Multiregional Economy Research Articles

Economic Development and International and Interregional Tourism

Summary Subject and purpose of work: Tourism was the fastest growing industry until the outbreak of Covid-2019. Nevertheless, there are a few studies on how the industry interacts with the rest of economies within a comprehensive analytical framework. The main concern of this study is how international and interregional tourism interacts with national economic development and economic structural change. Tourism and economic growth are investigated in a multi-regional small open economy which is perfectly competitive. Materials and methods: National economy consists of multiple regions and each region has three sectors: industry, service, and housing. Production side is the same as in the neoclassical growth theory. Households move freely between regions, equalizing utility level between regions by selecting housing, goods, tourism, and saving. A region’s amenity is endogenously related to the region’s population. Results: We explicitly solve the dynamics of the multi-regional economy. The system has a unique stable equilibrium point. Conclusions: We simulate the motion of the model and examine the effects of changes in the rate of interest, foreigners’ preference for visiting a region, a region ‘s total productivity of the service sector, domestic consumers’ preference for visiting a region, as well as the propensity to save, the propensity to consume regional services and housing.

Energy-economic resilience with multi-region input–output linear programming models

In this work we propose an input–output linear programming model to study the energy resilience of a multi-region economy that accounts for the inter-sectoral and inter-regional dependencies in the economic structure. The model computes the impacts of random energy production disruptions on the entire multi-region input–output system in the form of final demand deficits. We then propose a formulation to evaluate the energy resilience of the system based on computing the largest set of disruptions, or what is termed as resilience guarantee levels, that can be sustained by the system within given demand deficit budgets. A computational study is then performed using a 3-region-42-sector model based on China's 2012 multi-regional input–output table. The results show that regional trade barriers, coal-to-gas switch policies and technological efficiency of selected energy-intensive industries can influence China's energy resilience significantly. This can provide the policy-makers important guidance on improving energy resilience in a systematic manner.

The Transmission of Monetary Shocks in a Multi-Region Economy: The Case of China

This paper constructs a sticky price Dynamic Stochastic General Equilibrium model with multi-regions. Producers from different regions would range in price rigidity, production function, the regional structures of intermediate inputs. That is, firms from each area, can get intermediates and investments from all the regions in the country following the empirical Multi-region Input-Output table in China. Different from the previous symmetry model, the model in this paper allows idiosyncratic regional dynamics to the national monetary shocks. This model is calculated by the Bayesian estimation method using the regional and aggregate China empirical data.

Growth, environmental change and business cycles in a multi-regional economy

The purpose of this is to examine multi-regional dynamics with wealth and pollutant accumulation over time. The paper generalizes the dynamic model by Zhang (2016). It treats regional amenities endogenous variables dependent on the region's population and level of pollutants. Regional differences in productivities and amenities are important for modelling regional agglomeration. The government decides environmental tax rates on production, consumption, wealth, income from wealth and housing. The economy is perfectly competitive. The dynamics of J-region economy is described by differential equations. We demonstrate business cycles due to different exogenous periodic perturbations in the multi-regional economy.

Agglomeration patterns in a multi-regional economy without income effects

We study the long-run spatial distribution of industry using a multi-region core–periphery model with quasi-linear log utility Pfluger (Reg Sci Urban Econ 34:565–573, 2004). We show that a distribution in which industry is evenly dispersed among some of the regions, while the other regions have no industry, cannot be stable. A spatial distribution where industry is evenly distributed among all regions except one can be stable, but only if that region is significantly more industrialized than the other regions. When trade costs decrease, the type of transition from dispersion to agglomeration depends on the fraction of workers that are mobile. If this fraction is low, the transition from dispersion to agglomeration is catastrophic once dispersion becomes unstable. If it is high, there is a discontinuous jump to partial agglomeration in one region and then a smooth transition until full agglomeration. Finally, we find that mobile workers benefit from more agglomerated spatial distributions, whereas immobile workers prefer more dispersed distributions. The economy as a whole shows a tendency towards overagglomeration for intermediate levels of trade costs.

GTAPinGAMS: Multiregional and Small Open Economy Model (Supplementary files)

GTAPinGAMS: Multiregional and Small Open Economy Model (Supplementary files)

Economic Landscapes, What are They? An Application to the Brazilian Economy and to the Sugar Cane Complex

In assessing the economic impact of a sector or group of sectors on a single or multiregional economy, input-output analysis has proven to be a popular method. However, there has a problem in displaying all the information that can be obtained from this analytical approach. In this paper, we have tried to set new directions in the use of input-output analysis by presenting an improved way of looking at the economic landscapes. While this is not a new concept, a new meaning is explored in this paper; essentially, it will now be possible to visualize, in a simple picture, all the relations in the economy as well as being able to view how one sector is related to the other sectors/regions in the economy. These relations can be measured in terms of structural changes, production, value added, employment, imports, etc. While all the possibilities cannot be explored in this paper, the basic idea is given here and the smart reader can uncover all the various possibilities. To illustrate the power of analysis provided by the economic landscapes, an application is made to the sugar cane complex using an interregional input-output system for the Brazilian economy, constructed for 2 regions (Northeast and Rest of Brazil), for the years of 1985, 1992, and 1995.

