A new approach to modelling the input-output structure of regional economies using non-survey methods

This paper proposes a new approach to the regionalization of national input-output tables where suitable regional data are scarce and analysts are considering using location quotients (LQs). We focus on the FLQ formula, which frequently yields the best results of the pure LQ-based methods, and devel...

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Bibliographic Details
Published in:Journal of economic structures 2021-07, Vol.10 (1), p.1-31, Article 12
Main Authors: Flegg, A. T, Lamonica, Guiseppe R, Chelli, Francesco, Recchioni, Maria C, Tohmo, Timo
Format: Article
Language:English
Subjects:
Business and Management
Cross-entropy
Economic theory
Economics
Economics and Finance
Employment
Engineering
Entropy
FLQ
GRAS
Methods
Regional tables
Regions
Statistics
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Summary:This paper proposes a new approach to the regionalization of national input-output tables where suitable regional data are scarce and analysts are considering using location quotients (LQs). We focus on the FLQ formula, which frequently yields the best results of the pure LQ-based methods, and develop an enhanced way of implementing this approach. We use a modified cross-entropy (MCE) method, along with a regression model, to estimate values of the unknown parameter δ in the FLQ formula, specific to both region and country. An analysis of survey-based data for 16 South Korean regions reveals that the proposed FLQ+ approach yields more accurate estimates of both input coefficients and sectoral output multipliers than those from simpler LQ-based methods or the MCE approach alone. Sectoral outputs (or employment) are the only regional data required. The MCE method also clearly outperforms GRAS.
ISSN:2193-2409
2193-2409
DOI:10.1186/s40008-021-00242-8