What are the economic impacts of short food supply chains? A local multiplier effect (LM3) evaluation

Abstract

Shortening food supply chains attracts increasing support from policymakers, to improve returns to farmers and stimulate rural development. However, there is a lack of empirical evidence regarding the impacts of short food supply chains on local economies. To address this, the article quantifies the impacts of short food supply chains on local economies, using the Keynesian-based Local Multiplier 3 method (LM3), applied to a unique dataset of 122 farm businesses from five European Union countries (France, Hungary, Italy, Poland and the United Kingdom). Estimations cover 305 market chains, comprising both short and long food supply chains, in which sampled farmers participate. The results indicate that the revenues from farm production remain largely within local economies, generating a substantial multiplier effect (LM3 > 2). This effect stems from purchases of farm inputs locally including, in the first instance, hiring local labour, as well as the expenditures of local suppliers that re-spend part of their revenues within the local area. The multiplier effects of short food supply chains are similar to long food supply chain equivalents as both use largely local labour and source tradable inputs locally. In shaping food chain policy a broader set of socioeconomic benefits to local development from selling through short food supply chains should be considered.