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Economic Impact of the
Nova Scotia Boatbuilding Industry
Prepared by:
Canmac Economics Limited
Prepared for:
Nova Scotia Boatbuilders Association
December, 2016
ECONOMIC IMPACT OF THE NOVA SCOTIA BOATBUILDING INDUSTRY
CANMAC ECONOMICS LIMITED (902)864-3838 2
Contents Executive Summary ......................................................................................................................... 3
Chapter One – Introduction ............................................................................................................ 7
1.1 Study Purpose .................................................................................................................. 7
1.2 Methodology Overview .................................................................................................... 7
1.3 Report Outline .................................................................................................................. 9
Chapter Two – Nova Scotia Boatbuilding Sector Overview and Impact....................................... 10
2.1 Introduction.................................................................................................................... 10
2.2 Nova Scotia’s Boatbuilding Sector ................................................................................. 10
2.3 Economic Impact ............................................................................................................ 11
Chapter 3 – Conclusions ............................................................................................................... 14
Appendix A – Limitations to I-O Models ....................................................................................... 16
Appendix B – Glossary of Terms ................................................................................................... 20
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Executive Summary
This report provides an economic impact assessment of the Nova Scotia Boatbuilding Industry.
The report measures the direct and total contribution to provincial household income,
employment and provincial output (Gross Domestic Product).
The approach used in this report is an input-output impact assessment of expenditure flows.
First the direct impact of the sector is documented. This is followed by simulations with the
input-output model to estimate total impacts.
Based on simulations with the Nova Scotia input-output model, the economic impact of the
Nova Scotia Boatbuilding Industry is significant. In 2015, the Nova Scotia Boatbuilding Industry
created:
Direct household income of $34.0 million and total household income of $46.7
million.
Direct employment of 667 and total employment of 927.
Direct gross domestic product of $37.4 million and total gross domestic product of
$60.1 million.
ECONOMIC IMPACT OF THE NOVA SCOTIA BOATBUILDING INDUSTRY
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Nova Scotia Boatbuilders Industry is a rural economic activity –
98.5% of establishments are outside the Halifax Region.
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Nova Scotia Boatbuilders is a dynamic industry dominated by new construction sales to Atlantic
Canada. Prior to the 2008 financial crisis recession the opposite was true. The sector was
dominated by recreational boat sales to the U.S.
2003 = $82 Million
2004 = $85 Million
2015 = $89 Million
41,000,000
37,000,000
12,000,000
Total Sales Breakdown
by Boat Type, 2015
Commercial fishing boats
Other commercial boats
Recreational boats 77,600,000
5,800,000
5,700,000
900,000
Total Sales Breakdown
by Market Destination, 2015
To Atlantic Region
To Canada, but outsideAtlantic Region
To USA
To Overseas
$52,000,000.0
$37,000,000.0
$1,000,000.0
Total Sales Breakdown
by Type of Work, 2015
New Construction
Refit/Repair/Service
Boat Storage
40
50
60
70
80
90
100
Mill
ions
$
Annual Sales - Nova Scotia Boatbuilders Industry
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Employment (Jobs)
Direct Spinoff
GDP
Direct Spinoff
Household Income
Direct Spinoff
$60,906,569 $45,662,123 927
BOAT
MANUFACTURE
Electricity
Repair Construction Services
Paints, coatings & adhesives
Iron & steel basic shapes and
fabrication
Iron & steel pipes and tubes
Builders, motor vehicles and other
Coating, engraving, heat treating
Custom work, Manufacturing
Wages & Salaries
Retail
Wholesale
Exports
Fishery
Truck
Transportation
Architectural, Engineering
Business Services,
Legal, banking,
accounting
$60,906,569 $45,662,123 927
ECONOMIC IMPACT OF THE NOVA SCOTIA BOATBUILDING INDUSTRY
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Chapter One – Introduction
1.1 Study Purpose
This report provides an economic impact assessment of the Nova Scotia Boatbuilding Industry.
The report measures the direct and total contribution to provincial household income,
employment and provincial output (Gross Domestic Product).
1.2 Methodology Overview
The approach used in this report is an input-output impact assessment of expenditure flows.
First the direct impact importance of the sector is documented. This is followed by simulations
with the input-output model to estimate total impacts.
The direct sector impact is specified by key performance indicators for each component. These
are –household income, Gross Domestic Product (consistent with I-O definitions) and direct
employment (full time equivalent).
