Coefficient Change in Embedded Econometric and Input–Output Models at the Regional Level

This paper examines the nature of coefficient change in integrated econometric (EC) and input–output (IO) models that employ an embedding strategy. Existing approaches towards coefficient change in integrated models are first reviewed and several substantive processes that give rise to dynamic coefficients at the regional level are identified. The main sources of coefficient change arise from dynamic adjustment processes that affect the regional purchase coefficients, regional technological coefficients and regional integration parameters. Each of these sources of change requires a different treatment when adopting an EC perspective. A general framework is suggested that nests each treatment as a specific case. The different specifications are then implemented in an embedded EC and IO employment demand model for the San Diego region, and evaluated through a series of in-sample and out-of-sample forecasting experiments. Simulation performance is found to improve through the use of a time-varying integra tion parameter. The results also indicate that model performance is more sensitive to the use of dynamic regional purchase coefficients than to the use of dynamic technical coefficients.     

Decomposing Input–Output Tables to Establish the Effects of Temporal Changes in Demographic and Economic Characteristics

This paper reports on an analysis of economic and demographic changes in the UK during the period 1981–91, using an extended input–output (IO) formulation designed to measure impacts of such changes in economic and demographic systems. We derive a simple temporal change decomposition method and apply it to the extended IO formulation. This is then linked to a labour market account decomposition, and the conjoint decomposition applied to two labour market accounts and two IO tables for the UK. We are able to identify the impacts on the demographic and economic systems caused by changes in the economy, economic activity of the population, natural population change, migration and coefficient shifts of different types.     

TESTING ASSUMPTIONS MADE IN THE CONSTRUCTION OF INPUT–OUTPUT TABLES

Product input–output (IO) tables are mainly constructed on the basis of product and/or industry technology assumptions. The choice is not trivial and deserves empirical analysis using input and output data at the level of establishments. This paper offers input–output compilers econometric tests to facilitate the construction of tailored hybrid technology-based product IO tables. We provide weighted likelihood ratios of the product and industry technology assumptions. Although the proposed econometric tests are aimed to be used ex ante, we construct four variants of hybrid technology-based product IO tables using establishment data from Andalusia (Spain) and contrast them to the official product IO table and the pure product and industry technology-based tables. Our econometric tests are not valid for industry IO tables.     

Regionalizing National Commodity-by-Industry Accounts

Exended input–output (IO) models are increasingly prominent in regional economic analysis. Social accounting matrices and associated multiplier decompositions, IO econometric model hybrids and computable general equilibrium models are finding greater acceptance in contexts in which simple IO models once dominated. Although the extended regional models build primarily on the foundation of regional, interindustry accounting frameworks, the data from which these regional accounts are drawn are most commonly in the form of a national commodity-by-industry account. Despite this longstanding fact, the IO table adaptation literature has focused almost solely on methods of adapting national interindustry accounts to regional economies. This paper presents a method designed specifically to regionalize commodity-by-industry accounts, in the context of the US reporting system. The focus on commodity-by-industry data demands a confrontation with several important issues that otherwise might go unattended. Using a particular system and its accompanying classification scheme ensures a comprehensive and consistent regionalization method.     

Interregional Input–Output Modelling in Indonesia: A Constrained Growth Rate Approach with Endogenous Investment

In interregional input–output (IO) models, investment can be endogenized in many different ways, varying from dynamic Leontief-type solutions to computable general equilibrium (CGE) models. However, large versions of these models are difficult to implement because of the absence of the required data. In this paper, a different, less data-demanding treatment of regional investment is presented for an interregional IO forecasting model in which a simultaneous solution is given for regional GDP by industry, on the one hand, and for regional aggregate investment, on the other hand. In this way, investment plays its role as a disaggregate demand factor by industry and region, as well as being an aggregate supply constraint on regional capital stock at the same time. Some empirical results are presented for a 27-region model in Indonesia, which has been used by the government during the preparations for the new national 5-year plan for 1994–1999.     

Queensland State Impact and Projection Model: The Household Sector

The Queensland Impact and Projection model is an integrated input–output econometric model of the Queensland economy. Its purpose is to complement a conventional input–output model for analyzing economic impacts at the state level. This paper provides an overview of some of the methods used to model the household sector in an input–output framework, before describing the approach taken in the Queensland model. Some results which support the empirical performance of the model are also provided. It is demonstrated that the integrated model is a viable alternative and improvement on the conventional input–output model. The results are consistent with the static input–output model and conform to expectations about how the economy responds in real impact situations.     

Environmental Accounting of Eco-innovations through Environmental Input–Output Analysis: The Case of Hydrogen and Fuel Cells Buses

The introduction of environmentally friendly innovations in both transport and energy sectors are included in the list of priorities of the European Union political agenda. This paper investigates the environmental consequences of the introduction of hydrogen and fuel cells technology in the European economic system by applying environmental input–output analysis and life cycle assessment tools. Hydrogen is produced through the reforming of natural gas and it is employed in fuel cells buses that offer transport services to final consumers. We have built three scenarios based on different assumptions on the final demand. We have shown the results for three impact categories: global warming, photochemical oxidation and acidification. The results suggest that the use of hydrogen in fuel cells buses is only environmentally desirable if accompanied either by the employment of renewable sources or by carbon dioxide capture, or both.     

