember 1980 but discontinued those flights in early 1981 in favor of new route authority from D/FW. :'\evertheless. Texas International or other D/FW carriers could in the future transfer some of their intrastate or interstate service back to Love Field. an action that would directly counter the agreements and understandings established when D/FW was planned . Furthermore. Muse Air, a new low-fare airline. planned to begin twenty-eight daily flights in July 1981 between Love Field and Houston's Hobby Airport. The CAB granted a certificate to Muse A.ir in January 1981 to serve a number of cities in Texas and in other states. and the airline intends to inaugurate routes to additional cities if the Dallas­Houston route is successful. Meanwhile. as a consequence of the Love Field amendment. Southwest Airlines during 1980 expanded its interstate service into Oklahoma and New Mexico. The Outlook for the Future As of the summer of 1981. prospects are for an increas­ ing volume of commercial jet traffic at Love Field unless the owner of that airport-the city of Dallas-places restric­ tions on the types of aircraft or hours of flight operations. The level of neighborhood complaints has increased with the level of aircraft noise since interstate service began. The Love Field Citizens· Action Committee has pushed for noise abatement procedures, including a ban on night flights . The city has hired a consulting firm to study the noise problem and possible noise control programs. with a report due in November 1981. While residents of areas near Love Field are not likely to take further action until after the consultant's report, increased operations at D / FW are affecting residents of Irving, located between Dallas and the regional airport. A diagonal runway. originally designed to handle only 2 per­ cent of takeoffs and landings. points southeastward from the airport towards Irving. In the past, planes taking off from that runway had been routed east to minimize noise problems in residential areas of the suburban city. This eastward route. however. conflicts with flights from Love Field, so the FAA began sending planes south from the diagonal runway over the populated areas. The city of Irving and residents of the city have filed a lawsuit in NOVEMBER-DECEMBER 1981 federal court to halt the new flight path. The noise problem has, thus. spread from Love Field to areas near the regional airport. which was built in part to avoid such problems. The problem at Irving would have been less serious had the CAB not authorized interstate flights at Love Field, for then there would not have been as great a potential for con­flict between the D/FW and Love Field flight patterns. If a majority of the CAB had concurred with the admin­istrative law judge about the need for an environmental impact assessment. the situation today in Dallas and Irving would probably be quite different. At least there would have been a delay in the introduction of legislation that specifically authorized interstate flights. The proposed new daily flights of Muse Air alone. not including the additional interstate routes of Southwest Airlines. are greater than the number of new operations that would have been necessary in 1979 to trigger further environmental study.8 The law judge was apparently correct in his belief that the six pro­posed daily flights in the New Orleans case should not have been considered alone but rather in their possible cumula­tive effect. The federal government has, in the process of reducing its enforcement role, forced upon local govern ments an emironmental problem that they themselves would not have allO\\ed to develop. Dallas consistently opposed inter­state service from Love Field, but the CAB and Congress went against the official position of the city government. .-\s a consequence. the city is faced with the noise issue. The unanticipated consequence of airline deregulation may be that municipalities will become increasingly involved in policy making concerning the environmental effects of air transportation. Notes I. See LS. Ci\il Aeronautics Board. Sout/11\'esf Airlines Automatic .\larker Entry fnrestigation. Docket 34582. Initial Decision of the A.dministratiw La'' Judge. June 28. 1979. pp. 49-50. 2. See Haiab,·'s article on the editorial page of The Dallas .Uoming .\'e11·s. ~o\·ember 28. 1979. 3. See. for example. Theodore E. Keeler. "Domestic Trunk Airline Regulation: . .\n Economic Evaluation." in C.S .. Senate. Committee on Governmental Affairs. St11dy rm Federal Reg11/atio11, 95th Cong .. 2d sess .. appendix to vol. VI. p. 93. 4. L'.S. Congressional Record, 95th Cong.. 2d sess .. September 21. 1978. p. Hl0286. 5. L'.S. Civil . .\eronautics Board. South\\'est Airlines Automatic .lfar­ket Entry fnl'estigation, Docket 3458 2. Opinion and Order. Sep­tember 28. 1979. p. 7. The language of the statute held to be mandatory stated that automatic market entry certificates should be issued unless the applicant is not ·'fit. \\ i.lling. and able" to provide the seni ce. See p. 3 of the Opinion and Order. 6. L'.S. Congressional R ecord. 96th Cong: .. 1st sess.. October 22 . 1979. p. H94 70. 7. L'.S. Civil . .\eronautics Board. rlirport .\'orice uf Texas !11ter­11arional rlirlines. Inc. to Inaugurate Interstate Sen•ice ar Dallas Love Field. Docket 38654. Order 80-8-1 81 . . .\ uguq 29. 1980. p. 4. 8. See U.S. Civil Aeronautics Board. So11tl111"esr .-lirlines Automatic .Harker Entry /11l'estigatio11. Docket 34582. Initial Decision of the Administrative Law Judge. June 28. 1979. pp. 56-57 for a discus­sion of the board's formula for determinin~ the number of added flights necessary to require an environrnenul-impact statement. ~77 Regulation of Automobile Insurance in the Southwest Joseph C. Samprone, Jr. The insurance industry has begun the long process of rate deregulation. The increased reliance on competition should result in lower automobile insurance prices for the consumer and should free state insurance boards to focus attention on guaranteeing that motorists have adequate liability coverage. The History of Rate Regulation Regulation of the property-liability insurance industry began in 1944 with the South-Eastern Underwriters case, in which the U.S. Supreme Court, following federal anti­trust laws, ruled that insurance companies could not pool information to determine rates because such pooled infor­mation was also being used to restrain trade. While the South-Eastern Underwriters case was still in the courts, members of the U.S. Congress introduced legislation to exempt the industry from the Sherman and Clayton antitrust acts in order to allow the industry's rating bureaus to continue to collect and distribute rate informa­tion. Since the Department of Justice opposed total exemp­tion, a compromise bill, the McCarran-Ferguson Act, was introduced, eventually approved by both houses, and then signed into law by President Franklin D. Roosevelt in 1945 . Section 2b of the act stated that the insurance industry was only exempt from federal regulation to the extent that it was regulated by the individual states; joint rate making could only be continued if it was regulated by the indivi­dual states. The act did not explicitly explain, however, what actions by the individual states would constitute regu­lation. Since the industry and the individual states believed that compliance with the law would require uniformity of regulation, the National Association of Insurance Com­missioners and the All Industry Committee, made up of industry members, met to adopt regulatory bills to serve Joseph C. Samprone, Jr., is Assistant Professor of Consumer Eco· nomics, Purdue University. as models for the state legislators. The insurance commis­sioners hoped to be able to move more expeditiously than the individual states in preparing the regulatory laws and to obtain more uniform regulation through the model bills. In general, the model bills provided that rates could not be "excessive, inadequate, or unfairly discriminatory" and that rates had to be filed with a state insurance commissioner. The model bills allowed companies to combine in rating matters if their organizations were licensed and supervised by the state.1 By 1951, rate regulation on the lines of the model bills covered fire, casualty, fidelity and surety lines, and inland marine insurance in virtually every state. Regulation in the Southwest Considerable differences exist among the roles that the southwestern states of Arkansas, Louisiana, New Mexico, Oklahoma, and Texas have taken in regulating auto insur­ance. Arkansas and New Mexico have open competition laws, whereas Louisiana, Oklahoma, and Texas depend more on the regulatory process for setting auto insurance rates. Texas is one of two states (the other is Massachusetts) classified by the National Association of Insurance Com­missioners as having state-made rates. This system of regulation is the "ultimate in government control of insur­ance prices. "2 Before 1973 Texas rates were set by the State Board of Insurance, and insurers were required to adhere to those rates. Since June 1973, however, the Texas system of regulation has allowed insurers to file for uniform deviations from the rates set by the state board. These rate deviations, if deemed appropriate by the board, can then be used by the insurer. Oklahoma has "prior approval" auto insurance rate regulation, the most common type of rate regulation (adopted in twenty-three states as of mid-1980). Under this system of regulation, all rates-which may not be excessive, inadequate, or unfairly discriminatory-and supporting data TEXAS BUSINESS REVIEW must be filed with the state insurance commissioner. and rate filings do nor become effective until either the rates have been approYed or a specified period has expired. Insurers may file rates independently or may cooperate in making rates through bure:rn membership or subscribership: bureau members or subscribers may deYiate from bureau rates upon application to the commissioner. Louisiana has :idopted a modified prior approval rating la11'. ll'hich al1011·s for rate changes to be based on a change in the company's losses and to be effectiw immediately upon filing. although the rates are subject to subsequent disapproval by the commissioner. Prior approval is still required if a rate revision is based upon a change in ex­pense relations or rate classifications. ..