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Beyond Intermediates: The Role of Consumption and Commuting in the Construction of Local Input-Output Tables

  • Kristinn, Hermannsson

It is a well-established fact in the literature on simulating Input-Output tables that mechanical methods for estimating intermediate trade lead to biased results where cross-hauling is underestimated and Type-I multipliers are overstated. Repeated findings to this effect have led to a primary emphasis on advocating the accurate estimation of intermediate trade flows. This paper reviews previous research and argues for a qualification of the consensus view: When simulating IO tables, construction approaches need to consider spill-over effects driven by wage and consumption flows. In particular, for the case of metropolitan economies, wage and consumption flows are important if accurate Type-II multipliers are to be obtained. This is demonstrated by constructing an interregional Input-Output table, which captures interdependencies between a city and its commuter belt, nested within the wider regional economy. In addition to identifying interdependencies caused by interregional intermediate purchases, data on subregional household incomes and commuter flows are used to identify interdependencies from wage payments and household consumption. The construction of the table is varied around a range of assumptions on intermediate trade and household consumption to capture the sensitivity of multipliers.

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File URL: http://hdl.handle.net/10943/451
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Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2013-37.

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Date of creation: 2013
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Handle: RePEc:edn:sirdps:451
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  10. M H Robison & J R Miller, 1988. "Cross-hauling and nonsurvey input - output models: some lessons from small-area timber economies," Environment and Planning A, Pion Ltd, London, vol. 20(11), pages 1523-1530, November.
  11. Harrigan, F J & McGilvray, J W & McNicoll, I H, 1980. "A Comparison of Regional and National Technical Structures," Economic Journal, Royal Economic Society, vol. 90(363), pages 795-810, December.
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