Transboundary Income and Expenditure Flows in Regional Input‐output Models*

Abstract

Nearly all regional input-output models have been constructed without a proper accounting of inflows and outflows of personal income and personal consumption expenditures. Typically invoked is a no cross-payments assumption, analogous to the no cross-hauling assumption for commodities. We present a new accounting framework based on the classification of flows according to the location of income generation, receipt, and spending, and argue that only flows endogenous in all three respects should be part of a closed regional 1-0 model. We use the framework to compute the upward bias in multipliers in a typical regional 1-0 model. We also present several methods for estimating transboundary flows.

Empirical estimation of agglomeration economies associated with research facilities

“…Although many analysts interested in rural economic analysis employ a simpler economic base or Keynesian income multiplier models [for example, Mulligan, 1994;Thompson, 1983;Olfert and Stabler, 1994], the model employed in this study is a regional input-output model adapted for rural area analysis. In doing so, a traditional hybrid (mixed survey and non-survey based) model is modified to account for the greater openness of regional economies [see Rose and Stevens, 1991], the presence of local government and investment accounts, and the existence of multi-county economic regions. It is this latter approach that offers the most significant departure from traditional regional input-output studies.…”

Community input-output models for rural area analysis with an example from central Idaho

“…Craft the household sector to capture cross-boundary flows. Rose and Stevens (1991) warn of model errors stemming from the great openness of regional economies. Rural community economies are the most open of all regional economies, and a correct accounting of cross-boundary flows is therefore essential.…”

“…Rose and Stevens (1991) outline five problems in accounting for transboundary income and expenditures flows that can lead to errors in household-closed regional I-O models (p. 257, Table 2). The first problem stems from incorrect treatment of resident outspending such as vacation trips (i.e., income generated and received in the region, but spent outside).…”

“…Incommuter incomes are claimed by nonresidents, and thus excluded from matrix (1)'s vector V cx r f . At the same time, incommuter inspending forms a part of the exogenous export vector E. In principle, the endogeneity Rose and Stevens (1991) argue for would be achieved through the intercommunity model. Intercommunity trade and commuting are discussed in the section "Modeling intercommunity trade.…”

Life‐cycle Changes in Consumption Behavior: Age‐specific and Regional Variations*

“…Early research revealed that the set of important analytical elements in extended input‐output and social accounting models was dominated by consumption expenditure patterns (see Hewings, 1982; Hewings et al, 1989). More recently, data have been assembled to explore various facets of income distribution at the national and regional levels (Li et al, 1999; Rose and Li, 1999), to explore the nature and magnitude of transboundary income flows (Kilkenny and Rose, 1995; Rose and Stevens, 1991) and to develop estimates of interrelation income multipliers (Rose and Beaumont, 1988, 1989; Rose and Li, 1999), using the formulations proposed by Miyazawa (1968, 1976). However, very little of this work has made its way into regional and interregional general equilibrium models.…”