Multipliers in a Central Place Hierarchy

Abstract

Open economy multipliers, at the community level, capture only a portion of the system‐wide impact of changes in local autonomous spending. Multiplier effects for the central place system will include the community‐specific multiplier, where the autonomous expenditure was initiated, plus all of the cross‐community multiplier effects generated through linkages among communities in the hierarchy. Import leakages, in the form of shopping at higher levels, result in “filtering up” of expenditure increases initiated at lower levels of the system.In an earlier paper (Olfert and Stabler 1994), community‐level multipliers for a central place system in the Great Plains were estimated. In this paper, the distribution of direct and induced spending, resulting from autonomous spending increases initiated at particular levels of a central place hierarchy, is derived and empirically estimated over all levels of the hierarchy. Building on (1) own‐community level multipliers, (2) an exhaustive set of cross‐community multipliers are derived and empirically estimated. The combination of own‐ and cross‐community multipliers produces (3) system‐wide multipliers that show the system‐wide impact of spending initiated at any level in the hierarchy. Finally, (4) level‐specific impact multipliers resulting from autonomous spending originating at any (every) level in the system are calculated.Results indicate that the induced impact of autonomous expenditure increases anywhere in the system will be the greatest at the top of the hierarchy, that autonomous increases at higher levels have a larger local impact than they do at lower levels, and that equal expenditure increases across the hierarchy will have a disproportionate impact at the top of the hierarchy, as well, dueto a combination of higher own‐community multipliers and spending up the hierarchy by residents of lower level centers.