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The Development of an Urban Interindustry Model: 3. Input—Output Multipliers for Peterborough
Abstract
This is the final paper in a three part series published in successive issues of this journal. It discusses further applications of the input - output model developed for Peterborough, and shows first how the technique can be used to assess the effect of increasing sales to final demand by each sector on local income. Then, by using similar methods, the effect of increased sectoral final demand sales on the volume of imports into Peterborough is calculated. Finally some general conclusions on the application of input - output methods at the urban level are drawn.
... plimb==b -^ =~--0 -? + cr^* CTiÊ quation (13) shows that since hy the multiplier hypothesis, h > 0, the ordinary least squares estimate of the regional multiplier underestimates the true multiplier to the extent that the variance of the true export income is small relative to the variance of measurement errors asso ciated with export income. ...
... Finally, the method of instrumental variables may he practical for our problem, hut that possibility is not pursued in any depth in this FOOTNOTES iSome notable works employed the inputoutput framework are Hirsch [10], Gamick [4,5], Bourque [2], Morrison [13], Czamanski and Malizia [3], and Isard and Czamanski [11]. 2For example, those described by Steinnes and Fisher [19], Hill [9], and Glickman [6,7]. ...
Empirical estimations of the regional multiplier have been abundant in the literature of regional studies for many years. There have been traditionally two general approaches to the study of regional multipliers; one using the input-output model and the other the economic base approach. However, a large number of structural simultaneous equation models, which have been used primarily at the level of national economy, have been recently constructed and estimated to analyze many regional economic problems, including regional multiplier effects. Although input-output and regional macroeconomic models introduce a high degree of sophistication and comprehensiveness, the construction of such regional models usually entails high costs and complex data problems, especially in the case of a complete interindustry model. These difficulties seem to have led many investigators to use less costly and simpler economic base models.
Much theoretical and empirical work in regional economics has been devoted to the problems of constructing and estimating intra- and interregional input-output tables (see, for example, Riefler, 1973; Paelinck and Nijkamp, 1976, for a survey). There are several reasons for this.
British regional problems increasingly emphasize the need to understand the exploitation and movement of all factors of production between different parts of the country. This paper reviews evidence, from work sponsored by the National Institute of Economic and Social Research, on the significance for the standard regions of capital investment, interregional capital flows and regional investment multipliers. A high level of economic interdependence allows the effects of investment to become widely spread throughout the British space economy. This limits the power of capital expenditure to lead growth in the region where it takes place. Studies of the spatial implications of capital investment should therefore form part of more general appraisals of factor supply and demand changes and their effects on the decisions of different investing agencies (including government). Two distinctive themes for the geographical study of capital investment are suggested: the examination of relationships between investment projects by different agencies at appropriate sub-regional scales; and the ways in which established patterns of physical capital stock may influence the expenditure of new, mobile funds.
The paper constitutes a survey and reassessment of the literature on location and linkages. The analysis begins with a brief review of published work on the formal character of complexes of economic activity. The issue of agglomeration economies and linkage structure is then discussed and its relation to urbanization phenomena examined. From here, the account moves into a detailed investigation of the role of transport costs in the determination of linkage patterns. An attempt is made to systematize the evidence from a large number of applied studies on the various effects of the clustering and dispersal of productive activities on linkage structure. Various empirical analyses of the organization of production units and its effect on linkages are reviewed. A composite theory is then proposed on the basis of an account of the common dependence of both location and linkage on broad production system dynamics. The paper concludes with a brief glimpse at the possibilities of extending the theoretical apparatus developed here by integrating it with work that is currently going forward on the form and evolution of local labor markets.
This is the second of four papers which will be published in close sequence in this journal. It examines, first, a general economic-policy model, and second, existing data sources for the North-west region. The restrictions on the availability of data necessitate the specification of a more limited model of spatio - temporal economic structure. Five equations can be specified: for unemployment, employment, population, migration, and industrial movement, although policy variables are also included. Using the identification criteria and diagnostics discussed in the first part of this series, the lag structure of the model is then specified, and the parameters estimated by a two-stage least-squares procedure. The estimates from this model are then used to comment on patterns of regional dynamics and spatial policy.
Hewings G. J. D. (1971) Regional input-output models in the U.K.: Some problems and prospects for the use of nonsurvey techniques, Reg. Studies 5, 11--22. The possibilities of utilizing nonsurvey data in the production of regional input-output tables have recently been investigated in the United States. In this study, the 1954 U.K. input-output tables were used as a basis for the construction of a set of regional tables for the West Midlands for 1954. Using published data, projections were made to 1958: these projected output figures compared favourably with data recorded in the 1958 Census of Production. While the aggregate differences were small, of greater significance were the differences in the estimation, by each of the nonsurvey techniques, of the individual input coefficients and column multipliers. Although considerable empirical testing remains to be done, nonsurvey techniques would seem to have considerable potential in assisting the production of regional accounts but it is doubtful whether present methods will obviate local surveys completely.
Input-output analysis: A tool for management and research
- W H Fisher
Input-output analysis and urban development planning: Some applications of the Peterborough model
- W I Morrison