Estimation of Interregional Trade Coefficients and Multipliers in the Context of An Interregional Model

Abstract

1. Introduction In recent years there has been an increased interest in input-output analysis and its multiple applications to regional and interregional analysis. The purpose of this study is to provide a cursory description of the results of estimating trade coefficients and interregional multipliers by means of a statistical implementation of the Chenery--Moses model for Greece. In order to carry out the study in this field, the estimation of interregional trade coefficients by commodities is the fundamental work and is an important part for the compilation of interregional input-output table (Thalassinos 2007). But as most countries in the world, even developed countries, Greece does not have enough statistical data to build such matrix. The author has constructed by own forces an interregional model for the year 2010 of the Greek economy, which fill the gap of official regional statistics. The evaluation of the impacts of an exogenous change on a regional system would require a model that incorporates the industrial interrelations of a region with another region. The impacts were simulated considering three producing regions for the Greek economy, North Greece, Center Greece and Aegean Islands and Crete. The constructed interregional input-output matrix was used considering a set of three regions and ten aggregated sectors. From this matrix interregional-interdependence matrix was computing to show the direct and indirect relationships between producing sectors and regions. Finally, interregional multipliers were computed for each sector and region measured the impact on regions and on the economy as a whole. The above procedure revealed the major producing sector in the nations. In this regard the attempt of the present study to introduce regional input-output tables and regional technical coefficients would be beneficial to interregional model. The rest of the paper is organized as follows: In the second section a short overview of the literature review was provided. In section three we will describe the research methodology of interregional model. Section four is devoted to an empirical illustration. We apply the estimation procedures and data sources in the empirical implementation of the model. A concluding section finalized the paper. 2. Literature Review Isard (1951) was the first writer who developed the interregional input-output model with an analytical interregional trade coefficient matrix. This model requires an extent size of basic data. As a result one of the most powerful model was put forward by Chenery (1953) and then Moses (1955) independently and it is called Chenery-Moses model. The relative advantage of this model due to the fact that the technical input structure of production in each region and interregional trade structure of various products are separately stated. Therefore, the primary data needed to implement such a model, are usually less than the Isard model. Wassily Leontief in collaboration with Alan Strout evaluated a gravity trade model for different commodity shipments. New interregional input-output models have been constructed, Kilkenny and Rose (1995) and Hewings (1995). 3. The Model The Greek economy is divided into three regions: North, Middle and Aegean Islands and Crete. The model contains ten intermediate sectors after aggregation. The solution of the model can be obtained by using two sets of structural constants. The first set describes the structure of production or input requirements in each region. [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII] A second category of structural constants is a set of trade coefficients. The trade coefficients may also be presented as a diagonal block matrix. From the above two sets of structural constants a new matrix is obtained named regional input-output coefficient matrix and is given by the matrix A. [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII] In the case of Greece with three regions I, II, III the terms [A. …