The Potential Loss in Gross
National Product and Gross State Product from a Failure to Maintain
A Report prepared for the California
Department of Boating and Waterways
Philip King, Ph.D.
Douglas Symes, M.A
This report looks at how much the U.S. and the
State of California would lose if California's beaches
disappeared--our analysis avoids the most serious problem with
Economic Impact Reports--that people can substitute into other goods
The report was refereed by Rodney Weiher of NOAA
and Bill Stronge of Florida Atlantic University, both of whom are
recognized experts in the fields.
Download Full Report
While previous studies have documented the significant economic
impact created by California’s beaches, the U.S. Office of
Management and Budget’s (OMB’s) current policy limits the Federal
interest in California’s beaches since they believe visitors who
decide not to attend California’s beaches will spend their dollars
elsewhere in the US, creating no net economic or tax impact for the
This study carefully examines the OMB’s assumption and quantifies
the net loss to the State of California and to the US from a failure
to maintain California’s beaches. We analyze the economic loss
to California’s Gross State Product (GSP) and US Gross National
Product (GNP) should California’s beaches cease to exist.
During July, August and September of 2002, we randomly surveyed
2,370 household groups at nine Southern California beach locations
in San Diego, Orange, Los Angeles and Santa Barbara counties. An
additional 349 household groups were surveyed at non-beach tourists’
locations in San Diego and Hollywood.
More than two-thirds of overnight visitors surveyed at beaches said
that they would either not come to the area or would come less often
if there were no beaches.
Visitors to Southern California beaches expressed a strong
preference for out-of-state and foreign travel as a substitute for
beach recreation if California’s beaches were unavailable. At
all beaches surveyed, three quarters of respondents said that they
would travel outside California more than they do now if California
beaches were unavailable.
Our analysis indicates that, with no beaches, California would lose
$5.5 billion in Gross State Product (GSP) annually, while the US
economy would lose $2.4 billion in Gross National Product (GNP)
annually. Please note that these are not economic impact
estimates, but instead reflect the decisions of beachgoers to spend
their money in other states and countries. Unlike economic
impact estimates, where substitution is possible, these estimates
represent a net loss to the US and State economy.
We estimate the total annual economic loss, including direct,
indirect and induced effects to the California economy at $8.3
billion, and $6 billion to the US economy.
State of California would lose $509 million in direct tax losses
annually. If we include indirect and induced effects, the loss
increases to $761 million.
The Federal Government would lose $299 million in direct tax losses.
If we include indirect and induced effects, the loss increases to
$738 million. The California Department of Boating and Waterways
estimates the annual Federal cost of shore protection
for California beaches will be between $12 and $18 million per year,
approximately 4-6% of the direct Federal tax loss.
Foreign and out-of-state visitors comprise a significant percentage
of attendance at key beaches in California. For example, we found
26% of visitors to Venice Beach were foreign and 29% were from out
of state. At Mission beach in San Diego, 41% were from out of state
and 9% were foreign.
analysis does not include the impact of foreign investment in
California real estate on the shore and near beaches. We expect
that a significant loss to the US economy would also occur if this
investment declined but we have not attempted to quantify it in this
study. To the extent that foreign investment is significant, our
estimates understate the loss to the US economy.
If you have any
questions, feel free to e-mail
Other Recent Reports:
Economic Analysis of Beach
Spending and the Recreational Benefits of Beaches in the City of San
Clemente (Spring 2002)
Analysis of Beach Spending and the Recreational Benefits of Beaches in
the City of Carpinteria (Spring 2002)