The total economic impact consists of the direct, indirect and induced impacts. Indirect and
induced impacts are obtained from simulations with the latest Statistics Canada data. Figure 1.1
illustrates the process. The first step is to convert the direct sector data into the social
accounting framework used by the I-O system. The next step is to structure the simulation
appropriately to ensure that double counting of forward and backward linkages are avoided.
The final step is simulation with the latest Statistics Canada I-O Model.
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Figure 1.1: I-O Model Process
Direct Impact
Purchase boatbuilding services
Indirect Impact
Supplier employees spend their income
Household Induced Sector
Employees Spend their
income
Suppliers purchase
goods & services
Households
purchase
goods & services
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1.3 Report Outline
The report consists of three chapters (including the present one) and supporting appendices.
Chapter Two is the main analytical chapter. It presents the total economic and fiscal impacts
that result from the economic model simulations. Chapter Three provides concluding
comments on the impact results. Appendices provide 1) a discussion of the Nova Scotia Input-
Output Model strengths and limitations, 2) definition of terms, and 3) more detailed results.
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Chapter Two – Nova Scotia Boatbuilding Sector Overview and Impact
2.1 Introduction
This chapter sets out a sector overview in Section 2.2. Section 2.3 provides the economic
impact results.
2.2 Nova Scotia’s Boatbuilding Sector
Nova Scotia’s boatbuilding sector represents a dynamic growth industry for the Nova Scotia
economy. Chart 2.1 shows total sales growth over the 1998 to 2015 period. In 2015, sales
reached $89 million, the best sales level over the 1998 to 2015 period. Sales are expected to
grow by 12% in 2016.
CHART 2.1: ANNUAL SALES
40
50
60
70
80
90
100
Milli
ons $
Annual Sales - Nova Scotia Boatbuilders Industry
2003 = $82 Million
2004 = $85 Million
2015 = $89 Million
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Nova Scotia’s boatbuilding sector’s 2015 sales were concentrated in the Nova Scotia fishing
industry – 46% of sales. Sales to the Atlantic region (87.4%) dominated the geographic market
destinations. As shown in Chart 2.2, new construction (61.8%) was the primary type of work in
2015.
CHART 2.2: TOTAL SALES BREAKDOWN
2.3 Economic Impact
The Nova Scotia boatbuilding sector represents a vibrant economic sector with significant
backward and forward linkages. Chart 2.4 shows the sector’s cluster map – a listing of its major
direct suppliers and sales destinations. The largest input into the sector is wages and salaries
(30.1%). The largest supplier is custom work manufacturing (15.7%).
41,000,000
37,000,000
12,000,000
Total Sales Breakdown
by Boat Type, 2015
Commercial fishing boats
Other commercial boats
Recreational boats
$52,000,000.0
$37,000,000.0
$1,000,000.0
Total Sales Breakdown
by Type of Work, 2015
New Construction
Refit/Repair/Service
Boat Storage77,600,000
5,800,000
5,700,000
900,000
Total Sales Breakdown
by Market Destination, 2015
To Atlantic Region
To Canada, but outsideAtlantic Region
To USA
To Overseas
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In 2015 the Nova Scotia boatbuilding sector’s sales of $89.3 million resulted in significant
spinoff effects. Table 2.1 shows the economic impact simulation results using the latest Nova
Scotia Input-Output model from Statistics Canada. The results of the simulation show that the
sector created:
BOAT
MANUFACTURE
Electricity
Repair Construction Services
Paints, coatings & adhesives
Iron & steel basic shapes and
fabrication
Iron & steel pipes and tubes
Builders, motor vehicles and other
Coating, engraving, heat treating
Custom work, Manufacturing
Wages & Salaries
Retail
Wholesale
Exports
Fishery
Truck
Transportation
Architectural, Engineering
Business Services,
Legal, banking,
accounting
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$60.9 million in provincial GDP
$45.7 million in household income
927 in employment (full time equivalent jobs)
Table 2.1: Nova Scotia Input-Output Summary Report Nova Scotia Boatbuilders Association
Economic Impact Total Output ($) Household Income ($)
Employment (Jobs)
GDP@Basic Prices ($)
Direct Impact $89,300,000 $34,011,970 667 $37,435,259
Spinoff Impact $38,824,724 $11,650,153 260 $23,471,310
Total Impact $128,124,724 $45,662,123 927 $60,906,569
CHART 2.3: ECONOMIC IMPACT
The final impact from the household income is estimated at $8.2 million.
