REGIONAL INPUT-OUTPUT MATRICES AND AN APPLICATION TO ANALYZE A MANUFACTURING EXPORT SHOCK IN MEXICO

Leonardo Torre ,Jorge Alberto Alvarado ,Daniel Chiquiar ,Miroslava Quiroga

doi:10.29105/ensayos38.2-4

Abstract

Based on the national Input-Output Matrix (IOM) 2012 calculated by INEGI, we estimate with the Flegg approach four regional Input-Output Matrices (RIOMs) using Banco de México’s regionalization (Northern, North-Central, Central and Southern). These RIOMs are employed to evaluate the impact on regional gross output, value added and employment from a 10,000 million dollar shock on Mexican manufacturing exports. The results show that the effects on the absolute values of gross output, value added and employment in the North are clearly larger than those estimated for the other regions. Another finding is that the total effects of the regional shocks tend to concentrate in the manufacturing sector, with the highest concentration observed in the North, and the lowest in the South. It is also shown that the North is, by far, the region experiencing the greatest change in its value added relative to GDP, followed by the North Central, the Central and the South. The results suggest a strong linkage between the manufacturing sector and tertiary activities, particularly commerce and services in the central regions, as well as between manufacturing and oil and gas extraction in the South.

Highlights

This paper estimates the direct and indirect effects that an exogenous shock to the manufacturing exporting sector can have on other sectors of economic activity at the regional level in Mexico
This paper extends traditional input-output matrix (IOM) analysis to obtain regional input-output matrices (RIOMs), which can be useful tools to characterize the regional heterogeneity in the organization of economic activity within a country
A RIOM is a tool that allows us to estimate the impact on a variety of indicators of economic activity at sectorial and regional levels

Summary

Introduction

Positive shocks that originate in a particular manufacturing sector can have spill-over effects on other manufacturing sectors and on other activities—-such as services or construction—- via input-output linkages To identify these effects, this paper extends traditional input-output matrix (IOM) analysis to obtain regional input-output matrices (RIOMs), which can be useful tools to characterize the regional heterogeneity in the organization of economic activity within a country. Even if the first order effect of an exogenous shock on exports for a particular region depends on its export orientation, regions in which sectors are more interconnected will benefit greater from the same shock relative to those with weaker sectoral links This implies that heterogeneous effects can arise from a region’s export capability, and from its underlying microeconomic structure in terms of how economic activity is organized. Caliendo et al (2016) argue that intersectoral and interregional linkages are keys to understanding the response of the aggregate economy to micro-level shocks

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