Assessing the Behaviour of Non-Survey Methods for Constructing Regional Input–Output Tables through a Monte Carlo Simulation

Abstract

The paper aims to analyse the behaviour of a battery of non-survey techniques of constructing regional I-O tables in estimating impact. For this aim, a Monte Carlo simulation, based on the generation of 'true' multiregional I-O tables, was carried out. By aggregating multi-regional I-O tables, national I-O tables were obtained. From the latter, indirect regional tables were derived through the application of various regionalisation methods and the relevant multipliers were compared with the 'true' multipliers using a set of statistics. Three aspects of the behaviour of the methods have been analysed: performances to reproduce 'true' multipliers, variability of simulation error and direction of bias. The results have demonstrated that the Flegg et al. Location Quotient (FLQ) and its augmented version (AFLQ) represent an effective improvement of conventional techniques based on the use of location quotients in both reproducing 'true' multipliers and generating more stable simulation errors. In addition, the results have confirmed the existence of a tendency of the methods to over/underestimate impact. In the cases of the FLQ and the AFLQ, this tendency depends on the value of the parameter d.

A Comment on Tobias Kronenberg’s “Construction of Regional Input-Output Tables Using Nonsurvey Methods: The Role of Cross-Hauling”

“…Such cases are catered for by the augmented FLQ (AFLQ), which includes a regional specialization term. However, the empirical evidence suggests that this more complex adjustment formula does not yield significantly better results (Flegg and Webber, 2000;Bonfiglio and Chelli, 2008;Flegg and Tohmo, 2011).…”

“…This evidence includes studies using survey-based data for Peterborough (Flegg et al, 1995), Scotland (Flegg and Webber, 2000), one Finnish region (Tohmo, 2004), all Finnish regions (Flegg and Tohmo, 2011), along with the Monte Carlo study by Bonfiglio and Chelli (2008), who examined 400,000 sectoral output multipliers. On the other hand, Riddington et al (2006) found the FLQ to be unhelpful, albeit on the basis of findings pertaining to a single sector in one Scottish region (Flegg and Tohmo, 2011).…”

Methods for regionalizing input-output tables

“…Interregional trade occurs when the region is not able to cover its needs for a given regional activity; the opposite is also true if the supply of a region can meet its needs, then any potential surplus must be an interregional export to other parts of country. Such a net approach of interregional trade can result in a possible underestimation of interregional trade coefficients and an overestimation of intraregional input coefficients (Bonfiglio-Chelli 2008).…”

Regional economic effects of the european capital of culture project: the use of input-output analysis

“…It is obvious that SLQ takes into account the fi rst and third ones and vice versa CILQ considers the fi rst and second ones, but FLQ takes into account all three of them. FLQ as the most accurate method is endorsed by a number of works (Tohmo, 2004;Bonfi glio & Chelli, 2008;Kowalewski, 2012). Moreover, Flegg and Tohmo (2013) believe that it is a quotient suitable for use in a hybrid model of non-survey methods.…”