\rkansas. a competitive rating state. has a file-and­ use la11· for automobile insurance that is similar to those adopted in four other states. This form of regulation re­ quires that rates be filed before they are used: if the com­ missioner finds that the filed rates are excessi1·e. inade­ quate. or unfairly discriminatory. the rates 11·i11 be sub­ sequently disal1011·ed. The difference bet11·een the Arkansas and the Louisiana la11·s is that in Arkansas file and use applies to changes in both expenses and losses. while prior approval applies to the former in Louisiana. New ~lexico is one of eight competitive states 11·ith a use-and­ file la11'. 11·h.ich is more liberal than Arkansas· file-and-use la\\ since insurers can use rates before they file them with the commissioner (rates must be filed within a specified time period after the insurer begins to use them). 3 Effects of Regulation The state rate regulation found in Louisiana. Oklahoma. and Texas leads to higher insurance prices for private pas­senger auto liability and physical damage insurance.4 These higher prices result in competition over items other than price-mainly agent services-in the regulated sector. This nonprice competition. however. is not valued by con­sumers. :\'ationally. the welfare loss due to regulation and the resulting nonprice competition was S 5 9 7 million for 1973 for these tll'O lines of auto insurance. Because of non­price competition. direct writers in the regulated sector had less business than direct writers in the competitive sector. Table 1 Percentage of Automobile Insurance Written by Direct Writers State (rate system) 1977 1978 1979 Arkansas (prior approval)* 57.2 59 .7 62.5 Louisiana (modified prior approval) 47 .9 SO.I s1.2 New Mexico (use and file) 53 .7 55.S 54.7 Oklahoma (prior approval) 49.4 50.4 51.5 Texas (state-made rates) 46.2 47.5 48.8 *Arkansas converted from prior approval to file and use in July 1980. Source: Best's Review: Property/Casualty Insurance Edition (Old­'"ich, N.J.: A. M. Best and Co., Inc., September 1978, August 1980). Direct writers. who are insurers employing exclusive agents. make contacts with clients through their agent rep­resentatives. The use of exclusive agents tends to entail lower costs than does the use of independent agents who represent many companies. 5 (These independent agents retain property rights to the client contact.) As a result of their savings on sales costs. direct writers are more competi­tive when these savings can be passed on as lower rates. Independent agents. on the other hand, should be more competitive 11·hen such lower rates cannot be offered since they alone. as independent businessmen. can offer alterna­tive insurers for their customers. Of the five states studied from 1977 to 1979 Texas, the most regulated, had the lowest percentage of direct writers (see table 1). Arkansas, a prior appro\·al state from 1977 to 1979, had the highest percentage of insurance written by direct writers. Although prior approval of rate changes was required in Arkansas before I980. obtaining approval from the insurance com­missioner must not have been a difficult process. ,!\;ew '.-.lexico (the only competitive state of the five) had the second highest percentage of insurance written by direct writers. the situation one would expect since price competi­tion was possible in that state. States that require some form of prior approval of rates should also be concerned with the effect of rate regulation on the availability of auto insurance. For example, in states where insurers are free to set their rates. competitive mar­ket forces adjust prices to make insurance available to all consumers. In states where rate adjustments are either not al1011·ed or are costly because of prior-approval laws, many consumers will find it difficult to secure auto insurance. For example. if the state-approved premium for a particular auto insurance policy is S200 but the true exposure of the insurer would require a premium of S300. insurers would avoid 11·riting such a policy. Individual consumers will, therefore. not be able to find such a policy in the voluntary market and will have to turn to automobile insurance plans. Such plans are state mechanisms for distributing policies for car 01\·ners 11·ho cannot obtain coverage through the volun­tary market among auto insurers in proportion to the amount oi business they write voluntarily in the state. Among the iive states studied. Texas and Louisiana had the largest percentages of autos insured through automobile insurance plans from 1976 to 1978 (see table 2). This finding suggests that the voluntary market is not working properly in Texas and Louisiana and that the problem may Table 2 Percentage of Automobiles in State-Distributed Insurance Plans State (rate system) 1976 1977 1978 Arkansas (prior approval)* 0.90 0.98 0.86 Louisiana (modified prior approval) 2 .27 8.08 18.11 ew Mexico (use and file) 0.19 0.28 0 .25 Oklahoma (prior approval) 0 .16 0.31 0.24 Texas (state-made rates) 4.36 5.94 5.75 *Arkansas converted from prior approval to file and use in July 1980. Source: Insurance Facts, 1977, 1979, and 1980-1981 eds. ( ew York: Insurance Information Institute, various years). '\OVE\1BER-DECEMBER 1981 very well be the involvement of the state insurance board in the rate-setting process. Regulation and Protection of Accident Victims Of the five states only Arkansas and Oklahoma have compulsory auto insurance laws that require registered car owners to have liability insurance (twenty-seven states, in all, have such laws). Even where ownership of automobile liability insurance is not compulsory, states have set finan­cial responsibility limits that can be met either by personal assets or by an insurance policy. All five states studied have posted automobile financial responsibility limits (see table 3). Louisiana and Oklahoma have the lowest bodily injury liability limits in the country-$! 0,000 for all per­sons injured in an accident with a $5 ,000 limit for each individual. Here we find two states that seem more con­cerned with regulating rates than assuring victims that drivers accept some reasonable level of financial respon­sibility when accidents occur. Although not the highest in the country, New Mexico, the only competitive state among the five, has the highest limit-$30,000 for all per­sons injured in an accident with a $1 5 ,000 limit for each individual. If the purpose of insurance is to protect, some of the states in this region should probably devote more attention to changing financial responsibility limits and less to rate setting, which is more efficiently performed by the interaction of supply and demand in the market. The recent trend in the insurance industry is away from rate regulation and toward a more competitive means of setting rates. The most recent converts to competitive rate setting are Arizona, which adopted a use-and-file law in 1979, and Arkansas, which adopted file and use in 1980. As of June I, 1980, seventeen states have open competition rating systems for auto insurance.6 These rating systems allow insurance rates to adjust to changing market condi­tions. While rating organizations still determine rates, these rates are only advisory and firms are allowed to deviate from them without the prior approval of the in­surance commissioner. Greater dependence on competition should result in lower insurance prices and a decrease in the dependence Table 3 Financial Responsibility Laws State (rate system) Liability limits Arkansas (file and use)• 10/20/5t Louisiana (modified prior approval) 5/10/1 New Mexico (use and file) 15/30/5 Oklahoma (prior approval) 5/10/5 Texas (state-made rates) 10/20/5 •Arkansas converted from prior approval in July 1980. tThe first two figures refer to bodily injury liability limits and the third figure to property damage. For example, 10/20/5 means coverage up to $20,000 for all persons injured in an accident subject to a limit of $10,000 for one individual, and $5,000 coverage for property damage. Source: Insurance Facts, 1980-1981 ed. (New York: Insurance Information Institute, 1980). on automobile insurance plans. State insurance boards should then be able to concentrate more fully on ensuring that motorists have adequate amounts of liability coverage. In thus protecting victims, state boards will have a legiti­mate concern since the market mechanism will not keep liability coverage at its best level because victims are not involved in insurance transactions. Notes l. See James B. Donovan, "Regulation of Insurance Under the McCarran Act," Law and Contemporary Problems 15 (Autumn 1950): 486. 