Eco-System Services of Forests and Labour Market Effects - a Statistical Counterfactual Analysis

Forests provide many ecosystem services, spanning from productive outputs like timber to recreational amenities and preventative services such as shielding settlements from rockfalls, landslides, and avalanches. Industries situated in these protected areas reap these benefits without direct financial contributions. While rural regions are primary beneficiaries, intermediate and urban areas also enjoy these services, albeit to a lesser extent. However, the protective capacity of forests faces escalating threats due to climate change, resulting in more severe storms, increased forest fires, and heightened bark beetle infestations. Simultaneously, economic development and population growth amplify the demand for these services. Our interdisciplinary research project explores the economic advantages of protective forests, focusing on potentially protected rural areas susceptible to hazards. Maps pinpoint potential threats and aid in identifying economically valuable assets, like infrastructure and jobs, vulnerable to these perils. The study examines Austria, an ideal case due to its rural regions contributing significantly to manufacturing and services jobs, with protection forests playing a pivotal role due to the country's topography. Utilizing protective forest maps, area information, and employment data, we analyze the potential job displacement if firms in less location-bound industries relocate to less vulnerable regions. Assuming agglomeration benefits drive relocation decisions, our model envisions firms selecting the nearest intermediate or urban region with the relevant industry employment share. In this scenario, employees face the dilemma of either trailing their firms or seeking new job opportunities in a more limited job market. Commuting or relocating becomes a necessity, with longer distances to workplaces in the counterfactual scenario we analyze. Our primary interest lies in understanding the labor market dynamics, quantifying the number of jobs directly reliant on ecosystem services, and predicting potential job displacements if protective forests no longer offer these benefits. The results hold implications for industries like agriculture, forestry, quarrying, and tourism, which are less likely to relocate, further shaping the labor landscape and commuting patterns.