Wider Economic Benefits from Communication-Cost Reductions: An Endogenous Growth Approach

The paper examines the impact of communication-cost reductions on growth and welfare by means of an endogenous spatial growth model. Policy makers favouring certain infrastructure investments often claim that such projects have growth-stimulating effects that generate ‘wider impacts’ in terms of welfare, over and above producer and consumer surplus effects, which are typically measured by traditional cost–benefit analysis. It is well understood that such wider impacts cannot arise in a first-best environment with perfect competition and zero externality. But, if the market allocation is not first-best, wider effects do occur and can in principle be positive or negative. Recent literature has shown that freight-cost or commuting-cost reductions can have wider impacts. While large infrastructure projects, such as high-speed trains, have no direct effect on freight costs and little effect on commuting costs, they are nevertheless conjectured to generate wider impacts. The typical argument is that high-speed trains reduce the costs of face-to-face contacts. This promotes innovation, which in turn exerts a positive externality on growth. To verify these claims rigorously, I have set up a Romer-type endogenous growth model for a multiregional economy. In this model innovators need to learn from the existing stock of knowledge by communicating with others across space, which is a costly activity. I show that, at the margin, reducing these costs generates a welfare gain that consumers value more than the cost reduction itself.

Endogenous Alleviation of Overreaction Problem by Aggregate Information Announcement

It is well-known that agents overreact to public information in markets characterized by strategic complementarities. We propose a simple and implementable method of alleviating the overreaction problem. Extending the beauty-contest game of Morris and Shin to a multi-region economy, we show that, under an aggregate information announcement, each agent converts purely public information into imperfect public information endogenously. This makes the agents’ beliefs dispersed and alleviates the overreaction problem. Moreover, we compare the welfare effect of the aggregate information announcement with that of a separate announcement. We find that there exist plausible situations where the aggregate information announcement is better than the separate information announcement despite reduced quality.

EXPLORING THE INDONESIAN ECONOMIC LANDSCAPE AND STRUCTURAL CHANGE

In assessing the economic impact of a sector or a group of sectors on a single or multiregional economy, input-output analysis has been proven to be a popular method. This paper explores the degree of structural change of the Indonesian economy using the input-output frame work. It examines how linkages among economic sectors have evolved from 1971-2008 and identifies which economic sectors exhibited the highest inter-sectoral linkages. The study finds that manufacturing consistently becomes the key sector in the Indonesian economy. Indonesian cannot afford to leapfrog the industrialization stage and largely depend on a service-oriented economy when the potential for growth still lies primarily in manufacturing. The graphical presentation of inter-industry relationship through the “Multiplier Product Matrix” (MPM) and its associated “economic landscape” provides a visualization of the Indonesian economic landscape for selected years and how it has changed over time. Keywords: economic landscape, structural change, input output model, key sector

Bayesian Methods for TFP Analysis of a Multi-Region Economy with Dynamic Structure and Application to Japan

In this paper, we present the Bayesian methods for total factor productivity (TFP) analysis of a multi-region economy with dynamic structure. Conventional approaches to the empirical analysis of regional economic growth are incapable of providing an appropriate description of the behavior of TFP. Accordingly, we introduce a set of Bayesian statistical models based on regional production functions. In our framework, TFP is regarded as a time-varying parameter, and is estimated using a Bayesian smoothness priors approach. Compared with conventional approaches, this application of a Bayesian method makes it possible to analyze the behavior of TFP in detail. In addition, we take into account the fact that elasticity of output with respect to factors of production may vary across regions, implying a structural heterogeneity among the regions. Further, the possibility of structural changes in regional economies is incorporated. As an empirical application, we present the results for an analysis of Japanese prefectural data.

Agglomeration and Returns to Scale with Capital and Public Goods in a Multi-Regional Economy

This paper develops a multi-regional growth model with amenity, capital accumulation and regional public goods. The economy consists of any number of regions and each region consists of the industrial sector and public sector. The industrial sector provides goods in perfectly competitive markets. The public sector, which is financed by the regional government's tax incomes, supplies regional public goods. The public goods affect both firms and households. We show the existence of a unique equilibrium in the dynamic system. The comparative statics analysis also provides some important insights. For instance, if environmental improvement occurs in the advanced (less advanced) region, the national output rises (falls). If a region has a high rate of technological change and the other region remains technologically stationary, economic activities and labor force tend to be located in the technologically advancing region. If the propensity to save is increased, national output is increased and more people will be located in the technologically advanced region.