2. See Jon S. Hanson, Monitoring Competition: A Means ofRegulat­ing the Property and Liability Insurance Business (Milwaukee, Wisc.: National Association of Insurance Commissioners, May 1974). 3. The only states having automobile rating laws more liberal than the use-and-file law are California, Missouri, and Illinois, which do not require insurers to file their rates. 4. H. E. Frech III and Joseph C. Samprone, "The Welfare Loss of Excess Nonprice Competition: The Case of Property-Liability Insurance Regulation," Journal of Law and Economics 23 (October 1980): 429-40. 5. See Paul C. Joskow, "Cartels, Competition and Regulation in the Property-Liability Insurance Industry," The Bell Journal of Eco­nomics and Management Science 4 (Autumn 1973): 400. 6. These states are Arizona, Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Minnesota, Missouri, Montana, Nevada, New Mexico, Oregon, Utah, Virginia, and Wisconsin. Name _________~ Institution ______ Street _______ City______ State _____ Zip ____ 300 North Zeeb Road 30-32 Mortimer Street Dept. PR. Dept. P.R. Ann Arbor, Mi . 48106 London WIN 7RA U.S.A. England TEXAS BUSINESS REVIEW The Effect of Regulation on Water Service Recently. public interest in water utilities has focused on two issues: the effect of environmental regulation on the costs of providing water and the translation of those costs into changes in the rates that customers are charged. The passage of the federal Safe Drinking Water Act in I 97.f was apparently the instrument that brought these issues into the public mind. Water Utilities in the Southwest and in the United States Provision of water service and its costs and effects. how­ever, differ in the Southwest from those factors in the rest of the country (see table). (_..\ sample of 89 water utilities in Arizona. California. Colorado. New '>1 exico. '\'evada. Ok­lahoma, Texas. and Utah was used in this study to represent the Southwest : a U.S. sample of ~35 water utilities was chosen from thirty-seven states and the District of Colum­bia.) In the Southwest water utilities rely less on surface water sources but more on water purchases than do utilities in the rest of the country. The southwestern systems ha\'e greater maximum demands, provide water with fe\\·er em­ployees for each customer and for the population serwd. and ha\'e higher per capita consumption than do the U.S. water utilities. Treatment costs are lower and operation costs are higher in the Southwest than they are in the Cnited States as a whole. but the rates of increase for both the Southwest and the l'nited States were similar in 1970-1978. The South­west has slightly higher rates for small residential consumers (500 cubic feet) and lower rates for large residential ( 1.000 cubic feet) and commercial (10.000 cubic feet) consumers. Patrick C. '.lann is Professor of Economics and Research Associate and Paul R. Lefrancois is Research .-lssisrant at the Regional R e­search Jnsrir11re. \\'esr l 'irginia Cnfrersity. . \!orgamo\\'11. h'est l 'ir­ ginia. Patrick C. Mann Paul R. Lefrancois For both the Southwest and the United States as a whole water rates increased less than water costs in all user cate­gories. except southwestern industrial users. This trend could either mean that innstor-owned utilities have suf­fered declining rates of return on capital and that publicly O\\·ned iirms haw had declining surplus revenues or that utilities oi both ownership forms have postponed mainte­nance and the replacement of plant and equipment. Indus­trial water users may also have absorbed the burden of increases in "·ater costs. The Economi~ofWahr Hisrorically. water supply economics has focused on the cost-beneiit e\'aluation of such water projects as reservoirs and dams an.:l has paid little attention to the costs of provi­sion and the pricing of public water service. Water has al­ways been supplied at a relatively lower cost than other utility se!'\·i.:es and has generally constituted a relatively small proportion of consumers· budgets and firms' produc­tion costs. Jn a.:ldition. water rates have generally increased at a slower rate than prices for other public utility services. The under.:Je,·eloped status of \\·ater economics can also be partially attributed to relatively static technology, the rela­ti,·e smallness of the water industry within the U.S. econo­my. the dominance of public health issues over economic and financial concerns \\ ithin the industry. and the \'irtual absence of such controversial issues as public or private ownership and the appropriate role of competition. 1 In the early 1970s. the energy crisis fu rther decreased the impor­tance of water supply issues in the mind of the general pub­lic. except when .:lroughts induced concern. as happene.:l in California in 19i6 and 19i7 and in :\e'' Jersey in 1980 and 198 1. The emphasis on engineering in the development of wa­ter resources has resulted in a neglect of considerations of '\'O\'D !B ER-DECE.\!BER 1981 the price of water. The persistent belief that because water is a necessity it cannot be subjected to conventional eco­nomic analysis like other commodities has also affected studies of pricing.2 The reason water is differentiated from other utility services may lie in the public's fear of being deprived of adequate water supplies. If water is viewed as something special, adequate supplies of pure water are seen as more important than the costs of provision and price, and the result is overinvestment in water systems and water supply projects. The pressures that have produced recent regulatory re­form in other public utility sectors have now begun to af­fect water service. The recent high rate of inflation has in­creased the costs of labor, treatment, and capital construc­tion, and water rates have increased accordingly. While the situation has not been as volatile in water services as it has in, say, electric utilities, inflation has generated financing problems in the water industry. Inadequate rates, in some cases, have deferred system maintenance and postponed the replacement of existing facilities. Operation costs in some water utilities (systems requiring extensive pumping, for example) have increased more rapidly than the general in­flation rate. While consumer activism has been less concerned with water service than with other utility services, a desire to shield low-income users from increasing water rates, partic­ularly in rural areas, has recently emerged. In some areas, temporary water shortages and declining water tables have caused governments and user groups to become concerned about adequate future supplies. Finally, increased environ­mental regulation has resulted in increased treatment and purification costs for many water systems. The regulatory response to these various pressures in water services has been mixed. Cost adjustment mecha­nisms, similar to automatic fuel adjustment clauses, are un­common. The issue of whether construction work in prog­ress should be inserted in the rate base has become impor­tant as a result of the federal Safe Drinking Water Act of 1974. Increased attention is also being given to seasonal pricing and the declining block rate schedule. Although regulatory agencies have not aggressively pushed for lifeline rates in water service, increasing attention has been devoted to the appropriate share of revenue burden for each user class. Approximately 35,000 central water systems (defined as serving twenty-five or more persons) operate in the United States; 56 percent of these systems are publicly owned: About forty-seven states regulate the rates of privately owned water utilities.3 The extent and degree of regulatory power, however, varies significantly among states. The few states that do not have rate jurisdiction over private systems either lack authority or have no private firms to regulate. In states that have regulatory jurisdiction, regulation may be limited to investor-owned firms of a minimum size. Ap­proximately seventeen states have rate jurisdiction of vary­ing scope and degree over publicly owned water systems. Most publicly owned systems are subject to local rate regu­lation, which, of course, also varies substantially. The fed- Comparison of Water Utilities in the Southwest and in the United States, 1970 and 1978 Southwest sample of 89 water utilities U.S. sample of 235 water utilities 1970 1978 Total Annual 1970 1978 Total Annual Variable mean value mean value percentage change percentage change mean value mean value percentage change percentage change Operating variables Total production (million gallons a year) Consumption (gallons per capita a day) 12,800.00 202.00 14,040.00 188.00 9.7 6.7 1.0 -0.8 12,284.00 159.00 13,842.00 153.00 12.7 -3.7 1.3 -0.4 Population served (thousands) 190.00 219.00 15.7 1.6 195.00 221.00 13.6 1.4 Population served per mile of distribution line 387.00 305.00 -21.1 -2.6 342.00 331.00 - 3.2 -0.4 Customers served per mile of distribution line 