GDP
Direct Spinoff
Employment (Jobs)
Direct Spinoff
Household Income
Direct Spinoff
$60,906,569 $45,662,123 927
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Chapter 3 – Conclusions
The Nova Scotia Boatbuilding Industry is an important contributor to the economic
development of the Nova Scotia economy. It’s contribution is twofold. First, it contributes
directly by export sales outside Nova Scotia. Secondly, it contributes as an important
component of the fishery sector cluster. The presence of a strong, innovative boat construction
capability in the province ensures the fishery has direct access to the latest design and
innovation in the sector. As reported in Chapter 2, the sector provided in 2015, economic
contributions as follows:
$60.9 million in provincial GDP
$45.7 million in household income
927 in employment (full time equivalent jobs)
To put this in perspective, Table 3.1 shows the provincial economic contribution of other
manufacturing subsectors in Nova Scotia.
Table 3.1: Provincial Economic Contribution of Selected Manufacturing Subsectors
Sector GDP@Basic Prices ($)
Household Income ($)
Employment (Jobs)
Wineries & Distilleries $17,914,923 $8,264,569 236
Clothing & Leather & Allied Product Manufacturing $51,653,171 $32,505,815 945
Textile & Textile Product Mills $62,124,330 $41,451,647 903
The Nova Scotia Boatbuilding sector’s economic impact is also significant from a spatial
perspective. 98.5% of the sector’s output is produced outside the Halifax region. Hence, it
contributes significantly to employment in rural Nova Scotia where economic opportunities are
more limited.
Table 3.2 shows the importance of Nova Scotia’s Ship and Boatbuilding sector in 2015 using
Statistics Canada I-O table. Nova Scotia ranks highest in this regard for all ten provinces. Taking
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as input Statistics Canada’s total output for the Ship and Boatbuilding sector and simulating the
total GDP generated from this output, we find the impact represents 0.62% of Nova Scotia’s
total GDP. As shown in Table 3.2, the next largest is Newfoundland at 0.39% of GDP.
Table 3.2: Economic Importance Nova Scotia Ship and Boatbuilding Sector
Total Output Ship & Boatbuilding
Total GDP
Provincial GDP (Chained 2007$)
Ship & Boatbuilding as a % of Total Output
NL $137,269,000 $100,254,480 $25,688,100,000 0.39028
PE $5,052,000 $2,025,274 $4,674,500,000 0.04333
NS $297,066,000 $202,612,216 $32,559,900,000 0.62228
NB $1,252,000 $838,465 $26,418,800,000 0.00317
QC $247,850,000 $187,928,144 $313,675,800,000 0.05991
ON $149,607,000 $123,526,811 $617,456,500,000 0.02001
MB $3,369,000 $2,176,201 $54,609,400,000 0.00399
SK $94,000 $56,721 $59,389,300,000 0.00010
AB $8,499,000 $5,050,814 $299,602,700,000 0.00169
BC $422,996,000 $342,055,013 $210,909,800,000 0.16218
Source: Statistics Canada/Canmac Economics Ltd.
In conclusion, the Nova Scotia Boatbuilding sector provides a valuable contribution to the
economic life of the provincial economy.
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Appendix A – Limitations to I-O Models
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An input-output model, like any model, is an approximation to reality. It is built on assumptions
that are never fully realized in the real world. While most analysts are well aware of the
limitations of any I-O model it may be helpful to the general reader to review these limitations.
INPUT-OUTPUT LACKS AN EXPLICIT TIME DIMENSION
An input-output system provides a snapshot of an economy for a period of time (usually a one-
year period). If the economy is in disequilibrium, all future uses of the tables and the related
impact models will reflect the structural implications of the atypical year.
Multiplier effects do occur over time. However, the impact models associated with input-
output systems imply that the multiplier effects are virtually instantaneous. There is some
evidence to show that the multiplier effects take from two or three years to move through an
economy.
SENSITIVITY TO RELATIVE PRICE CHANGES
Relative prices between commodities will change from the base year of model construction to
the period in which the model is used. Therefore, the analysis of projects via input-output
analysis in the future will reflect one set of relative prices, while the direct requirements
coefficients in the tables reflect the relative prices of the base year. If the relative price
changes are not accounted for, future data supplied to the impact model will produce
“incorrect” impact results.
For example, say, in 1984 an industry required $100 of lumber for every $1,000 of output (i.e.
10 percent of inputs). If an analysis of the same industry were conducted in 2011, prices for the
same volume of lumber may have increased to $150 while inflation on all other inputs was only
10 percent. Therefore, the total output value (for the same amount of production) is now
$1,140, of which lumber is 13.2 percent of inputs. The relative price change in lumber has
caused an increase in the size of its technical coefficient. Using unadjusted data in the 2011
model would produce incorrect impact results to the extent that relative prices change.