Closing the Canadian Input–Output Model: Homogeneous vs Non-homogeneous Household Sector Specifications

This paper addresses, on both theoretical and empirical fronts, the task of endogenizing the household sector in a rectangular input–output (IO) model. The formulation of Miyazawa (1976) for square models is extended to the development of an impact matrix for rectangular models. This allows for the numerous household revenue sources to be built into the model. A closed model with non-homogeneous households is developed where individuals are modelled individually and by industry. The perform ance of the non-homogeneous household sector model is compared with a model that has a homogeneous household sector. The model with the non-homogeneous household sector is more sensitive to changes in wages and salaries than to changes in final demand.     

A Synthetic Approach to Projecting Input–Output Tables

This paper describes an approach used in the Canadian input–output (IO) accounts, which seeks to enhance the timeliness of the tables. It combines traditional updating methods, balancing techniques and the most recent data. To assess the performance of this approach, aggregate estimates from the synthetic accounts are presented for two years, and compared with estimates from benchmarks and with estimates obtained from a mechanical estimation technique. The results show that most IO components can be estimated with a relatively small estimation error and that substantial accuracy is gained from using the synthetic approach compared with a mechanical technique. Results based on data which are two years away from IO benchmarks are obtained at the cost of large errors. Synthetic estimates of the IO accounts improve the timeliness problem by at least a full year.     

A Disaggregated Econometric Model Based on Flexible Functional Forms

This paper introduces an econometric input—output model for Western Germany in a disaggregation of 12 commodities and sectors. The ‘Jorgenson’-type equilibrium model is based on flexible functional forms on the supply and on the demand side of the commodity markets. For intermediate demand, the relationship between the translog function and its special cases—the Cobb-Douglas function— is exploited. Prices and production are endogenized by market-clearing conditions. The fully integrated model also endogenizes capital accumulation, a rudimental govern-ment budget and income distribution, as well as wages and labour demand on rationed labour markets. The results of a dynamic ex post simulation show that the model is able to depict the sectoral economic development in Germany in the sample period from 1970 to 1986.     

A New Method for the Identification of Patterns in Input–Output Matrices

This paper suggests a new algorithm for selecting the input–output (IO) coefficients of a Leontief matrix in order of importance, so providing an analytical method for decomposing an IO matrix. It avoids the choice of arbitrary thresholds for eliminating flows or coefficients, and allows for circular relationships. For this purpose, a simple inverse-important criterion has been chosen, which is consistent with the logic of the Leontief model. A procedure that greatly reduces the computational burden is then devised. This method permits new comparisons of IO structures of different countries or regions, for identifying their different degree of internal integration and their reciprocal influence through the exchange of intermediate goods. An application to an IO model for seven European Community countries for 1980 is then presented.     

European Community Intercountry Input–Output Relations: Construction Method and Main Results for 1965–85

Eurostat constructs consolidated input–output (IO) tables for the European Community (EC) by means of an aggregation of the domestic and the intra-EC import matrices from the harmonized national IO tables. Intercountry EC IO tables can be constructed by disaggregating the intra-EC imports according to country of origin, with coefficients derived from international trade statistics. These procedures, however, produce inadequate outcomes for several reasons. The most important reason is that the imports are valued in ex-customs prices, instead of the theoretically more appropriate producers' prices. This paper analyzes the nature of these and other data problems, and describes a more extensive and satisfactory method to construct intercountry and consolidated EC IO tables. The empirical results are illustrated by an analysis of the domestic and intercountry intersectoral spillover effects for 1965–85.     

A POST-KEYNESIAN AGE MODEL TO FORECAST ENERGY DEMAND IN SPAIN

This paper develops an extended input–output model for the estimation of energy demand and related issues. It is built on the last Spanish Symmetric Input–Output Table (IOT, 2005). It has been tested for the period 2005–2008 and used for forecasting energy demand for the years 2009–2012 under different economic scenarios. The model shares some traits of the computable and applied general equilibrium models where quantity and price systems are interwoven. The differences lie in the theories explaining output and prices. Our quantity system is based on Keynes’ principle of effective demand (broad energy multipliers are derived). The price system is based on the classical (Sraffian) theory of prices of production, akin to post-Keynesian full-cost prices. The general price system can be manipulated to account for the specificities of energy prices. Historical trends of energy coefficients are computed by extrapolation of past IOTs and calibration.     