67.00 71.00 6.4 0.7 79.00 74.00 - 6.3 -0.7 Customers served Surface source production (percentage) 38,382.00 0.30 46,786.00 0.34 21.9 13.3 2.2 1.4 31,431.00 0.52 40,930.00 0.50 30.2 3.8 3.0 -0.4 Ground source production (percentage) Purchases (percentage) 0.42 0.28 0.37 0.29 -11.9 3.6 -1.4 0.4 0.39 0.08 0.42 0.08 7.7 0.0 0.8 0.0 Average daily distribution (million gallons) 35.10 38.50 9.7 1.0 33.70 37.90 12.7 1.3 Maximum daily distribution (million gallons) Miles of distribution line Load factor* Employees per 1,000 customers served Employees per 1,000 population served Cost and price variables 61.30 543.00 0.55 5.90 0.84 72.70 639.00 0.53 3.10 0.80 18.5 17.7 -3.6 -47.0 -4 .8 1.9 1.8 -0.4 -6.8 -0.5 53.10 459.00 0.62 3.90 0.90 55.40 573.00 0.67 3.30 0.92 4.4 24.9 8.1 -14.6 2.2 0.5 2.5 0.9 -1.7 0.2 Annual treatment costs (dollars per million gallons) Annual operating costs (dollars per million gallons) Monthly rate, 500 cubic feet (in dollars) Monthly rate, 1,000 cubic feet (in dollars) Monthly rate, 10,000 cubic feet (in dollars) Monthly rate, 100,000 cubic feet (in dollars) Ratio of commercial rate to large residential rate Ratio of commercial rate to small residential rate Ratio of industrial rate to large residential rate Ratio of industrial rate to small residential rate 24.00 231.10 2 .92 3.89 23.76 190.15 6.30 8.90 50.80 71.10 49.10 512.30 4.25 6.16 44.55 415.77 7.40 11.50 68.80 106.60 104.8 121.7 45.5 58.4 87.5 118.7 16.9 28.9 35.2 50.0 8.3 9.2 4.3 5.2 7.2 9.1 1.7 2.9 3.4 4.6 54.30 220.70 2.51 4 .33 31.38 229.51 7.40 12.90 55.00 96.40 11 5.40 430.30 4.06 6.98 51.96 410.73 7.60 13.40 61.50 108.60 112.5 94.9 61.8 61.2 65.6 79.0 3.3 3.9 11.8 12.6 8.7 7.7 5.5 5.4 5.8 6.7 0.4 0.4 1.2 1.3 •Average day demand divided by maximum day demand. Sources: '."n:ierican Water Work~ _Association, Operating Data for Water Utilities, 1970 (New York: AWWA, 1973), and American Water Works Association, 1978 Water Utility Operating Data (New York: A WWA, 1980). TEXAS BUSINESS REVIEW era! government also affects public and private water utili­ties through environmental regulation. l\lany water rate schedules are adopted to minimize cus­tomer complaints. to keep rates consistent with those of adjacent systems. or to provide adequate revenues. 4 Past practice. community acceptance. annexation policies. and other political considerations also influence rate-makino decisions. 5 While \·ariations in sources of supply. topogra~ phy. climate. system age. consumer density and mix. water quality, service area gro\vih. inflation rates. energy costs. service volume, per capita use. and financing of fire protec­tion facilities make comparisons difficult. a wide geograph­ical dispersion of U.S. cities have relatively higJ1 water rates.6 ­ Water systems that use surface sources will generally have decreasing unit costs with increasing size. but systems that use ground water sources may not decrease costs as their sizes increase.7 Increasing per capita consumption or increasing consumer density will tend to decrease unit costs. but increasing service connections will not necessarily result in substantial economies of scale.8 Thus. decreasing population density. increased reliance on surface water. and quality improvements push costs up. while an increased re­ liance on purchases (as opposed to self-supply) decreases unit costs and an increase in the size of a system generates treatment economies. as well as water quality improve­ ments matched by increased delivery costs. 9 Some large systems. however. can virtually exhaust economies of scale because of expansion costs arising from competition for reservoir sites. the extension of delivery systems to points more distant from production centers. and the exhaustion of more accessible sources of supply.10 Few analyses deal with the effects of environmental reg­ ulation on water rates and costs. A 1978 article estimated the cost effect of the Safe Drinking Water Act on the Dallas water system to range from a 22 percent to a 44 percent in­ crease in rates; this increase resulted from the installation of a treatment process using granular activated carbon. 11 Giv­ en the existence of economies of scale in water provision, the rate effects will be amplified for small water systems. 12 The costs of installation and operation of control processes. as well as monitoring costs, are likely to be significantly greater on a per unit basis for small water systems than they are for large water systems. Notes 1. Jerome \\". ~lilliman. "Policy Horizons for Future Crban \\.ater Supply ." Land Economics 39 (~lay 1963): 109-32. 2. Jack Hirshleifer. James C. DeHaven. md Jerome \\". ~lilliman. h'ater Supply: Economics. Technology. and Policy (Chicago: L"ni­versitv of Chicago Press. 1960). 3. N~rman Kelg. Charles \\'. Fristoe. and Frederick 0 . Goddard. "State Regulati~n of \\.ater Utilities." Public Uilities Fortnightly . A.ugust 13. 1970. pp. 19-25: and John C. Luthin. "Rate ~laking Pra~tices of State Regulatory Commissions." American Water Works Association Joumal 68 (September 1976): 490-91. 4. Hamdv H. H. Afifi and\". Lewis Bassie. Water Pricing Th eory and Practice fn fl/inois (Crbana: Bureau of Economic and Business Re­search. L'ni,·ersity of Illinois. 1969). NOVD!BER-DECEl\IBER 1981 5. William L. Patterson. "Application of \\.ater Rates." A111erican ll'ater h'orks Association Journal 65 (:\owmber 1973): 677-84. 6. Glenn Reiter. "Survey and Comparison of California \\.ater Agen­cies Rate Structure." American h'ater Works Association Joumal 69 (July 1977): 356-63: and Elroy F. Spitzer. "The True Cost of\\a­ter." American ll'ater ll'orks Association Joumal 63 (June 197 1) : 325-28. 7. Lawrence G. Hines. "The Long-Run Cost Function of\\'atcr Pro­duction for Selec ted Wisconsin C~mmunities." Land Economics 45 (February 1969): 133-+0. 8. J. L. ford and J. J. \\.arford. "Cost Functions for the Water In­dustry.'' Joumal of Industrial Economics 18 ('\iovember 1969): 5 3-63: and Richard .-'\....\ndrews. "Economies Associated with the Size of \\ater L"tilities and Communities Served in Ne\\· Ha mpshire and '.\ew England." l\'ater Resources Bulletin 7 (October 1971): 905-12. 9. Robert \!. Clark. "Cost and Pricing Relationships in \\'ater Sup­ply." Joumal of the Enrironmental Engineering Dirision -ASCE 102 (April 1976): 361-73: and idem, "\\ater Supply Reg:ionaliza­tion: A Critical Evaluation." Journal of the Water Resources Plan· ning and .1/anagemellt Dirision-ASCE 105 (September 1979): 279­ 94. 10. Stew H. Hanke and Robert K. Davis. "Potential for \larg:inal Cost Pricing in Water Resource \ lanagement." h'ater Resources Re­search 9 (August 1973): 808-25. 11 . Henry J. Graeser. "financing System Changes." American Water l\'orks Association Jou ma/ 70 (September 1978): 492-95. 12. Robert \I. Oark and Richard G. Stevie. " \lee ring the Drinking \\'ater Standards: The Price of Regulation." in Safe Drinking Water: Currem and Fut11re Problems. Clifford S. Russell. ed. (Washington. D.C.: Resources for the Future. 1978). pp. 271-312. Texas Railroads A Record of Construction and Abandonment Charles P. Zlatkovich Tex.is R.1ilro,1ds offers a complete record of the construction and panial abandonment of the railroad sntem of the state of Texas from 185 3 through 1980. Along \\·ith pre,·iously unpub­lished material from the records of the Texas Railroad Commission, the book offers maps of the railroad system O\-cr time. illustrations. photographs. and brief histories of the major railroad lines operating in Texas. HardcoYer S10 Paperback $7 ......................... Bureau of Business Research P.O. Box 74-59 • Austin. Texas 78712 The Characteristics of Pick-Your-Own Vegetable Marketing on the Texas South Plains Claud M. Davidson C. Judy Davidson With rising food costs, many individuals and families are purchasing fresh vegetables directly from local producers through roadside stands, farmers' markets, house-to-house sales, and pick-your-own operations. In some parts of the country roadside stands and farmers' markets predominate; however, in West Texas, pick-your-own activities appear to be the most significant form of direct marketing. In pick­your-own activities, which can be either organized and formal or unstructured and informal, consumers go to the farm or field, harvest the produce they wish to purchase, usually furnish their own containers, pay the producer (value is normally based on weight or volume measure­ments), and transport the produce to their home. In 1980, fifty-five pick-your-own operations were locat­ed in Lubbock County, which is on the flat, semiarid south­ern High Plains and is the heart of an agricultural region based on large cotton and sorghum farms. Little commer­cial vegetable farming is done in the area, but the pick-your­own operations are distributed throughout the market (see figure). Out of the fifty-five operations, we interviewed forty-five owners and producers. (Of the ten producers from whom data were not available, one preferred not to respond to questions, four had moved and their telephones had been disconnected, and the authors were unable to contact five additional producers.) Characteristics of Producers Pick-your-own marketing of fresh garden produce does not appear to be a long-term economic activity for most producers; 53.4 percent had been in business for three years