Using Charm to Adjust for Cross-Hauling: The Case of the Province of Hubei,China

Data for the Chinese province of Hubei are used to assess the performance of Kronenberg's Cross-Hauling Adjusted Regionalization Method (CHARM), a method that takes explicit account of cross-hauling when constructing regional input–output tables. A key determinant of cross-hauling is held to be the heterogeneity of commodities, which is estimated using national data. However, contrary to the authors’ findings for Finland, CHARM does not generate reliable estimates of Hubei's sectoral exports, imports and volume of trade, although it is more successful in estimating sectoral supply multipliers. The poor simulations of regional trade are attributed to the fact that Hubei is a relatively small region, where there is a large divergence between regional and national technology and pattern of final demand. The simulation errors are decomposed into components reflecting differences between regional and national technology, final demand and heterogeneity. The third component is found to be the least important of the three sources of error.     

International trade,pollution, and economic structure: evidence on CO2 emissions for the North and the South

This study investigates the mechanics of international trade and CO₂ emissions in two blocs of countries (‘North’ and ‘South’) by analyzing data from the World Input–Output Database. We adapt the Miyazawa technique to estimate the linkages between international trade and the environment at a global scale. Therefore, this study is in line with the idea of highlighting the role of feedback effects as well as the nature and extent of extra-regional influences on an economy in response to an additional stimulus. This is a contribution that, to our best knowledge, has not yet appeared in the literature. Our results suggest that both the North and the South have become less pollution-intensive (technique effect) over the years. Interestingly and in contrast to much of the literature, we also find support to the hypothesis that the South has specialized in relatively more pollution-intensive activities (composition effect).     

The Global MRIO Lab – charting the world economy

ABSTRACT

We describe the creation of the Global Multi-Region Input–Output (MRIO) Lab, which is a cloud-computing platform offering a collaborative research environment through which participants can use each other’s resources to assemble their own individual MRIO versions. The Global MRIO Lab’s main purpose is to harness and focus previously disparate resources aimed at compiling large-scale MRIO databases that provide comprehensive representations of interregional trade, economic structure, industrial interdependence, as well as environmental and social impact. Based on the operational Australian Industrial Ecology Lab, a particularly important feature of this cloud environment is a highly detailed regional and sectoral taxonomy called the ‘root classification’. The purpose of this root is to serve as a feedstock from which researchers can choose any combination of regions and economic sectors to form a model of the economy that is suitable to address their particular research questions. Thus, the Global MRIO Lab concept enables enhanced flexibility in MRIO database construction whilst at the same time saving resources and avoiding duplication, by sharing time- and labour-intensive tasks amongst multiple research teams. We explain the concept, architecture, development and preliminary results of the Global MRIO Lab, and discuss its ability to continuously deliver some of the most prominent world MRIO databases.     

U.S. Strategic Trade Policy and the Competitiveness of the U.S. Construction Industry in Developing Country Markets

SUMMARY

U.S. government trade policy increasingly reflects “strategic trade” beliefs that, because competition in markets is imperfect, governments can act strategically to affect trade flows and enhance national welfare. The U.S. National Export Strategy targets the infrastructure sector in twelve developing countries as a strategic opportunity for U.S. construction firms. This paper examines whether U.S. government export promotion initiatives effectively implement strategic trade policy by providing appropriate support to these firms in that target market. It concludes that, within limits, they do.     

CONSTRUCTION OF MULTI-REGIONAL INPUT–OUTPUT TABLES USING THE CHARM METHOD

Subnational multi-regional input–output tables (IOT) are important tools for studying interregional socio-economic and/or environmental interrelations that help to address a wide range of current societal, ecological and economic challenges. However, the lack of subnational input–output data is a major obstacle which leads to a wide use of non-survey methods. Like other non-survey methods, the cross-hauling adjusted regionalization method (CHARM) was originally developed for the construction of single-regional IOT. In this paper, we extend CHARM to the case of bi- and multi-regional IOT. We find that the original CHARM formula has two limitations that are also of great importance for the single-regional case: First, cross-hauling in interregional trade is implicitly set to zero and, second, accounting balances may be violated owing to structural differences between the regional and national economies. We present a modified formula addressing these issues and examine its performance in terms of a case study.     

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.     

Alternative Approaches of Physical Input–Output Analysis to Estimate Primary Material Inputs of Production and Consumption Activities

In the last few years, a number of studies have been presented that link material flow accounting and input–output analysis (based on monetary input–output tables) for the calculation of direct and indirect resource inputs for production and consumption activities. The compilation of the first physical input–output tables for some European countries in the 1990s opened new possibilities for linking physical accounting and input– output analysis. Physical input–output analysis has so far only been applied for selected materials, but it has not been used for comprehensive assessments of material requirements of economic activities. In this paper, possibilities and limits of this new input–output approach are clarified. We present and discuss a procedure similar to monetary input– output analysis and develop an alternative approach to account for primary inputs and waste otherwise not included in the analysis. Based on aggregated input–output tables for Germany, we present numerical examples intended to compare the alternative approaches of physical input–output analysis.     

