Regions in an Interdependent Economy
MODEL LAB · LABORATORY 06
Regions in an
Interdependent Economy.
Economic impacts do not stop at administrative borders. Extend input–output analysis across space and discover how demand in one region activates local production, interregional supply chains and external imports.
INTERREGIONAL TRADEREST OF THE WORLD · LEAKAGE
WHY SPACE CHANGES THE RESULT
National effects have
a geography.
A multi-regional input–output system records not only which industry supplies which industry, but also the region of origin and the region of use.
Origin
The producing region where output, value added, jobs and environmental pressure occur.
Destination
The purchasing region whose industries or final users initiate demand for the product.
Spillover
Output generated outside the region where the original demand shock occurs.
Leakage
Demand satisfied outside the modelled regional system through imports from the rest of the world.
THE MRIO BLOCK SYSTEM
Within regions.
Between regions.
Represent domestic technical requirements within each regional economy.
Represent interregional input requirements and transmit shocks through trade.
Identifies the location of the demand shock independently from the location of production.
REGIONAL TRANSMISSION LABORATORY
Place the shock.
Map the consequences.
Choose the demand region and adjust local supply, interregional dependence and external leakage. ECONORIA allocates the production effect by location.
SPATIAL READINGRegion A retains most of the production response, while Region B gains through interregional supply chains. A national total alone would hide this distribution.
THINK LIKE A REGIONAL MODELLER
Four disciplines of
spatial analysis.
Locate production
Assign an effect to where production occurs, not simply where expenditure is announced.
Preserve bilateral trade
Origin–destination flows reveal asymmetric dependence that national accounts aggregate away.
Separate spillover and leakage
Interregional imports remain inside the national system; foreign imports leave it.
Report distributions
A positive national effect can coexist with highly unequal regional gains and adjustment burdens.
SCIENTIFIC CHECKPOINT
Where does a spillover
effect occur?
A demand shock begins in Region A, but suppliers in Region B increase production. How should Region B’s response be classified?
Keep effects inside the regional system distinct from external leakage.
