A Multisectoral Regional Econometric Model of Niigata Economy (NIIOM)

Abstract

This study aims at constructing a multisectoral regional econometric model for Niigata prefecture with special reference to exports to other regions, especially to Northeast Asia. The model has 33 sectors for production with a Leontief type input-output system combined with less disaggregated capital and labor markets of 5 sectors, including government capital stocks with four categories. Both sides of demand and supply are explicitly specified in the model with the adjustment mechanism of prices and demographic mobility. Two factors in the model play an important role in regional development: a. time distance and b. demographic stimulus. It is demonstrated that the government investment in capital stocks for transportation and communication has a significant impact on the expansion of the regional economy through shortening of time distance and enhancing productive efficiency. Also significant is the effect of population policy by the local government, since the multiplier of the population increase is greater than usually expected which tends to grow as a kind of synergy effect through the increase in labor supply and the expansion of consumption and investment. If an adequate policy package is implemented, it is suggested that Niigata's economy is likely to be stimulated by the improved linkage to Northeast Asia.