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CONSTANT TECHNOLOGY
As mentioned earlier, the input-output system is a static model. However, times change and so
do the technologies used. To mitigate this limitation, most input-output systems are updated
on a periodic basis. The PEI Input-Output system has been updated over the years. Such an
update picks up any technology changes in the economy. Between updates no changes in
technology are assumed.
CONSTANT RETURNS TO SCALE
Input-output systems assume constant returns to scale; that is, all inputs change in the same
proportion as any change in an industry’s output. This assumption implies that even for one-
dollar increase in sales, the model will show impacts on wages, salaries and employment
associated with the multiplier effects. However, common sense tells us that this is not true.
Such a small increase would not necessarily cause, especially in the short run, generation of a
commensurate increase in wages or employment. However, in the long run, it can be assumed
that even a small increase in final demand will produce the multiplier effects estimated by an
input-output system.
In the short run, industries can draw on inventories, use their labor more efficiently, etc. to
increase output with limited impact effects. However, if the new level of final demand is
maintained, then firms in the long run will move back to their historical steady-state level of the
utilization of factors of production. In the long run, increases in, say, household income due to
increases in final demand will reflect the technical coefficients’ relationship between income
and output modeled in the input-output system.
NO SUPPLY CONSTRAINTS
Input-output systems assume that whatever is demanded by industries as inputs can be
supplied. They assume no productive capability constraints. This problem is not significant
when there is excess capacity in an economy. However, when economies are operating at or
near capacity, this limitation is important. The multipliers for an economy near capacity will be
underestimated. This is because increased final demand will require new capital investment
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whose own direct and multiplier effects are not captured within the standard input-output
system.
FIXED CONSUMPTION PATTERNS
The consumption patterns that result in household re-spending multipliers are assumed to be
fixed and linear. As Canadians become “better off” they redirect real growth in income to
savings and luxury consumption. Because the input-output system is static, it does not model
the effect of non-linear patterns in household consumption (as real incomes increase) within its
multiplier estimates. This problem is partially overcome by regularly updating input-output
systems.
CONCLUSION
Although the list of limitations may appear long, a similar or longer list is associated with almost
any form of economic analysis. The limitations occur in different areas in other analytical tools.
No one economic model is expected to provide the comprehensive “answer”. Economic
analysis techniques should be used in a complementary fashion to appreciate the full scope of a
problem. In a very real sense, then, quantitative economic models should be used to examine
the structural implications of changes in an economy and should not be treated as providing
“the” answer.
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Appendix B – Glossary of Terms
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Glossary of Terms
Direct Impact All 'first round' economic activities which contribute to GDP, employment, household income. These can vary from investment in a new or expanded facility to wages paid to employees directly involved in production of the operation for which an impact statement is required. Gross Domestic Product (GDP) The measure of economic activity in an economy, in this case the Nova Scotia economy. GDP measured on an expenditure basis is expressed as: GDP = C + G + I + X - M where: C = Personal consumption (expenditure) of goods and services. G = Government expenditures on goods and services. I = Investment in capital, machinery equipment and inventories. X = Exports of goods and services. M = Imports of goods and services. GDP is also measured on an income basis and consists of :
- labour income - corporate profits before taxes - interest and investment income - net farm income - unincorporated business income - inventory valuation adjustment - indirect taxes less subsidies - capital consumption allowance
Gross domestic product of an industry is the value added by labour and capital in transforming inputs purchased from other producers into outputs.
Indirect Impact All 'subsequent rounds' of economic activities which contribute to GDP, employment, household income. These activities are not directly associated with the production activity but are a result of direct production activities. These indirect contributions also include 'induced contributions' which measure the economic activity associated with the respending of wages paid in the direct, indirect, and to a lesser extent earlier rounds of induced activity.
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Input-Output (I-O) The input-output model measures the wide economic impact of a direct economic event by the known inter-industry dependency in the given economy. Different sectors of an economy depend on other sectors of the economy to supply its inputs or purchase its output to varying degrees. The imbalance in this supply/demand relationship is made up by imports (supply) and exports (demand).
The input-output model measures total economic activity defined as direct + indirect + induced activities. For an explanation on direct, indirect and induced activity see preceding GDP definition.
Input-Output Multipliers Relate the indirect and induced impact by industry to the direct increase or reduction of the output of a given industry. The sum of all industries indirect and induced impacts plus the direct industry impact equals the total impact.
Multipliers are produced for output, income, GDP, and employment.