A forecasting territorial model of regional growth: the MASST model

Abstract

The profound and unique institutional and economic processes which characterise the historic period Europe is facing and will face call for appropriate methodologies to forecast the impact of these processes on Europe and its territory. Few regional econometric models as the basis of forecasting exercises have been developed, either replicating national macroeconomic models, or through complex systems of equations for each region that are linked to both the national aggregate economy and to the other regional economies through input—output technical coefficients that determine intra- and inter-regional trade and output. This paper presents a new regional forecasting model, labelled MASST (macroeconomic, sectoral, social and territorial), built on a modern conceptualization of regional growth. In MASST, regional growth is conceived as a competitive, endogenous and cumulative process in which social and a spatial elements play an important role: local resource endowments and increasing returns in the form of agglomeration economies and spatial growth spillovers perform an important role in the explanation of regional growth differentials. MASST is generative in nature, since local factors matter, but it is also a model that considers a second family of development factors, these being macroeconomic and national. This structure of the model gives rise to the possibility of producing an efficient interactive national—regional approach, combining top-down and bottom-up approaches.