Estimating the Accounting Price of Foreign Exchange: An Input–Output Approach

When adjustments in the foreign exchange market involve changes in the production of marginally traded goods, the traditional formula for calculating the accounting (shadow) price of foreign exchange assumes that domestic prices and marginal costs at efficiency prices for those goods are equal. In this paper, a method is proposed for estimating an accounting price ratio of foreign exchange in a partial equilibrium framework, abandoning that assumption. For that purpose, input–output techniques are used, to take into account the effets of changes in the production of traded goods.     

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.     

The Virtual IELab – an exercise in replicating part of the EXIOBASE V.2 production pipeline in a virtual laboratory

ABSTRACT

We explore options to replicate the EXIOBASE2 multi-region input–output (MRIO) database in the Virtual IELab cloud-computing laboratory environment. Whereas EXIOBASE2 is constructed using a multi-process reconciliation procedure, we present an alternative compilation technique that uses EXIOBASE2's pre-processed data and final tables in reconciling the IELab MRIO with conflicting raw data information. This approach skips the labour-intensive step of detailing and harmonising country tables. Adherence metrics reveal the EXIOBASE2-based IELab table to be considerably less balanced than the original but with stronger adherence to other constraints data. However, these metrics are not comparable to the original EXIOBASE2 statistics due to the distinctive implementation of constraint sets in the two platforms. IELab's main value-added is its flexibility in tailoring EXIOBASE2-based MRIOs beyond the original recipe. Finally, IELab's global carbon, water and material footprints are shown to be comparable with previously reported resource footprints. In contrast, deviations in land footprints warrant further investigation.     

THE ‘REST OF THE WORLD’ – ESTIMATING THE ECONOMIC STRUCTURE OF MISSING REGIONS IN GLOBAL MULTI-REGIONAL INPUT–OUTPUT TABLES

Incomplete data for the economic structure of numerous countries hamper the compilation of global multi-regional input–output (MRIO) tables. By themselves, most of these countries are of only limited importance for the global economy and incumbent environmental issues. Hence, in most recent global MRIO tables these countries are either roughly estimated or summarised in one rest of the world (RoW) region. Combining a wide range of countries, this RoW region may play a significant role in global economic and environmental accounts. We conceptualise the importance of RoW in several environmental footprint accounts and present algorithms to estimate the structure of RoW. The approach utilises the information of the economic structure within known parts of the MRIO table to estimate the unknown structure. Using this method, global warming potential and employment footprints remain stable irrespective of the chosen initial estimates, whereas natural land use footprints and individual product impacts vary significantly.     

Impact of Carbon Dioxide Emissions Reduction on the Austrian Economy

A linked econometric input–output (IO) model of the Austrian economy with an energy block is used in this study to assess the sectoral effects of carbon dioxide emissions reduction. The energy block and the other commodities are linked by a partitioned IO model. Energy demand is described using aggregate energy demand equations, by activities and subdemand systems of the translog type for different fuel types. The conversion of energy is modelled using an IO model of the energy sector. Measures for carbon dioxide reduction from detailed expert studies are introduced in the energy model and in the econometric model. The primary impacts are on energy demand, fuel shares and investment in new energy technologies. The simulation results of the partitioned IO model show different impacts on gross output, GDP and employment.     

Environmental responsibility and policy in a two-country dynamic input–output model

Increased spatial dependency of economic activities, as well as spatial differentiation of production and consumption, has implications for environmental policy. One of the issues that has gained importance is the responsibility for the emissions from products that cross national boundaries during the environmental policy's lifetime. This paper discusses the different ethical views of environmental responsibility. Furthermore, the policy measures that are associated with the different viewpoints are analyzed in a novel dynamic two-country two-sector dynamic input–output model. A numerical example is modeled to assess taxing schemes that are based on these ethical viewpoints. The results show that a tax on the ‘embodied’ environmental pressure, which is generally viewed as ethically preferable, is less effective that the current policy of taxing consumers of products. Our discussion however shows that these results are very dependent on the model structure and initial parameters that are used. Nevertheless, the model illustrates that policies that are based on ethically superior standpoints may have detrimental distortionary effects in the dynamic setting.     

Economic Integration: Systemic Measures in an Input–Output Framework

Countries are linked through trade and for their mutual benefits they often group together. Consequently, trade blocs are formed in some form or another, examples of which are the EU, EFTA, ASEAN, NAFTA, and SAARC. Depending upon the form and the nature of the grouping, trade relations among countries obviously vary across the trade blocs. The pattern and the volume of trade of the participating countries are different and thus cause different impacts on the growth and development of the countries concerned. Also, the nature of integration changes over time. To examine the strength of integration within trade blocs, systemic measures of integration hitherto not available are formulated in an input–output framework. The measures are used, as a case study, to assess the inter-temporal variations in the degree of integration of SAARC.     

