Interregional Input Research Articles

(Inter)regional Input-Output Table Estimation: from Surveys to Spatial Econometrics

Researchers and practitioners who consider economic regional (sub-national) policy questions often face the problem of regional input-output (I--O) table unavailability. The literature offers a number of approaches to approximate such tables. In this paper, a survey of the leading state-of-the-art methods in the field is presented, and their pros and cons are discussed. I take into account both single-region approaches, such as the location quotient (LQ) family, as well as interregional input--output (IRIO) methods, especially their class referred to as gravity-RAS. I pay particular attention to recent developments in using spatial econometric methods (Spatial IRIO). The discussion is illustrated with simple numerical examples and selected empirical results.

Carbon‐trade nexus: The embodied carbon emission transfer network of China's sustainable development demonstration belt

AbstractUncovering energy‐related carbon emission transfer networks and assessing its structure and efficiency can help reshape the regional carbon‐trade nexus. Combining the social network analysis and interregional input–output model, our study estimates the carbon trade patterns from various perspectives and explores the topological characteristics of energy‐related carbon emission transfer networks within China's green development demonstration belt. Furthermore, carbon pressure index is used to identify key area for the regional carbon reduction. Results indicate that the three reaches are in descending order of embodied carbon emissions whether from the production or consumption perspectives when most of provinces are in the status of “carbon overload.” Furthermore, the total embodied carbon transfers with the large amounts occur at the provinces that are adjacent to each other. In terms of degree centrality, Jiangsu, Anhui, and Zhejiang dominate the carbon emission transfer network within the region, whereas Jiangxi, Sichuan, and Zhejiang serve as the main intermediaries and bridges. As a result, the findings should provide policymakers with new insights into how to formulate more targeted strategies for carbon management in different provinces and sectors.

Estimating high-resolution interregional input–output tables: a Bayesian spatial approach

ABSTRACT Due to the scarcity of subnational interregional input–output (IRIO), various approaches to their estimation are actively under investigation in the literature. This paper focuses on the application of spatial econometric method. It determines intra- and interregional coefficients through a joint procedure which successfully avoids the direct recycling of estimates for other geographies and granularities. Instead, the use of Bayesian methods is proposed, which formally integrate limited evidence from existing regional tables (Finland) with a set of sectoral data on value added for 73 NUTS-3 regions in Poland, the latter being dominant. An empirical test of replicating the Korean survey-based IRIO table demonstrates that the accuracy of this approach slightly outperforms an alternative IRIOLQ procedure. The incorporation of time-based distance measurement has only modest effects on empirical fit, and the use of big geolocation dataset to account for commuting relocates 18.9% of the induced effect from a city to its periphery.

The European regions in the global value chains: New results with new data

AbstractThis article contains the methodology and main results related to the update and extension of the widest interregional input–output tables for the entire EU27, UK and the European Free Trade Association (EFTA) countries. This work continues the outstanding effort developed in the past years regarding the estimation and analysis of different multiregional input–output (MRIO) databases at the country level (world input–output database, EXIOBASE, ICIO, FIGARO, etc.) and the MRIO tables developed for the European Union (EU) at the NUTS2 level. The main contribution consists of updating and extending the current EUREGIO collection to obtain a EUREGIO table for 2017, which will be referred (NUTS‐2 Rev.2016) for all the EU27 + UK + EFTA countries and will be embedded in the new FIGARO multicountry 2017. Such effort was developed in the context of the ESPON‐IRIE project. This article summarises the methodology used and compares the results obtained with the ones of the main benchmarks, providing an analysis of the national and regional participation in the global value chains (GVCs). The main results suggest that, on average, 65% of value added is embodied in the goods and services sold to the same NUTS‐2 region, 16% is embodied in the ones sold to regions in the same country and the remaining 20% is exported (to other countries). Exploring the heterogeneity within these figures can also be seen that the variety is higher across regions than across sectors. Our analysis suggests that, to a large extent, the heterogeneous participation of EU27 + UK + EFTA regions in the GVCs is explained by their sectoral structure more than by the regional idiosyncratic characteristics. Such results open the floor for the correct design of industrial policies, embedded in the smart specialisation paradigm.