or less (see table I). Only four operators (8.8 percent of the total) have offered pick-your-own produce for more than ten years. Furthermore, acreages devoted to produce Oaud M. Davidson is Professor of Geography, Texas Tech Univer· sity. C. Judy Davidson is lnstnictor of Geography, Texas Tech University. for consumer picking are often small, with 42.2 percent of the plots smaller than two acres (see table 2). Producers who have been in the business for more than ten years tend to have the largest acreages-over ten acres-in pick-your­own production. Twenty-six, or 57.8 percent, of the producers were non­farmers who owned or had access to acreages in the rural or rural-urban fringe areas but did not rely on agriculture as the major source of their income (see table 3). Most of these individuals were employed in Lubbock and con­sidered their pick-your-own operations a source of supple­mentary income. They may, in fact, have looked to their pick-your-own businesses as interim land use between pur­chasing and subdividing. Many of the production sites operated by nonfarmers were adjacent to or very near the incorporated city limits. Farmers were the second largest occupational group of pick-your-own producers; ten of the pick-your-own pro­ducers were farmers. Plots operated by this group tended to be larger than those of the rural nonfarmers. Farmers also tend to remain in pick-your-own operations longer than do producers in the other occupational categories. Of the forty-five interviewed only one operator was engaged in pick-your-own activities full time ; he also supplemented his income by custom farming for others. Thirty-six of the operators owned the land on which their vegetables were produced. Only seven operated on rented property and two leased land for their production. Most producers own their farming equipment, but some Table 1 Length of Involvement in Pick-Your-Own Production Number of years Number of producers Percentage of total 1-3 24 53.4 4-6 12 26.7 7-9 s 11. l 10-12 2 4.4 More than 12 2 4.4 TEXAS BUSINESS REVIEW s1113ller ,)p,:;·"\,)rs hire custom plowers to cultivate their iidds. esp~,· i,11\y for the first deep breaking of the soil in the spring. Production Characteristics \lost operators of pick-your-O\\·n \·egetJbk marketing sell se\'eral types of produce. Bec3use of local dimare and soil conditions. \':lriarions in production ch,uacteristk s. and -:onsumer prefererh·es. however. some crops 3re mor<: com­mon than others. In 1980 a mJjority of the producers raised black-eyed peas. green beJns. and okra (see table 4). Black-eyed peas were the most common crop because of local demand. ease of production. and because the same types of equipment used with the peas can be used in producing cotton. the primary agricultural crop on the South Plain s. Tomatoes. cantJloupes. squash. watermelons. and cu­cumbers \1 er<:> also popular items. A number of operators-­ten in 1980 ---produced corn for corn-on-the-cob consu mp­tion. but others find this production unprofitable because of high labor demands. materiJls necessary to control corn­rebted insects Jnd disease. and plant damage cJused by :·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-i·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·-·­ 1 Locations of Pick-Your-Own Operations, 1980 I I I I FUTURE PRODUCTION PLANS Continue Uncertain Discontinue City Limit us 62-82 • x . I I I I • I • I I LUBBOCK COUNTY I .'.\OVD!BFR-DECE\!BER 198 1 untrained pickers. Other types of vegetables were offered by less than 20 percent of the producers in 1980. Growing vegetables on the basis of personal preference instead of local demand appears to be a common and rather risky choice. Interviews with producers of turnips and mustard greens revealed that few, if any, customers picked that produce. With the exception of cantaloupes, watermelons, and onions, the goods most in demand were those that can be canned or frozen. Although some consumers preferred to pick only a few days' supply, most purchased a larger quantity for use throughout the remainder of the year. Producers encountered six types of problems. The most common was plant abuse, mentioned by 31 percent of those interviewed. Most plant abuse resulted from careless­ness, from lack of knowledge concerning proper harvesting techniques, and from the presence of young children in the field. As examples, branches were often broken from pea vines; some people used knives to cut into unpicked okra to test for tenderness; customers often pulled the shucks from unpicked ears of corn to check kernel development; and children and others often stepped on produce growing near the ground. In pick-your-own activities elsewhere in the country, especially in the Northeast, pickers are closely supervised. In Lubbock County, however, the profit margin for this type of farming is so low that producers could not afford the additional costs that close supervision would entail. The availability and cost of water for irrigation was a problem mentioned by 29 percent of the producers inter­viewed. All vegetable crops in Lubbock County must be irrigated. Water for this irrigation is pumped from the Ogallala Aquifer by means of deep wells. Farmers in Lub­bock County must be concerned with the depletion of the groundwater supply and with the rising cost of fuel neces­sary to pump irrigation water to the surface. Seven producers (14 percent) reported cheating (mis­representing the quantity of produce picked) as a problem. Cheating was not considered to be a major problem by Table 2 Acreage in Pick-Your-Own Production Number of acres Number of producers Percentage of total Less than 2 2-5 6-10 More than 10 19 6 10 10 42.2 13.4 22 .2 22.2 Table 3 Occupations of Producers Occupation Number of producers Percentage of total 5 11.1 Nonfarmer 26 57.8 Retired nonfarmer 4 8.9 most of the producers, who often rely entirely on the word of customers and may not even check cars or trucks to determine the exact type or quantity of produce picked. Distance from the major market-Lubbock-was stated as an increasing problem by 14 percent of the producers. Gasoline prices have made urban dwellers hesitant to drive more than ten or fifteen miles to pick vegetables, especially the more common types, such as black-eyed peas and green beans. Theft of produce was mentioned by only 8 percent; the location of most fields near the producers' homes probably contributes to the low incidence of theft. The nuisance of receiving a large number of telephone calls was mentioned by two producers, but most operators accept and welcome telephone calls because they realize that customers and potential customers need to know the type, quantity, and quality of available vegetables before they drive to the fields. The producers advertised their produce through news­papers, signs, word of mouth, and the radio. All of them placed classified ads in newspapers. Newspaper ads usually specified the type of produce available, gave directions to the field , and often gave the telephone number of the producer. Eight producers used roadside signs, which sup­plemented the newspaper directions, especially if the vege­tables were produced away from a major highway. Six producers counted on word-of-mouth advertising. Because of cost, only three producers used the radio as an advertis­ing medium, and none had purchased commercial spots for television use. Future Production Plans Twenty-four, or 53.3 percent, of the operators inter­viewed planned to continue pick-your-own production. A number of reasons were given in support of continued operation. Several producers stated that planting vege­tables helped hold the soil in place during the windy West Table 4 Farmer 10 22.2 Retired farmer Types of Produce Raised Crop Number of producers Percentage of total Black-eyed peas 41 91.1 Green beans 29 64.4 Okra 2 8 62.2 Tomatoes 22 4 8.8 Cantaloupes 17 37.7 Squash 14 3 1.l Wa termelons 14 31.1 Cucumbers 12 26.6 Corn 10 22 .2 Peppers 8 17.7 Cream peas 4 8.8 Pumpkins 2 4.4 Onions 2 4.4 Mustard greens 2 4.4 Turn ips 2 4.4 Sweet potatoes 1 2.2 Eggplants 1 2.2 Purple hull peas 2.2 TEXAS BUSINESS REVIEW Texas spring and summer seasons. For them. vegetables were prefernble to weeds as a ground cover. especially near their homesites. A number of individuals stated that market gardens kept their children occupied during the summer months. In some cJses. high school and college-age young people used pick-your-own operations as a source of in­come for school. and several paid for university educations with their profits. SeYeral producers. especially the older ones. stated that they \\-ere planning to continue because they enjoyed not only the \\·ork. but also the opportunity to visit with customers and friends. All producers planning to continue operations indicated that the activity was Atlases. For research, reference, or just plain curiosity. Atlas of Texas Stanley :\.. . -\.rbingast et al. 1976. 179 pages. 11" x H" spiral bound. Sketches by Buck Schiwetz and Charles Beckendorf: many color maps. S25. ''.-\.mong state atlases. this \·olume is second to none. -South u:estem Historical Quarterly ".-\.n almost inexhaustible mine of factual informa­tion about the state. its history, its deYelopment, its resources, and its people." -Th e Cattleman . .\tlas of :\lexico Stanley .-\...