On the Parameterization of Techniques for Representing Regional Economic Structures

Abstract

This paper is concerned with two parameterized methods of regionalising input-output coefficients: the Flegg et al. Location Quotient (FLQ) and its augmented version (AFLQ). For applying the two techniques, a parameter δ has to be estimated. In this regard, the paper faces two matters that are still open in the literature: the existence of a range of δ that can be used in different regions and the estimation of the most appropriate value of δ. For this aim, a Monte Carlo simulation has been carried out in order to generate 'true' multiregional I-O tables randomly. From the simulation, analyses based on probability distributions and regression were also carried out. Finally, these simulation results have been compared with those of an empirical case. Results confirm that there is actually a range of values of δ within which the best δ is more likely to fall. For the FLQ, this range is centred on 0.3 with an associated probability of 33% (if the width of the range is set at 0.1), whereas, for the AFLQ, the relevant range is between 0.3 and 0.4 with a probability by 38%. Finally, this paper provided a way to estimate the best δ for a given region, without knowing the relevant and detailed economic structure at sectoral level.Non-survey techniques, Input-output matrices, Monte Carlo simulation,

Regional Input–Output Tables and the FLQ Formula: A Case Study of Finland

“…Some survey-based evidence on its possible value is presented for Scotland by Flegg and Webber (2000) and for the Italian Marche region by Bonfiglio (2009). However, the generality of results obtained from a single region is always open to question, so our primary aim has been to provide more guidance, drawn from a detailed examination of a wide range of regions of different size, on the appropriate value(s) of δ.…”

Estimating Regional Input Coefficients and Multipliers: The Use of FLQ is Not a Gamble

“…A rather different route to the estimation of δ has been proposed by Bonfiglio (2009), who derived the following regression equation:…”

The economic impact of agricultural projects in a petroleum-exporting country: the case of palm oil in the Republic of Congo

“…For this reason, Bonflglio's (2006b) established approach has been adopted here. This choice is motivated by relatively recent empirical evidence showing that it produces more reliable multipliers in comparison with other régionalisation techniques (Bonfiglio and Chelli, 2008;Bonfiglio, 2009). This approach is based on the application of a three-stage estimation method.…”