Income Leakage Regional Effects: Supply and Demand Shocks during the Pandemic in Brazil and Chile

During the COVID-19 pandemic, regions were affected by a combination of economic crises: weak demand and constrained supply. Several studies have sought to analyse the heterogeneous effects of supply and demand shocks on the labour market, economic growth, and the environment. This study has a different focus, estimating both direct and indirect effects of demand and supply shocks adopted during the pandemic in Brazil and Chile. Afterwards, the paper compares the degree of regional absorption (leakage) of income resulting from each of these shocks, applying an interregional input–output model for each country. The results of this study show that income absorption by the poorest regions is relatively greater in the case of a supply shock. It can be said, therefore, that this type of shock improves the retention of income generated in the poorest regions, favouring the development of these localities and the reduction in regional inequalities. The main reason for this result is that supply policies have restricted essential sectors to a lesser extent, and these sectors are generally less concentrated in large urban centres in both Brazil and Chile. In other words, much of the interregional leakage is driven by the demand for non-essential products, mainly in the richest urban economy centres. Finally, the geographical dimension of regional inequalities leads to the economic benefit of prosperous areas in the country when shocks occur in vulnerable regions, highlighting the centre–periphery pattern in both countries.

POTENTIAL LEADING SECTOR TO DRIVE ECONOMIC GROWTH IN WEST NUSA TENGGARA PROVINCE

West Nusa Tenggara Province (NTB) has a small economy with a concentration of output to meet needs within its region and has a small proportion of trade outside the NTB region. Leading sectors are needed for faster economic growth. This study aims to describe how the structure of trade and the leading sectors drive economic growth. This research uses the descriptive quantitative method by utilizing interregional input and output data. The results indicate that the output trade structure is mostly traded within the NTB area and the majority is used for final demand. The sector with the largest output value in NTB is still the agricultural sector. However, based on sectoral linkages, the Electricity and Gas Procurement sector has the greatest capacity to encourage the progress of its upstream and downstream sectors. This means that the sector has the potential as a leading sector with the highest economic multiplier and should this sector be encouraged and continued to be spurred to boost economic growth.

Inflation and Spatial Spillovers in a Large Archipelago: Evidence from Indonesia*

This study examines inflation dynamics in Indonesia, a large archipelagic country, using the Phillips curve specification. Utilising province‐level data from 2015 to 2019, the analysis accounts for regional interaction across Indonesian provinces and estimates spatial spillovers. To address the challenges of applying spatial methods to the world's largest archipelagic nation, two new approaches for the spatial weight matrix criteria are introduced: contiguity‐based from artificial boundaries (Thiessen polygons) and trade‐based from the Interregional Input–Output Tables. Furthermore, exploiting a new dataset, the study contrasts alternative measurements of inflation and output gap. These distinctions yield new findings. The results indicate the presence of a conventional Phillips curve in Indonesia. Different measures of inflation and the output gap have distinct spatial spillover effects.

Linkages between Sectors and Regions in the Aceh Economy

This study analyzes the economy of Aceh not only based on the linkage between industries but also based on the linkage between regions. The analysis used forward linkages and backward links to determine the leading sectors in Aceh. The data used is secondary data from Indonesia's 2016 Inter-Regional Input Output (IRIO) based on domestic transactions at producer prices. The data is sourced from Statistics Indonesia. The study results show that the key sectors in Aceh are Electricity and Gas and Manufacturing. These sectors have the highest spreading power (backward linkage) and sensitivity (forward linkage) because they are in the first quadrant. In addition, inter-regional linkage analysis shows that the final demand shock in Aceh has a large output impact on DKI Jakarta, North Sumatera, and Riau. On the other hand, the economy of Aceh was affected by the final demand shock from several provinces on the island of Sumatra, namely North Sumatera, Bengkulu, West Sumatera, Jambi, and Sumatra Selatan. The policy implications that can be applied to increase labor skills and management in leading sectors will have a multiplier effect on other sectors and the cooperation between provinces in a special economic zone.