-\.rbingas t et al. 1975. 16-l: pages. 11 " x H " spiral bound. $20. ".-\.n excellent compilation of OYer 200 maps plus tables.'' -The American Cartographer ''.-\.II school libraries should ha\·e it and all '.\lexi­canists will \\·ant it ." -J ournal of Geograp hy Atlas of Central America Stanley A . . -\.rbingast et al. 1979. 70 pages. 11'' x H" spiral bound. $18. "\'ery well done." -.\'orth _--I merican Congress on Latin .-1. merica "The only cartographic trectment of the Central .-\merican region published in English since 1955. •· -The American Cartographer Bureau of Business Research P.O. Box 7459 • .-\.ustin, Texas 78712 ~ ~ profitable. but we did not attempt to determine the degree of profitability. Twelw individuals stated that they planned to discon­tinue acti\'ities. and nine others were uncertain. All twenty­one stated that their operations were not profitable. Several cited the \\'Jter problems mentioned previously. and a num­ber \1ere getting out of the business because of health or age. In addition. se\'eral producers planned to discontinue operations because they felt that they were located beyond the range that Lubbock customers would travel. Observations Many area operators who plan to discontinue production or who are uncertain about future plans are located imme­diately southwest of Lubbock. This southwest quadrant is a region of declining water supply and of residential ex­pansion. Large farms on that side of the city were broken into smaller acreages several years ago. and some of the acreages are now being subdivided into residential lots. Pick-your-o\\'n operations provided one method of using the small acreages until che owners were ready to sub­divide. These operations offered a transition between the breaking down of large farms and subsequent subdivision for residential or commercial purposes. Relations between producer and consumer tend to be highly informal in Lubbock County. and the overall pick­your-0\1 n marketing operation does not appear to be as highly structured as it is in many areas of the country. 1 While inten-ie\\·ing producers. we saw no designated parking areas. no portable rest room facilities, no direct supervision of pickers. and no playgrounds for children. Despite turnover. the number of pick-your-own opera­tions in the Lubbock County area appears to be increasing each year. \\-ith rapidly rising food costs. more consumers are disco\·ering this method of buying fresh produce at low prices. Preliminary research on consumer habits and prefer­ences re\'eals that individuals are willing to travel greater distances for some types of produce than for others. It might be most practical for pick-your-own operators far­thest from Lubbock to specialize in types of produce that may not be the most common to the area but that con­sumers are 1\·illing to travel greater distances to obtain. Con­sequently. \·egetable producers need to be more aware of consumer characteristics and preferences. Note 1. Exampks of pick-your-own produce characteristics and operations in other parts of the l'nited States include J. \\'. Courter and C. C. Zych. "1970 Surwy of Pick-Your-0\1·n Stra\1-berry Customers." Better Far111i11g i11 flli11 ois. Fruit Growing Report No. 24 (l'rbana­Champaign: l'niYersity of Illinois. 1971): \!orris S. Fabian and Robert \ I. Hunter. !111pro ri11g the Ef(ecril'eness of Pick-four-011'11 Direct _\farketi11g H·irh Be11e[irs for Far111ers a11d Co11s11111ers (\'ew Brunswick. N.J.: Cooperati\·e Extension Senice. 1979): and Peter L. Henderson and Harold R. Linstrom. Far111er-ro-Co11s11111er Direct :\larketi11g i11 Six Stares. ESCE Agriculrnral Information Bulletin \'o. 36 (Washington. D.C.: C.S. Dep:utment of _.\griculture. 1980) . .\'OVE\iBER-DECEMBER 198 1 Index: Volume 55 ( 1981) Author Index Benjamin J. Allen Larry M. Austin Donald W. Baerresen Donald W. Baerresen C. Taylor Barnes C. Richard Bath David L. Baumer Gordon Bennett John G. Bordie John P. Bradley Kathleen Brook Lynn E. Browne Clyde E. Browning Kent S. Butler Kent S. Butler W.W. Callan D. Gary Carman Cletus C. Coughlin F. Jay Cummings C. Judy Davidson Claud M. Davidson Terry K. Dorsey Terry K. Dorsey Helen Durio James B. Dworkin 0. Homer Erekson John S. Evans Warren W. Fisher Warren W. Fisher Robert W. Gilmer Patricia Gober William D. Gunther Billy C. Hamilton Niles Hansen Jack Harris Fred H. Hays Fred H. Hays Lewis E. Hill John R. Howell Robert Hughes, Jr. Antitrust Problems in Regulating Deepwater Ports: A Postmortem on Seadock Urban and Rural Differences in Small Texas Banks The Value of Imports through U.S. Ports on the Mexican Border Mexico's Assembly Program: Implications for the United States The Effect of Military Retirement on Population Redistribution Dependency, Inflation, and the Allocation of Mexico's Petroleum Reserves The Effects of Federal Regulation of the Dairy Industry on Southern Producers Prospects for Texas and U.S. Trade with China Prospects for Solar Energy in Texas Airline Deregulation and Potential Urban Noise Problems Income, Employment, and Population Growth in the U.S.-Mexico Border Counties Narrowing Regional Income Differentials The Effect of Federal Spending on Regional Development Texas Coastal Land Development and Environmental Regulation The Land Development Process in Texas Coastal Areas The Case against Deregulation of the Texas Trucking Industry The Cost of Foreign Students at Public Universities in Texas Regional Financial Differences in Intercollegiate Athletics The Size and Geographic Characteristics of Texas Multibank Holding Companies The Characteristics of Pick-Your-Own Vegetable Marketing on the Texas South Plains The Characteristics of Pick-Your-Own Vegetable Marketing on the Texas South Plains The Information Technology Industry in Texas: Forecast to 1990 Outlook for the Texas Oil and Gas Industry in 1990 Parental Concerns about Raising Children: A Texas Survey Results of the Professional Baseball Players' Strike of 1981 Regional Financial Differences in Intercollegiate Athletics Dependency, Inflation, and the Allocation of Mexico's Petroleum Reserves The Information Technology Industry in Texas: Forecast to 1990 Outlook for the Texas Oil and Gas Industry in 1990 The History of Natural Gas Pipelines in the Southwest The Effect of Federal Policy on Interregional Migration Urban Enterprise Zones: Can They Work in the United States? The Potential Competition Doctrine and Bank Holding Company Acquisitions in Texas Development of the Southwest Borderlands The Outlook for Multifamily Housing Multibank Holding Companies: A Review of the 1970s The Incipiency Doctrine and Potential Competition in Secondary Banking Markets External Benefits of High-Technology Industry: The Case of Texas Instruments in Lubbock Prospects for Solar Energy in Texas Parental Concerns about Raising Children: A Texas Survey Sept.-Oct., p. 185 Jan.-Feb., p. 34 Sept.-Oct., p. 192 Nov.-Dec., p. 253 May-June, p. 100 Sept.-Oct., p. 196 Jan.-Feb., p. 19 May-June, p. 93 May-June, p. 109 Nov.-Dec., p. 275 May-June, p. 136 July-Aug., p. 141 Sept.-Oct., p. 212 Jan.-Feb., p. 38 July-Aug., p. 177 Jan.-Feb., p. 27 Sept.-Oct.,p. 234 Mar.-Apr., p. 49 Sept.-Oct., p. 228 Nov.-Dec., p. 284 Nov.-Dec., p. 284 May-June, p. 122 July-Aug., p. 172 Sept.-Oct.,p. 238 Nov.-Dec., p. 268 Mar.-Apr., p. 49 Sept.-Oct., p. 196 May-June, p. 122 July-Aug., p. 172 May-June, p. 129 Nov.-Dec., p. 262 July-Aug., p. 149 Mar.-Apr., p. 64 Nov.-Dec., p. 247 July-Aug., p. 157 Jan.-Feb. , p. 30 Mar.-Apr., p. 70 May-June, p. 1 26 May-June, p. 109 Sept.-Oct., p. 238 TEXAS BUSINESS REVIEW Richard C. Hula Dilmus D. fames Robert J. Johnson :Martin T. Katzman Kenneth E. Knight Kenneth E. Knight Theodor Kohers Charles G. Leathers Paul R. Lefrancois J. Dennis Lord Susan A . .MacManus Jeff Madura Jeff Madura Patrick C. Mann Robert L. Mansell Ronald W. Matlin Edward M. Miller Michael V. Miller Tarun K. Mukherjee Jerome Olson Valinda Parker Valinda Parker James T. Peach Patricia M. Pierce Alessandro Pio Thomas R. Plaut Thomas R. Plaut Joseph E. Pluta Alan R. Posner James P. Rakowski John Rees William R. Reichenstein Warren Rose Curtis C. Roseman Rose M. Rubin Rose ,\1. Rubin Joseph C. Samprone. Jr. V. Howard Savage Gloria .M . Shatto Patricia M. Shields ,\lichael Stone \fichael Stone Gene C. Uselton Mabel A. Wandelt Harold C. White Ronald P. Wilder Duane Windsor Michael N. Wolfr Katie N. Womack Geographic Discrimination in the Dallas Home Credit Market Dependency. Inflation. and the Allocation of Mexico's Petroleum Reserves The Use of Polygraphs to Screen Potential Employees Toward a Solar Texas: The Promise of Photovoltaics The Information Technology Industry in Texas: Forecast to 1990 Outlook for the Texas Oil and Gas Industry in 1990 Commercial Bank Profitability in the South Urban Enterprise Zones: Can They Work in the United States? The Effect of Regulation on Water Service The Dynamics of the Retail Geography of Texas Citizens' Views of Growth in Houston Factors Affecting Attendance at Sunbelt ,\1ajor League Baseball Games The Effect of the Antiblackout Law on Professional Football Teams in the Sunbelt The Effect of Regulation on Water Service Texas and Alberta: A Comparison of Regional Economies Toward a Solar Texas: The Promise of Photovoltaics Regional Differences in Productivity. Profitability, and Wages Industrial Development and an Expanding Labor Force in Brownsville Urban and Rural Differences in Small Texas Banks Outlook for the Single-Family Housing \1arket in Texas Texas Coastal Land Development and Environmental Regulation The Land Development Process in Texas Coastal Areas Income. Employment. and Population Growth in the U.S.