The integration of international financial markets: an attempt to quantify contagion in an input–output-type analysis

ABSTRACT

The increasing integration of international financial markets means that credit defaults in one country have to be covered by creditors in other countries. If the principle of creditor liability were applied systematically, the financial losses incurred by the financial institution that provided the credit and is thus directly affected by the default would be ‘passed on’ through its domestic and foreign shareholders and debt holders, as well as their creditors, to the original savers. In this paper, this contagion effect will be estimated by taking international capital linkages into account. Analogously to an input–output analysis of inter-industry linkages, savings used for investments in one country are traced back to the countries from which the funds originated. This also reveals the important role of international financial centers, which essentially serve as distributors of investment risks, while the financial losses are ultimately borne by larger countries with higher levels of savings.     

Effects of international trade on domestic employment: an application of a global multiregional input–output supermultiplier model (1995–2011)

The effects on domestic employment of international trade and the globalisation of supply chains are as politically controversial as they are empirically inconclusive. To estimate them we extend the global multiregional input–output framework by endogenising demand for both domestic and imported intermediates, private business investment and household non-durable consumption – or equivalently, we generalise the supermultiplier formula. The model accounts, in particular, for the employment consequences of economic integration and those channelled through integration. We estimate these foreign sector effects alongside those of domestic origin using a recursive hierarchical structural decomposition analysis and statistics from the World Input–Output Database and National Accounts that cover years 1995–2011. Focusing on Spain, Italy, France, Germany, the UK, the US, Japan and China we answer the following questions: To what extent did international linkages deriving from international trade affect domestic employment? Did domestic employment benefit from economic integration?     

Measuring industrial upgrading: applying factor analysis in a global value chain framework

ABSTRACT

A key question for promoting international competition is how to improve the position of countries and industries in global value chains (GVCs). The first step is to properly measure industrial upgrading in GVCs. This is not a trivial issue because upgrading has not been defined unambiguously. Several authors have used different (and sometimes related) measures, all of which indicate certain aspects of upgrading. Rather than trying to find the single, ultimate measure of upgrading, we propose a different approach. We examine the multidimensionality of industrial upgrading, using eight indicators in factor analysis. Four of the eight indicators adopt the GVC perspective and include, for example, the growth of the share in value-added exports. We provide three quantitative dimensions of industrial upgrading: process upgrading, product upgrading, and skill upgrading. With these dimensions, we compare and analyze the upgrading of different countries and industries using the World Input–Output Database.     

Estimating economic impacts of the US-South Korea free trade agreement

ABSTRACT

We analyze the economic impacts of the United States-South Korea Free Trade Agreement by applying the Global Trade Analysis Project (GTAP) computable general equilibrium model to highly disaggregated commodity flow data. The analysis calculates the impacts in terms of welfare effects, national economic indicators (such as GDP), and business performance metrics (such as sales revenue), which can be used by a variety of decision-makers. Our results suggest several trade-offs among these measures. Positive welfare gains between the US and South Korea are about the same in absolute terms, but favor the latter in relative terms, and very heavily so for GDP gains. Moreover, the US is projected to incur a loss of gross output (sales revenue) in several major manufacturing sectors that are heavily concentrated in geographic areas that have been promised a return of jobs by the Trump Administration.     

On the simultaneous estimation of physical and monetary commodity flows

Large databases mapping commodity flows measured in various units such as currency, tons or caloric values are the backbone of many recent environmental-economic studies. Their construction typically requires combining large amounts of partial information in a series of successive steps. These include the estimation of unobserved flows, transformations between units, handling aggregation re-classification and, finally, reconciling estimates with mass, financial and/or energy balances. This paper proposes a maximum entropy model that allows for the simultaneous estimation of unobserved commodity flows as well as corresponding prices such that data constraints in various units of measurement, levels of aggregation and possibly mismatching classifications are simultaneously satisfied. Its capability is assessed through a Monte-Carlo analysis and its performance compared with a simple step-wise approach. Our results suggest that the simultaneous approach performs significantly better in a vast majority of cases.     

Global Impacts of the Automotive Supply Chain Disruption Following the Japanese Earthquake of 2011

This paper provides an input–output method to estimate worldwide economic impacts generated by supply chain disruptions. The method is used to analyse global economic effects due to the disruptions in the automotive industry that followed the Japanese earthquake and the consequent tsunami and nuclear crisis of March 2011. By combining a mixed multi-regional input–output model, the World Input–Output Database and data at the factory level, the study quantifies the economic impacts of the disruptions broken down by country and industry. The results show that the global economic effect (in terms of value added) of this disruption amounted to US$139 billion. The most affected (groups of) countries were Japan (39%), the USA (25%), China (8%) and the European Union (7%). The most strongly affected industries were transport equipment (37%), other business activities (10%), basic and fabricated metals (8%), wholesale trade (7%) and financial intermediation (4%).