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

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  • Kristinn Hermannsson

    () (Department of Econonics, Fraser of Allander Institute, University of Strathclyde)

Abstract

1 Beyond Intermediates: The Role of Consumption and Commuting in the Construction of Local Input-Output Tables Dr Kristinn Hermannsson, Fraser of Allander Institute, Department of Economics, University of Strathclyde kristinn.hermannsson@strath.ac.uk Abstract 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.

Suggested Citation

  • Kristinn Hermannsson, 2013. "Beyond Intermediates: The Role of Consumption and Commuting in the Construction of Local Input-Output Tables," Working Papers 1305, University of Strathclyde Business School, Department of Economics.
  • Handle: RePEc:str:wpaper:1305
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    References listed on IDEAS

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    Cited by:

    1. Hermannsson, Kristinn & McIntyre, Stuart G., 2014. "Local consumption and territorial based accounting for CO2 emissions," Ecological Economics, Elsevier, vol. 104(C), pages 1-11.
    2. Tony Flegg & Leonardo J. Mastronardi & Carlos A. Romero, 2015. "Evaluating the FLQ and AFLQ formulae for estimating regional input coefficients: empirical evidence for the province of C¨®rdoba, Argentina," Working Papers 20151508, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.

    More about this item

    Keywords

    Input-Output; Location Quotients; Commuting; Consumption; Glasgow; Scotland.;

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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