-Mexico Border Counties The Shortage of :\urses in Texas The Effect of Regional Employment Trends on Occupation Mix and Income Distribution The Texas Economy in the Year 2000 Migration Trends of the Elderly in the United States and the Southwest Recent Income and Employment Trends ,,·ithin Regions of Texas Export Promotion Policies in the Sunbelt States Changes in Airline Service in Texas since Deregulation The Regional Effect of Environmental Protection Policy The Effect of 1980 Banking Legislation on Texas Banks and Thrift Institutions The Economic Future of Galveston The Effect of ,\filitary Retirement on Population Redistribution The Role of Health ,\laintenance Organizations in Containing Health-Care Costs HMOs and Competition in Health-Care Delivery: The Case of Tarrant County Regulation of Automobile Insurance in the Southwest The Effect of Transfer Payments on the Texas Economy The Cost and Availability of Credit and Venture Capital: A South­west Survey The Use of Polygraphs to Screen Potential Employees The Information Technology Industry in Texas: Forecast to 1990 Outlook for the Texas Oil and Gas Industry in 1990 The Case for Deregulation of the Texas Trucking Industry The Shortage of Nurses in Texas Personnel Administration in the South Central States Foreign Trade and the Increasing Importance of Southern Ports Recent Performance of Zero-Base Budgeting Systems in the Public Sector Personnel Administration in the South Central States Costs of Public Transportation in Texas Cities July-Aug. , p. 162 Sept.-Oct.. p. 1 96 Mar.-Apr. , p. 90 May-June. p. 113 May-June, p. 122 July-Aug., p. I 72 Sept.-Oct., p. 225 July-Aug., p. 149 Nov.-Dec., p. 281 Nov.-Dec., p. 272 July-Aug., p. 166 Mar.-Apr., p. 52 July-Aug., p. 175 Nov.-Dec., p. 28 I Nov.-Dec., p. 241 May-June, p. 113 May-June, p. 11 7 Nov.-Dec., p. 258 Jan.-Feb., p. 34 Jan.-Feb., p. 5 Jan.-Feb., p. 3 8 July-Aug., p. I 77 May-June, p. 136 Mar.-Apr., p. 7 5 July-Aug., p. I 80 Jan.-Feb., p. l May-June, p. 105 \1ar.-Apr. , p. 55 July-Aug., p. 152 July-Aug., p. 146 Sept.-Oct., p. 21 7 Mar.-Apr., p. 60 Jan.-Feb., p. 4 3 May-June, p. 100 Jan.-Feb .. p. 9 Mar.-Apr. , p. 78 Nov.-Dec., p. 278 Sept.-Oct.. p. 2 21 Jan.-Feb ., p. 14 Mar.-Apr.. p. 90 May-June, p. I 22 July-Aug., p. 172 Jan.-Feb .. p. 24 Mar.-Apr. , p. 75 Mar.-Apr.. p. 8 5 'v!ay-June, p. 96 Sept.-Oct.. p. 203 ,\1ar.-Apr., p. 85 Mar.-Apr.. p. 81 NOVDIBER-DECEMBER 198 1 Subject Index BANKING Commercial Bank Profitability in the South The Effect of 1980 Banking Legislation on Texas Banks and Thrift Institutions The Incipiency Doctrine and Potential Competition in Secondary Banking Markets in Texas Multibank Holding Companies: A Review of the 1970s The Potential Competition Doctrine and Bank Holding Company Acquisitions in Texas The Size and Geographic Characteristics of Texas Multibank Holding Companies Urban and Rural Differences in Small Texas Banks BORDER ISSUES Development of the Southwest Borderlands Income, Employment, and Population Growth in the U.S.-Mexico Border Counties Mexico's Assembly Program: Implications for the United States The Value of Imports through U.S. Ports on the Mexican Border CITIES Citizens' Views of Growth in Houston The Economic Future of Galveston Industrial Development and an Expanding Labor Force in Brownsville Urban Enterprise Zones: Can They Work in the United States? DEMOGRAPHICS The Effect of Federal Policy on Interregional Migration The Effect of Military Retirement on Population Redistribution Migration Trends of the Elderly in the United States and the Southwest Outlook for the Single-Family Housing Market in Texas The Texas Economy in the Year 2000 DEVELOPMENT Citizen's Views of Growth in Houston Development of the Southwest Borderlands The Land Development Process in Texas Coastal Areas Theodor Kohers William R. Reichenstein Fred H. Hays Fred H. Hays Billy C. Hamilton F. Jay Cummings Larry M. Austin and Tarun K. Mukherjee Niles Hansen Kathleen Brook and James T. Peach Donald W. Baerresen Donald W. Baerresen Susan A. MacManus Warren Rose Michael V. Miller William D. Gunther and Charles G. Leathers Patricia Gober C. Taylor Barnes and Curtis C. Roseman Thomas R. Plaut Jerome Olson Thomas R. Plaut Susan A. MacManus Niles Hansen Valinda Parker and Kent S. Butler Sept.-Oct., p. 225 Mar.-Apr., p. 60 Mar.-Apr., p. 70 Jan.-Feb., p. 30 Mar.-Apr., p. 64 Sept.-Oct., p. 228 Jan.-Feb., p. 34 Nov.-Dec., p. 247 May-June, p. 136 Nov.-Dec., p. 253 Sept.-Oct., p. 192 July-Aug., p. 166 Jan.-Feb., p. 43 Nov.-Dec., p. 258 July-Aug., p. 149 Nov.-Dec., p. 262 May-June, p. 100 May-June, p. 105 Jan.-Feb., p. 5 Jan.-Feb., p. 1 July-Aug., p. 166 Nov.-Dec., p. 247 July-Aug., p. 177 TEXAS BUSINESS REVIEW Texas Coastal Land Development and Environ­mental Regulation ENERGY Dependency. Inflation. and the Allocation of ~lexico's Petroleum Reserves The llistory of :'.\annal Gas Pipelines in the Southwest Outlook for the Texas Oil and Gas Industry in 1990 Prospects for Solar Energy in Texas Toward a Solar Texas: The Promise of Photornltaics GOVERNMENT FINANCE The Cost of Foreign Students at Public Cniversities in Texas The Effect of Federal Spending: on Regional Development The Effect of Transfer Payments on the Texas Economy Recent Performance of Zero-Base Budgeting: Systems in the Public Sector HEALTH H\!Os and Competition in Health-Care Delivery: The Case of Tarrant County The Role of Health \laintenance Organizations in Containing Health-Care Costs The Shortage of :'.\urses in Texas HOUSING Geographic Discrimination in the Dallas Home Credit \larket The Outlook for \lultifamily Housing Outlook for the Sing:le-Family Housing \!arket in Texas INDUSTRY STUDIES The Case against Deregulation of the Texas Trucking Industry The Case for Deregulation of the Texas Trucking Industry The Effect of the Antiblackout La\\" on Professional Football Teams in the Sunbelt The Effect of Regulation on Water Sen-ice The Effects of Federal Regulation of the Dairy Industry on Southern Producers External Benefits of High-Technology Industry: The Case of Texas Instruments in Lubbock Factors Affecting Attendance at Sunbelt Major League Baseball Games The Information Technology Industry in Texas: Forecast to I990 :\'OVD!BER-DECEMBER 1981 Kent S. Butler and Valinda Parker C. Richard Bath. John S. Evans. and Dilmus D. James Robert \V . Gilmer Kenneth E. Knight. Terry K. Dorsey. \lichael Stone. and Warren W. Fisher John G. Bordie and John R. Howell \lartin T. l\.atzman and Ronald\\'. \latlin D. Gary Carman Clyde E. Browning V. Howard Savage Duane Windsor Rose \I. Rubin Rose \I. Rubin Mabel A. \\'andelt and Patricia M. Pierce Richard C. Hula Jack Harris Jerome Olson \\'.\\'.Callan Gene C. Uselton Jeff Madura Patrick C. \lann and Paul R. Lefrancois David L Baumer Lewis E. Hill Jeff Madura Kenneth E. Knight. Terry K. Dorsey. Michael Stone. and Warren\\'. Fisher Jan.-Feb.. p. 38 Sept.-Oct.. p. 196 \lay-June , p. 129 July-Aug.. p. 172 \fay-June. p. I09 \lay-June, p. 113 Sept.-Oct.. p. 234 Sept.-Oct., p. 2l 2 Sept.-Oct.. p. 221 Sept.-Oct.. p. 203 \lar.-Apr.. p. 78 Jan.-Feb .. p. 9 \lar.-Apr.. p. 75 July-Aug.. p. 162 July-A.ug .. p. 157 Jan.-Feb.. p. 5 Jan.-Feb. , p. 27 Jan.-Feb .. p. 24 July-Aug.. p. 175 :'.\o\·.-Dec .. p. 281 Jan.-Feb.. p. 19 \lay-June. p. 12 6 :\IJr.-A.pr .. p. 52 \lay-June. p. 122 29 1 Outlook for the Texas Oil and Gas Industry in 1 990 Regional Financial Differences in Intercollegiate Athletics Regulation of Automobile Insurance in the Southwest Results of the Professional Baseball Players' Strike of 198 1 INFLATION AND ECONOMIC CONDITIONS The Dynamics of the Retail Geography of Texas The Effect of Regional Employment Trends on Occupation Mix and Income Distribution The Effect of Transfer Payments on the Texas Economy Narrowing Regional Income Differentials Recent Income and Employment Trends within Regions of Texas Regional Differences in Productivity, Profitability, and Wages Texas and Alberta: A Comparison of Regional Economies The Texas Economy in the Year 2000 Urban Enterprise Zones: Can They Work in the United States? INTERNATIONAL BUSINESS Dependency, Inflation, and the Allocation of Mexico's Petroleum Reserves Export Promotion Policies in Sunbelt States Foreign Trade and the Increasing Importance of Southern Ports Mexico's Assembly Program: Implications for the United States Prospects for Texas and U.S. Trade with China The Value of Imports through U.S. Ports on the Mexican Border LABOR AND EMPLOYMENT The Effect of Regional Employment Trends on Occupation Mix and Income Distribution Industrial Development and an Expanding Labor Force in Brownsville Personnel Administration in the South Central States Recent Income and Employment Trends within Regions of Texas Results of the Professional Baseball Players' Strike of 1981 The Use of Polygraphs to Screen Potential Employees REGIONAL STUDIES The Effect of Federal Policy on Interregional Migration Kenneth E. Knight, Terry K. Dorsey, Michael Stone, and Warren W. Fisher 0. Homer Erekson and Cletus C. Coughlin Joseph C. Samprone, Jr. James B. Dworkin J. Dennis Lord Alessandro Pio V. Howard Savage Lynn E. Browne Joseph E. Pluta Edward M. Miller Robert L. Mansell Thomas R. Plaut William D. Gunther and Charles G. Leathers C. Richard Bath, John S. Evans, and Dilmus D. James Allan R. Posner Ronald P. Wilder Donald W. Baerresen Gordon Bennett Donald W. Baerresen Alessandro Pio Michael V. Miller Harold C. White and Michael N. Wolfe Joseph E. Pluta James B. Dworkin Robert J. Johnson and Patricia M. Shields Patricia Gober July-Aug., p. 172 Mar.