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

Kristinn Hermannsson

Research output: Working paperDiscussion paper

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.
LanguageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-36
Number of pages37
Volume13
Publication statusPublished - 2013

Fingerprint

Input-output table
Wages
Interdependencies
Commuting
Multiplier
Household consumption
Qualification
Household income
Purchase
Trade flows
Spillover effects
Payment
Regional economy

Keywords

  • input-output
  • location quotients
  • commuting
  • consumption
  • glasgow
  • scotland

Cite this

Hermannsson, K. (2013). Beyond Intermediates: The Role of Consumption and Commuting in the Construction of Local Input-Output Tables . (05 ed.) (pp. 1-36). Glasgow: University of Strathclyde.
Hermannsson, Kristinn. / Beyond Intermediates : The Role of Consumption and Commuting in the Construction of Local Input-Output Tables . 05. ed. Glasgow : University of Strathclyde, 2013. pp. 1-36
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Hermannsson, K 2013 'Beyond Intermediates: The Role of Consumption and Commuting in the Construction of Local Input-Output Tables ' 05 edn, University of Strathclyde, Glasgow, pp. 1-36.

Beyond Intermediates : The Role of Consumption and Commuting in the Construction of Local Input-Output Tables . / Hermannsson, Kristinn.

05. ed. Glasgow : University of Strathclyde, 2013. p. 1-36.

Research output: Working paperDiscussion paper

TY - UNPB

T1 - Beyond Intermediates

T2 - The Role of Consumption and Commuting in the Construction of Local Input-Output Tables

AU - Hermannsson, Kristinn

N1 - Published as a paper within the Discussion Papers in Economics, No. 13-05 (2013)

PY - 2013

Y1 - 2013

N2 - 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.

AB - 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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KW - commuting

KW - consumption

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KW - scotland

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Hermannsson K. Beyond Intermediates: The Role of Consumption and Commuting in the Construction of Local Input-Output Tables . 05 ed. Glasgow: University of Strathclyde. 2013, p. 1-36.