Identification of regional fundamental economic structure (FES) of Chilean economy: A field of influence approach

Abstract

This study contributes to the understanding of the regional structure of the Chilean economy utilizing the fundamental economic structure (FES) approach. The regional FES construct implies that selected characteristics of an economy will vary predictably with economic size, as measured by regional: domestic product, population, total value added, and total sector output. The overarching problem addressed in this research is if identifiable patterns of relations among regional macro aggregates and economic transactions can be revealed via regional input-output tables. Jensen, West and Hewings discuss the tiered, partitioned, and temporal approaches to the identification of FES using regional input–output table and spatial economic data. This research addresses the following four research questions: (1) Does a regional FES exist for the Chilean economy? (2) What proportions of the cells are predictable? (3) Can stability patterns in the intermediate transaction table be identified for Chilean regional economy? (4) Which economic transactions are most important across regional economies in Chile? Four regression models: linear-linear, linear-logarithmic, linear-inverse, and linear-logarithmic of inverse are run to identify the largest proportion of predictable FES cells for the Chilean regional economy. The regional input–output tables (1996) for the 13 regions compiled by the National Institute of Statistics of Chile provide data for the analysis. A FES analysis shows 75% cells are predictable, 34% are stable, and 25% are important for Chilean regional economies. Further, 7% of the total fundamental economic activities are predictable, stable and important simultaneously. These strong FES based economic activities consist of chemicals, rubber, petroleum, and plastics as well as public services among several other fundamental industries.