-Apr., p. 49 Nov .-Dec., p. 278 Nov.-Dec., p. 268 Nov.-Dec., p. 272 July-Aug., p. 180 Sept.-Oct., p. 221 July-Aug., p. 141 Mar.-Apr., p. 55 May-June, p. 117 Nov.-Dec., p. 241 Jan.-Feb., p. 1 July-Aug., p. 149 Sept.-Oct., p. 196 July-Aug., p. 152 May-June, p. 96 Nov.-Dec., p. 253 May-June, p. 93 Sept.-Oct., p. 192 July-Aug., p. 180 Nov.-Dec., p. 258 Mar.-Apr., p. 85 Mar.-Apr., p. 55 Nov.-Dec., p. 268 Mar.-Apr. , p. 90 Nov.-Dec., p. 262 TEXAS BUSINESS REVIEW The Effei:t of Federal Spending on Regional DeYeloprnent \ arrO\\·ing Region:il Income Differentials Regional Differences in Productivity. Profitability. and Wages The Regional Effect of Environmental Protection Policy Texas and Alberta: A Comparison of Regional Economies REGULATION AND DEREGULATION Airline Deregulation and Potential Urban :\oise Problems _-\ntitrust Problems in Regulating Deepwater Ports: _-\Postmortem on Seadock The Case against Deregulation of the Texas Trucking Industry The Case for Deregulation of the Texas Trucking Industry Changes in Airline Service in Texas since Deregulation The Effect of Regulation on Water Service The Effects of Federal Regulation of the Dairy Industry on Southern Producers Regulation of Automobile Insurance in the Southwest Texas Coastal Land Development and EnYiron­ mental Regulation SMALL BUSINESS The Characteristics of Pick-Your-0\\-n Vegetable ~larketing on the Texas South Plains The Cost and Availability of Credit and Venture Capital: A Southwest Survey Urban and Rural Differences in Small Texas Banks SOCIAL ISSUES The Cost of Foreign Students at Public Universities in Texas Parental Concerns about Raising Children: _-\ Texas Suf\·ey TRANSPORTATION Airline Deregl!lation and Potential Urban 'oise Problems Antitrust Problems in Regulating Deep\\·ater Ports: A Postmortem on Seadock The Case against Deregulation of the Texas Trucking Industry The Case for Deregulation of the Texas Trucking Industry Changes in Airline Service in Texas since Deregulation Costs of Public Transportation in Texas Cities >:OVDIBER-DECEMBER 1981 Clyde E. Browning Lynn E. Browne Ed ward ~I. r-liller John Rees Robert L. Mansell John P. Bradley Benjamin J. Allen W.W. Callan Gene C. Uselton James P. Rakowski Patrick C. Mann and Paul R. Lefrancois David L. Baumer Joseph C. Samprone. Jr. Kent S. Butler and Valinda Parker Claud M. Davidson and C. Judy Davidson Gloria M. Shatto Larry M. Austin and Tarun K. Mukherjee D. Gary Carman Helen Durio and Robert Hughes, Jr. John P. Bradley Benjamin J. Allen W.W. Callan Gene C. Uselton James P. Rakowski Katie N. Womack Sept.-Oct., p. 212 July-Aug., p. 141 May-June. p. 117 Sept.-Oct., p. 21 7 Nov.-Dec., p. 241 Nov.-Dec., p. 275 Sept.-Oct., p. 185 Jan.-Feb. , p. 27 Jan.-Feb., p. 24 July-Aug., p. 146 Nov.-Dec., p. 281 Jan.-Feb., p. 19 Nov.-Dec., p. 278 Jan.-Feb., p. 38 Nov.-Dec. , p. 284 Jan.-Feb., p. 14 Jan.-Feb., p. 34 Sept.-Oct., p. 234 Sept.-Oct., p. 238 Nov.-Dec., p. 275 Sept.-Oct. , p. 185 Jan.-Feb., p. 27 Jan.-Feb., p. 24 July-Aug. , p. 146 Mar.-Apr. , p. 81 ... BBR Publications on Latin America ·-. Atlas of Mexico Arbingast, Stanley A., et al. Revised 1975. 164 pp., some maps in color. $20.00. ISBN 87755-187-1. An economic atlas of Mexico. Credit Systems for Small Scale Farmers: Case Histories from Mexico Williams, Simon, and James A. Miller. 1973. 260 pp. $5.00. ISBN 87755-153-7. Studies in Latin American Business No. 14. An examination of those credit operations touching the Mexican campesinos. A Spanish edition is available from Editorial Diana, Mexico. Economic Integration in Latin America: The Progress and Problems of LAFT A Mathis, F. John. 1969. 112 pp. $4.00. ISBN 87755-076-X. Studies in Latin American Business No. 8. The study is con­cerned primarily with the Latin American Free Trade Asso­ciation as the organization expected to determine the suc­cess or failure of the common market in Latin America. A Spanish edition is available from Editorial Diana, Mexico. Industrial Polarization under Economic Inte­gration in Latin America Garbacz, Christopher. 1971. 101 pp. $4.00. ISBN 87755­138-3. Studies in Latin American Business No. 11. The focus is the tendency for an economic union of countries with widely divergent levels of development to result in further extreme concentration of economic activity at a few industrial poles. Industrialization and Employment in Puerto Rico, 1950-1972 Holbik, Karel, and Philip L. Swan. 1975. 82 pp. $4.00. ISBN 87755-208-8. Studies in Latin American Business No. 16. Although de­velopment programs dating from the 1940s have made pos­sible the emergence of Puerto Rico as an industrialized economy, the economic changes have resulted in certain problems, problems that are a major focus in the book. International Tourism and Latin American Development Krause, Walter, and G. Donald Jud. 1973. 74 pp. $5 .00. ISBN 87755-176-6. Studies in Latin American Business No. 15. The central ques­tions in the work are (1) What is the potential for tourism in Latin America? and (2) What must Latin America do to realize the potential? Mexican Migration and the U.S. Labor Market: A Mounting Issue for the Seventies Briggs, Vernon M., Jr. 1975. 37 pp. $4.00. ISBN 87755­214-2. Studies in Human Resource Development No. 3. An analysis of the effects of U.S. labor, immigration, and border poli­cies on employment and labor problems of the seventies. The Mexican Migration Numbers Game: An Analysis of the Lesko Estimate of Undocu­mented Migration from Mexico to the United States Roberts, Kenneth, Michael E. Conroy, Allan G. King, and Jorge Rizo-Patron. 1978. 33 pp. $4.00. ISBN 87755­228-2. Research Report 1978-1. A detailed account of methods used to enumerate illegal aliens in this country and a critical assessment of this approach. The Mexico-United States Border: Public Poli­cy and Chicano Economic Welfare Briggs, Vernon M., Jr. 1974. 28 pp. $4.00. ISBN 87755­200-2. Studies in Human Resource Development No. 2. A dis­cussion of the effects of U.S. immigration policies. Monetary Accommodation of Regional Inte­gration in Latin America Ziegler, Lawrence F. 1971. 83 pp. $4.00. ISBN 87755­154-5. Studies in Latin American Business No. 12. The author's focus is the monetary side of the Latin American move­ment toward market integration. Social Class and Consumption Behavior in Sao Paulo, Brazil Cunningham, Isabella C.M., et al. 1976. 177 pp. $4.00. ISBN 87755-258-4. Studies in Marketing No. 23 . The authors examined the shopping and consumption behavior of individuals in vari­ous social classes in Sao Paulo. Trade and Industrialization in the Central American Common Market: The First Decade Holbik, Karel, and Philip L. Swan. 1972. 67 pp. $4.00. ISBN 87755-167-7. Studies in Latin American Business No. 13 . The authors trace the development of the Central American Common Market and evaluate its results. The United States and Latin America: The Alliance for Progress Program Krause, Walter. 1963. 35 pp. $4.00. ISBN 87755-070-0. Studies in Latin American Business No. 2. A discussion of the political and economic involvement of the United States with Latin America through the Alliance for Progress. Wage Differences between United States and Guatemalan Industrial Firms in Guatemala Maddox, Robert Casey. 1971. 57 pp. $4.00. ISBN 87755­143-X. Studies in Latin American Business No. 10. The wage levels and factors accounting for differences are analyzed. ,, TEXAS BUSINESS REVIEW Barometers of Texas Business (All figures are for Texas unless otherwise indicated.) All graphs except the one for nonagricultural employment are adjusted for seasonal variation. Data were compiled from the following sources: U.S. Department of Labor, Texas Employment Commission, Texas Railroad Commission, and Federal Reserve Bank. Data on oil refining are current through May 1981 ; data on industrial production are current through Septem­ber 1981; all other data are current through October 1981. Consumer Prices (Index 1967=100) Percentage Unemployed 300 ' Houston United States .." ~ ,I''._,, ~ .. ~ t Dallas-Fort Worth 250 200 150 . 1-9-73-r---T1_9_7_5r----ir1-97-7-r---T1~9~7~9.---,~17 100 -+---.-1_9_7_3 ..... -..-19_7_5-r---~1~9~7~7.--.........-19_7_9-r---~1-9__,81 2.o-+----.-98::-:11 Oil Production and Refining Industrial Activity (Index 1967=100) (Index 1967=100) 275--.--------------------------------------~ 250 160 225 140 200 (127.1) 175120 150 100 ·' ,,._ ,.. ..,,__ ..'' 125 Total industrial production ., •••••••• (80.9) 80 lOO-f----r-19_7_3.,.---T1~9~7~5-r---~1-9_7_7r----r1-9_7_9r---r1-9-8~1 1973 1975 1977 1979 19811 6,250 ~--------------..::___________, 6,000 5,750 5,500 5,250 5,000 4,750 4,500 4,250 4,000 3,750 1,500 1,250 1,000 750 500 250 Total (6,213) Trade (1,514) Services ( 1,096) Manufacturing (1,087) Government (1,048) Construction (436) Transportation and public utilities (390) Finance (354) Mining (287)