Interregional Spillovers Research Articles

Large Projects in Hinterland Regions: A Dynamic Multiregional Input‐Output Model for Assessing the Economic Impacts

Interregional spillovers and the expansion of capacity in hinterland sectors represent two types of economic impact associated with large capital projects in hinterland regions. The simultaneous treatment of these within an input‐output (I‐O) framework is the subject of this paper. A dynamic multiregional I‐O (DMRIO) model is derived and applied to a scenario of oil development in Canada's Northwest Territories (NWT). A comparision of output profiles generated by the DMRIO model and a static MRIO model shows that the DMRIO formulation has merit. Specifically, in years where capacity adjustments are called for in the hinterland region, the static MRIO model is unable to capture the intraregional and interregional economic implications of this activity. In a year of particularly large‐capacity shortfalls in several NWT sectors a static MRIO model underestimates the Canada‐wide total impact of the project by more than one billion 1984 dollars.

Innovation, Foreign Direct Investment and Growth

Direct foreign investment is incorporated in a dynamic general equilibrium model with endogenous technological change. In contrast to recent endogenous growth approaches, I allow for geographical separation of the innovation and production of newly developed goods. Firms acquire specific knowledge through R&D investment in the more developed country and use their specific asset to establish a production plant in the low‐cost country. Foreign direct investment is accompanied by interregional spillovers of knowledge from the more to the less advanced country. I derive a steady‐state equilibrium with active innovation and production activities in the high‐technology sector in both countries. Furthermore, the implications of factor flow liberalization as well as of industrial policies are investigated.

Regional Income Dynamics

This paper uses time-series techniques to explore interregional links in regional per capita income growth. The study examines annual data for the period 1929 to 1990 for the eight Bureau of Economic Analysis (BEA) regions. Impulse response functions and variance decompositions from an estimated structural vector autoregression reveal that important and highly persistent interregional spillovers exist. Moreover, these spillovers tend to be geographically dispersed.

Interregional spillovers in the presence of perfect and imperfect household mobility

When households are immobile across regions, the decentralized provision of public goods that generate interregional benefit spillovers is inefficiently low. We analyze this problem in an environment of interregional household migration and obtain the following results: if households are perfectly mobile across regions, then the decentralized provision of public goods generating spillovers is socially efficient. There is no need for central government intervention. If households are attached to particular regions for cultural or nationalistic reasons, however, at least one of two regions undersupplies the public good. Central government intervention can enhance efficiency.

Interregional Spillovers in Regional Impact Assessment: New Mexico, Texas, and the Supreme Court

ABSTRACT Input‐output models are frequently used to estimate impacts, benefits or damages from some event. These analytic models and the questions they are designed to answer are usually based on political definitions of regions. However the true impacts propagate according to the actual spatial pattern of the regional economy. Because of the divergence between the political regions used for analysis and the economic regions on the ground, the economic impacts which spill over political boundaries can sometimes become analytically important. This paper applies these concepts to a case study of allocating irrigation water from the Pecos River in Texas and New Mexico. The U.S. Supreme Court has ruled that New Mexico used water belonging to Texas. Our analysis suggests that the spillover benefits to Texas from New Mexico's use of the water might equal or exceed the benefits which Texas would have gotten from using the water itself. Texas might be better off because New Mexico took its water.