Analisis Sektor Pariwisata Provinsi Nusa Tenggara Barat dan Dampak MotoGP Mandalika

The tourism industry in West Nusa Tenggara (NTB) province continues to develop with the construction of the KEK (Special Economic Zone) Mandalika and the performance of international events. The MotoGP event was expected to have an economic impact on NTB province and the nation. This study analyzes the role of tourism industry in NTB province by focusing on the 2022 MotoGP event in Mandalika on the economy of NTB province and other provinces in Indonesia. The research method used in this study was the Inter-Regional Input Output (IRIO) method. One of essential findings from this research was the role of the tourism industry in the economy of NTB province, which was still relatively small, nevertheles, tourism was considered as a key and potential industry in the future. The MotoGP event impacts on the formation of an output of IDR606,92 billion, added values of IDR315,94 billion, labor wages of IDR137,67 billion, and potential taxes of IDR14,25 billion. The spillover impact on the other provinces was still relatively small. With that impact on the economy, international events must be held regularly. For future research, some sources of shocks to government spending and investment may be interesting to be studied

Input–output analysis of the Ukraine war: A tool for assessing the internal territorial impacts of the conflict

AbstractThe Russian invasion of Ukraine on February 24, 2022, scaled up the ongoing conflict in Donbas beyond its regional borders, hindering and halting different aspects of economic life. Considering the internal geography of Ukraine's economic structure, the damage to physical infrastructure and supply chain disruption are likely to propagate to other parts of the country through an intricate plot of production and income linkages. From a disaggregated analysis of multiregional and multisectoral linkages, this article offers a systematic, integrated account of the structural linkages that allows modeling spillovers from one Ukrainian region to another. This approach breaks new ground by highlighting the internal economic effects of the conflict in Ukraine. We develop an interregional input–output system for Ukraine, providing the numerical basis for developing analytical frameworks to support knowledge‐building in the recovery process of distressed territories during the postwar period. We offer this database to the international scientific community to support modeling projects focusing on structural features of the Ukrainian economy. As shown in our illustrative exercises, understanding the structure of intersectoral and interregional linkages is critical to better understanding the propagation of exogenous shocks to the economy.

Agricultural industry in West Papua Province: An analysis of backward and forward linkages

Agriculture, Forestry and Fisheries Sector in West Papua Province contributes significantly to the Gross Regional Domestic Product (GRDP). While on the employment side, this sector also able to absorb a third of the workforce in this province. It indicates the important role of this sector in the economy of West Papua Province. The purpose of this paper is to determine the magnitude of the forward and backward linkage of agricultural industry in West Papua Province. The combination of forward and backward linkage will produce a key industry. The Inter-Regional Input Output (IRIO) model and 2016 IRIO data was used in this study. The findings show that Food Crops Agriculture; Annual Horticultural Crops, Annual Horticulture, others; and Livestock is included in the undeveloped category. Meanwhile, Seasonal and Annual Plantations, Forestry and Logging Industries, and Fisheries are in growing industries category. Gross value-added multiplier of all agricultural industries is below one where the highest value is in the Forestry and Logging Industry whereas Livestock Industry is the lowest.

