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On the multiplier concept in regional analysis

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  • Novica Supić

Abstract

Major aim of the paper is to explain how Keynesian multiplier model can be used to estimate the effect of expenditure changes on regional economy especially regional income and employment. Among many factors, marginal propensity to consume locally produced goods plays a crucial role in determining regional multiplier effects. A critical feature of the regional multiplier is an extent to which expenditure injections leak out of a region and special attention has therefore been paid to identifying the nature of this leakage. Regional multiplier analysis has undoubtedly proved to be of a substantial value not only for defining and operating regional policy but also in providing an explanation of how regional economies actually function. It nevertheless has its weaknesses, the primary one being that it does not provide detailed information of economic effects of the expenditure injections. As a response to this criticism, regional econometric models which provide far greater details have been developed. Key words: Regional economy, Multiplier model, Marginal propensity to consume local products, Leakage effect.JEL: R11, R13, R15.

Suggested Citation

  • Novica Supić, 2006. "On the multiplier concept in regional analysis," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 53(1), pages 89-103.
    • Handle: RePEc:voj:journl:v:53:y:2006:i:1:p:89-103:id:303
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    File URL: https://panoeconomicus.org/index.php/jorunal/article/view/303/289
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    More about this item

    Keywords

    Regional economy; Multiplier model; Marginal propensity to consume local products; Leakage effect;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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