Capitalism beyond Harmonious Equilibrium: Mathematics as If Human Agency Mattered

Narrating a world of flux entails moving away from equilibrium-oriented thinking toward considerations of emergence, uncertain futures, and unintended consequences. This is not the exclusive domain of the qualitative theory construction and analysis that has dominated such thinking in sociospatial theory: it is also involved in mathematical theory construction. It requires a relational approach to mathematical theory, however, that moves beyond unidirectional claims of cause and effect, avoids deterministic and teleological thinking, and recognizes the incompleteness and openness of any such theoretical construction. These arguments are explored through an example that employs mathematical techniques often associated with complexity theory to examine unevenly shifting economic landscapes where the best guesses of capitalist entrepreneurs are interrelated with the emergent multiregional economy in which capitalists participate. This highlights the unexpectedly heightened dynamical importance of regions in a globally connected world; how cherished theoretical principles become renegotiated, as relationality leads to emergence; and that there is space for human agency, through modeling praxis appropriate to ‘incomplete systems’. We open modest cracks in the supposed wall between quantitative and qualitative approaches, oriented toward a methodological reinterpretation of what employing mathematical arguments could mean within larger, postpositivist theoretical projects in critical human geography.

IS IT IS OR IS IT AIN'T MY OBLIGATION? REGIONAL DEBT IN A FISCAL FEDERATION*

This article studies the repayment of regional debt in a multiregion economy with a central authority: Who pays the obligation issued by a region? With commitment, the central government will use its economy‐wide taxation power in support of its objective to smooth distortionary taxes and consumption across regions. Absent commitment, this tool of the central government may be exploited to induce it to bail out regional government deficits. We characterize the conditions under which bailouts occur and their welfare implications. In particular, we show when the gains from a federation may outweigh the welfare costs of a bailout. We use these insights to comment on actual fiscal relations in three quite different federations: the United States, the European Union, and Argentina.

Growth and Agglomeration of a Small-Open Multi-Regional Economy

We study economic growth of a multi-regional small open economy in a perfectly competitive economy. The national economy consists of multiple regions and each region has one production sector and one housing sector. Following the traditional literature of small open economies, we assume that the rate of interest is fixed in international market. The production side is the same as in the neoclassical growth theory. Households move freely among regions, equalizing utility level among regions by choosing housing, goods and saving. A region’s amenity is endogenous, depending on the region’s output and population. We explicitly solve the dynamics of the multi-regional economy. The system has a unique stable equilibrium point. We simulate the motion of the model and examine effects of changes in the rate of interest, the preference, and amenity parameters. We show, for instance, that a productivity improvement in the region with lowest productivity reduces the GDP and GNP and a rise in the preference for large cities may accelerate agglomeration of the population and economic activities into a region with high productivity.

Impacts of Emission Reduction Policies in a Multi-Regional Multi-Sectoral Small Open Economy with Endogenous Growth

The burden sharing of pollution abatement costs raises the issue of how to share the costs between entities (country, region or industry) and how the pollution permits should be distributed between the parties involved. This paper explores this issue in the framework of a dynamic endogenous growth 2 sectors - 2 regions - 2 inputs Heckscher-Ohlin model of a small open multi-regional economy with an international tradable permits market. Given an emission-based grand-fathering sharing rule, capital accumulation is more negatively affected by the environmental policy in the energy intensive sector. We show that such a property does not necessarily hold with a production-based grand-fathering sharing rule. We also show that the impact on capital is likely to translate into the sectoral added value level after some time, specially if the economy is submitted to an increasingly constraining environmental policy driving up the ratio price of permits to price of energy. Finally, we show that the impact of environmental policy at the regional level depends crucially on the specialization of the region along the baseline.

On the number and size of cities*

We study the effects of a decrease in inter-city transport costs on the spatial distribution of population in a multi-regional economy, when a rise in the regional population generates higher urban costs. Holding the number of cities constant, as transport costs are reduced gradually from a very high level to a very low level, there is a first phase in which large cities grow while small cities shrink, a second phase in which both large and small cities grow while medium size cities shrink, and a third phase in which large cities shrink while small cities grow. Furthermore, when the number of cities is allowed to vary as transport costs are reduced from large to small values, it first decreases and then increases.

Impact of Trade Liberalisation on a Multi-Region Economy within an Inter-Regional Game Theoretic Framework

The aim of this paper is to analyse the general equilibrium effects of tariff changes in a multi-regional model that has inter-government strategic interactions, where central and regional governments react to policies of one another by implementing counter strategies to maximise their own welfare. The motivation for this paper arises from observing inter-provincial and provincial-central government competitive money creation behaviour in China and in the former Soviet Union. By engaging in competitive money creation, governments are able to cushion the impact of tariff changes on national and regional absorption. However, it is also shown that as the marginal rate of substitution of absorption for inflation increases, the impacts of tariff changes with and without competitive money creation tend to converge.

Long‐run development of a multi‐regional economy

Abstract. This article analyses models of a multi‐regional economy with n regions and m factors, with a Cobb‐Douglas or CES production function, and with or without economies of scale and Hicks‐neutral technological progress, in which factors are imperfectly mobile as described by a revised gravity model. The article clarifies the incidence of interregional factor mobility, conditions of convergence of interregional per‐capita income, the long‐run equilibrium regional shares of factors and of income, and the convergence speed. The results are further generalised by explicitly introducing interregional distances.

Long-run development of a multi-regional economy

Long-run development of a multi-regional economy