Tourism-led economic contribution, interregional repercussion effects, and intersectoral propagation activities in Tokyo Metropolitan

This study aims to investigate the contribution of visitors’ expenditure to Tokyo Metropolitan’s economy including its decomposition, the interregional repercussion effect between Tokyo and the rest of Japan, and the intersectoral propagation activities between tourism and the other sector in Tokyo based on two-region interregional input–output model and Miyazawa’s partitioned matrix multipliers. Measurement in tworegion model yielded to a higher value compared to single-region model, where domestic visitors lead the major contribution in overall, prominently on services sectors. The indirect and feedback effects to industries in Tokyo were strongly linked to tertiary sector, while spillover effect to the rest of Japan was more widely distributed. The economic activities in Tokyo were highly dependent on the industries in the rest of Japan, in similar manner as tourism on the other sectors within Tokyo. Tourism industries have strong inducible effects on the other sector. Considering these interregional and intersectoral interdependencies, improving the tourism sector in Tokyo may imply a promising effect to benefit the economy of Tokyo and subsequently other Japanese regions.

Regional inequality in China during its rise as a giant exporter: A value chain analysis

AbstractChina's exports success has implications for regional income inequality, because most of its export products are manufactured in the coastal zone. We propose a value chain‐based accounting framework to quantify the contributions of exports to regional income inequality. We employ newly developed interregional input–output tables for China, which distinguish between processing export activities and ordinary export activities. We analyze the period 2002–2012, the decade during which China became the “Factory of the World.” We find that an RMB of processing exports contributed much more to regional inequality than an RMB of ordinary exports or domestic final demand. Still, changes in regional inequality (increasing in 2002–2007 and decreasing between 2007 and 2012) are much more due to rising ordinary exports in the first subperiod and the growth of domestic final demand coupled with changes in the configuration of value chains in the second.

Economic exposure to regional value chain disruptions: evidence from Wuhan’s lockdown in China

ABSTRACT Production fragmentation across multiple regions can result in a regional shock propagating along value chains to a wider array of regions. We propose a methodological framework to measure the economic exposure to regional value chain disruptions due to city lockdown during Covid-19. The exposure index is evaluated by applying a hypothetical extraction method to a regionally extended inter-country input–output framework incorporating China’s interregional input–output table. Our methodology can be adapted to conduct disaster impact analyses at city, state and country levels. It provides a tool for the immediate assessment of the economic risks of value chain disruptions, enabling quick policy responses.

ECONOMIC IMPACT ASSESSMENT OF VILLAGE FUND IN INDONESIA USING INTER-REGIONAL INPUT OUTPUT ANALYSIS

The economic development of a region/country is marked by development in various sectors and regions through private or public spending. In 2017, village fund (as one of government expenditure) has induced and supported sectors such as public administration, human health and social works, education, manufacturing industries and other service activities in any region. This study aims to analyze the impact of the 2017 village fund program realization on the Indonesian economy, such as the impact on final demand, household income, and employment coverage. The method used in this research is Inter-Regional Input Output (IRIO) analysis using the IRIO Indonesia Table in 2016 domestic transactions on producer prices classification 102 x 102 sectors (6 regions and 17 sectors). The results of this study show Indonesia's total domestic output in 2017 for the realization of the village fund budget of IDR 98 trillion. Meanwhile, Village Fund 2017 program stimulated a total salary increase of IDR 26.980 trillion or 648,132 additional workers or contributed to employment increase during 2017 as 13.12%. The results of the analysis of the output multiplier and the income multiplier show that, if we viewed in sectoral details, the electricity and gas sector and the manufacturing industry sector have more roles in increasing output compared to other sectors.

Skill-based functional specialization in trade: an input–output analysis of multiscalar value chains in Brazil

ABSTRACT Sophisticated spatial labour markets can promote better opportunities for functional upgrading in value-added trade. This paper estimates the skill-based functional specialization in Brazilian labour factor content in trade in value-added (LTiVA), considering different geographical scales. We combined an interregional input–output model for Brazilian states with occupational data to identify the skill intensity embedded in LTiVA based on the hypothetical extraction method (HEM) technique. Our findings show that the largest Southeastern economic area specializes in highly sophisticated functions, while the rest of the country embodies low skills in value-added trade for domestic and global trade levels. Furthermore, the results reveal a central role for the São Paulo state governing the subnational value chains and reinforcing the international uneven spatial functional division pattern at the subnational level.