Analysing Materials and Energy Flows in an Industrial District using an Enterprise Input–Output Model

Recent approaches to sustainable development leave much room for policies at a local level. In fact, it is becoming evident that targets such as increasing resource productivity, preserving natural cycles, or extending the present level of welfare, are best pursued within the confines of a local area. In particular, environmental changes are best brought about by considering local systems of firms as cornerstones of cooperative strategies and using data on materials and energy use in physical terms. In this paper, an enterprise input–output model is developed for an industrial district, i.e. a local group of firms specialized in the production of a single final output. The model allows for a detailed quantitative analysis of materials and energy flows and the consequent generation of waste and pollution. As a planning tool, the model may be used to evaluate alternative scenarios, such as the possibility of re- using waste taking account of sustainability requirements. An empirical case study applies the model to an industrial district in Southern Italy producing leather sofas.     

Comparison of Input–Output,Input–Output + Econometric and Computable General Equilibrium Impact Models at the Regional Level

Economic impact studies are a common practice—indeed, a necessary prerequisite in many cases of project development—in Australia. Although input–output (IO) is still regarded as the ‘bread-and-butter’ model for these types of study, attention in recent years has turned towards more sophisticated models, the main contenders being integrated IO + econometric and computable general equilibrium models. All these models, which are often promoted as substitutes, exhibit characteristics which are theoretically and empirically appealing, yet questions have been raised with respect to the different approaches, with apparently little awareness at the practitioner level as to the extent of these differences. This paper compares the three models and demonstrates that the differences can be quite substantial, even when the models rely on the same database and are subjected to the same impact scenario.     

ECONOMETRIC ANALYSIS OF EUROPEAN CARBON DIOXIDE EMISSIONS BASED ON RECTANGULAR SUPPLY-USE TABLES

This paper formalises the so-called Supply-Use Based Econometric (SUBE) approach that allows for the introduction of econometric analysis in the calculation of backward input–output multipliers of the Leontief-type quantity model, using rectangular supply and use tables. The SUBE approach does not require any kind of inverse matrix and incorporates the traditional approach (with square supply-use tables) as a particular case. The empirical analysis shows that the SUBE carbon dioxide multipliers for the EU27 are considerably lower than those obtained by the traditional Leontief inverse. In an application of the SUBE approach, the European economy appears to emit about 10% less carbon dioxide than in a situation in which it would not import any intermediate inputs from outside the EU27.     

Effective Rates of Sectoral Productivity Change

In effective rates of sectoral productivity change, some of the inputs are treated as produced. Here, this is extended to cover all the inputs. All the sectoral rates of productivity growth based on a static input–output (IO) framework are shown to be equal to the corresponding rates of decrease in the production price. For the direct rate, all the input prices are treated as exogenous constants. For the effective rates, prices of the inputs, which are treated as produced, are determined by production technology. The fully effective rate is derived from the price equations of the closed dynamic IO model. It is equal to the rate of decrease in the production price when the prices of all inputs, human capital and human time included, depend on production technology. The overall rate, obtained as a weighted sum of the fully effective sectoral rates, is equal to the rate of growth in the growth potential of the economy.     

THE EXTENDED ECONOMETRIC INPUT–OUTPUT MODEL WITH HETEROGENEOUS HOUSEHOLD DEMAND SYSTEM

This paper proposes an extension to the regional econometric input–output model (REIM) [Conway, R.S. (1990) The Washington Projection and Simulation Model: A Regional Interindustry Econometric Model. International Regional Science Review, 13, 141–165; Israilevich, P.R., G.J.D. Hewings, M. Sonis and G.R. Schindler (1997) Forecasting Structural Change with a Regional Econometric Input–Output Model. Journal of Regional Science, 37, 565–590]. We integrate a demand system with age and income parameters into the REIM. The extended model thus addresses concerns about the effects of household heterogeneity. The initial testing is conducted with a model for the Chicago metropolitan area. First, using aggregate expenditure data by income and age groups, the almost ideal demand system with group fixed effects is constructed. Next, the estimated demand system is linked to the REIM to reflect long-term changes in the age and income distribution of households. The long-range simulation from the extended model takes into account structural changes in expenditure type stemming from changing demographic composition. The extended model further broadens the scope of impact analysis under various scenarios associated with age and income changes.     

How Japan–US Economic Interdependence Changed from 1985 to 1990: Some Findings from Price-adjusted MITI Intercountry Input–Output Tables

This paper consists of two parts. First, constant-price Japan–US intercountry input–output (IO) tables are compiled, based on Japan–US IO tables of the Ministry of International Trade and Industry (MITI) for 1985 and 1990, and the relative producer prices of both countries, which are estimated by the ‘peeling off’ method from OECD purchasing power parity data. Second, a factor decomposition analysis is carried out to show changes in Japan–US economic interdependence between 1985 and 1990. The Leontief inverse matrices of intercountry IO tables are decomposed into three matrices, which reflect domestic repercussion effects, spillover effects to the other country and feedback effects of own final demand from the other country. Then, a traditional decomposition analysis of changes in production for both countries is applied to see how both countries' economic interdependence changed. It is found that Japan–US economic interdependence moved from a pattern of Japan's dependence on the US to an almost equally interdependent pattern, although the degree of dependence was still higher in Japan in 1990. At the same time, there are significant industrial structural changes in the relationship between both countries, as a result of the significant appreciation of the yen relative to the dollar from 1985 to 1990.