An interregional input–output analysis with the Eaton–Kortum model

This study proposes a multi-regional input–output (I–O) model obtained from comparative statics analysis and a linear approximation of Eaton and Kortum's (2002). [Technology, geography, and trade. Econometrica, 70(5), 1741–1779. https://doi.org/10.1111/ecta.2002.70.issue-5] general equilibrium trade model. The derived reduced form, which represents the effect of a final demand shock, is equivalent to the Leontief inverse, which means that our model is a straightforward extension of the conventional I–O framework. In addition, supply-side shocks, such as a decrease in transport costs, and the corresponding welfare gains are also calculated without setting any structural parameters. The linear reduced forms also enable us to decompose the welfare gains into various ripple channels, such as by sector, region, or the time that the gain arrives. A Japanese multi-regional I–O table is used as a numerical example to derive the effect of a reduction in transport costs (for the links around the northern region). The results indicate that more than half of the welfare gains in the southwest region are delivered through indirect channels, and their time to arrival is more than twice of that in the northern region, which is close to the shock.

Gorontalo Economy Linkage in Perspective Tables IO and IRIO Year 2016

Gorontalo Province has the potential to develop, but still has several problems related to inequality and population welfare, so appropriate policies are needed to encourage accelerated development. This study aims to determine the inter-sectoral and inter-regional linkages in Gorontalo Province using the Input Output (IO) and Inter Regional Input Output (IRIO) Tables 2016. The results of this study show that the economy of Gorontalo Province cannot be separated from other provinces and abroad. Gorontalo's leading industries are the supply of electricity and gas (D) and the processing industry (C). Other industries that can be developed are Agriculture, Forestry and Fisheries (A), Trade (G), and Construction (F) which have the largest contribution to the economy of Gorontalo Province. The provinces most affected if there is a change in final demand in Gorontalo Province are DKI Jakarta, Central Java, and East Java. Meanwhile, the provinces that have the greatest impact on Gorontalo Province if there is a change in final demand are North Sulawesi, Central Sulawesi, and Banten.

Examining the role of China's outward direct investment in realizing carbon neutrality: empirical evidence from Belt and Road countries

PurposeKnown as the major capital providers in Belt and Road countries and the largest carbon emitter in the world, what role China's outward direct investment (ODI) plays in carbon neutralization has become a matter of concern. This study aims to measure the impact of China's ODI on the carbon emissions of Belt and Road countries.Design/methodology/approachBased on an econometric model and an inter-regional input–output model, a new model measuring the carbon emission effects of ODI is developed.FindingsThe empirical results show that (1) in general, China's ODI generates an emission-reduction effect in Belt and Road countries; (2) The relationship between the emission-reduction effect and income level of host countries shows an approximate inverted U-shaped trend; and (3) China's ODI generates stronger emission-reduction effects on capital-intensive industries.Originality/valueThis study quantitatively measures the scale of carbon emission-increase and reduction effect, which is relatively lacking in previous studies. This study explores the heterogeneity from the perspectives of regions, countries and industries. The authors have compiled an inter-regional input–output table for the Belt and Road countries for 2014 to provide a broad basis for the study of related issues.

Regional inequality and CO2 emissions-based trade across value chains networks: a multiscalar analysis from Brazilian states

ABSTRACT This article analyses the interregional linkages and the relative intensity of CO2 emissions embedded into domestic and global value chains from Brazilian states. An extended environmentally interregional input–output model (EEIIO) was applied to measure the bilateral trade in value-added (TiVA) and the total implicit emissions trade (TTE). The results reveal unbalanced pollution patterns in space. Few manufacturing hubs in core Brazilian states (mainly São Paulo and Rio de Janeiro) are net importers of intensive greenhouse gas (GHG) inputs from peripheries, implying an environmental responsibility driven by networks’ governance and relative position. By recognizing the role that multiscalar integration plays in implicit CO2 in both production and trade, it is possible to build local strategies to reduce sustainable spatial gaps.