Multisectoral tools for key sectors analysis in regional analysis

Ferran Sancho, Manuel Alejandro Cardenete

Research output: Contribution to journalArticleResearchpeer-review

2 Citations (Scopus)

Abstract

Detection of key sectors in any economy whether national and regional level, is a key issue to which policymakers have to face when they need to take decisions to promote economic growth and regional development. Their identification, therefore, becomes a key objective, both to support the growth of macroeconomic variables such as GDP (gross domestic product) or GVA (gross value added), and increasing the number of jobs or if any regionalised to envision the impact of public spending. The evolution of the different branches of activity can be taking along time, i.e. longer productive sectors boost the economy or otherwise, sectors that energize and drive the rest of the economy must be taken into account and be clearly identified. To do this, the multisectoral models, whether Input-output Tables (IOT) or Social Accounting Matrices (SAM) (or even exercises more complex as those corresponding to the computable General equilibrium models), they can give concrete answers to policymakers on the effects of betting on an economic policy or another. we can identify the multiplier effects generated-or lost-and the number of jobs created, or destroyed. As we know, social accounting matrix, whose construction is built around an input-output table has a fixed period. For practical purposes it is usual to assume that such matrices have approximately valid for five years as the undoubted structural changes that will occur in the reality of that time interval are not strong enough to change them substantively. Thus, thanks to these models, questions of this type can be made in any of the local, regional, national and/or multinational by different governments and supranational institutions levels and responses can be found in large cases, thanks to these characteristics models. This work is divided into six sections where different detection methods are reviewed key sectors, from classic-section Rasmussen 3, the method of hypothetical extraction-section 4, through the Multiplier Product Matrix-section 5 - and computable general equilibrium models (cGe) -section 6-. In section 2 the approximation of these methodologies is justified using SAMs and we obtain some conclusions and possible future research in section 7. For the objective, we will review traditional methods of input-output analysis, but applied to social accounting matrices. These matrices are databases in which information is collected for a given period and for a breakdown of agents and sectors, bilateral economic transactions measured by income flows. The SAM includes economic information, such about producers, consumers, government and the foreign sector agents; also incorporate information on the use of production factors, labor and capital. Therefore, the novelty of this work is to extend the application of emerging within the input-output analysis to the field of social accounting matrices methodologies, and also see how they can be used to identify the key sectors of an economy using this alternative conceptualization. Input-output tables have partial information of economic flows and SAM allows to complement these interrelationships and to capture interindustrial and institutional agents interrelations. limitation of the input-output methodology has been sufficiently argued in the literature, making it unnecessary to dwell on this aspect. SAM, departing from the IoT and supplemented by information from the household survey or national (or regional) accounts, allows further broken down into the results. In any case, despite the obvious advantage of closing SAM circular flow of income and therefore incorporate the interrelationship between the primary inputs and final demand, both databases have the limitations of any database developed from primary data in some cases secondarily information, trying to capture the still photograph of an economy, as a whole, with the problems of different data sources temporize, given the high demand for them necessary for processing. More explicitly, we can say that, based on leontief technology, we work with a more sophisticated matrix can close circular flow of income, as mentioned above. we also have the additional advantage that both basic macroeconomic identities, to respect the underlying equilibrium conditions which are reflected endogenously when a general equilibrium model is implemented microeconomic met. In short, the SAMs are quintessential databases usually used in the construction of general equilibrium models applied. These models show the nature of economic relationships, satisfy the optimality conditions on the behavior of agents, the technological feasibility respect and comply with the restrictions in terms of use of productive resources. Doing a brief tour of the sections that follow, first we have a section where detection methodology in key sectors will be developed by Rasmussen (1956) and Augustinovics (1970). we follow with the explanation of the analysis with sectors extraction methodology from dietzenbacher et al. (1993). we will complete the above methods with the multiplier product matrix (MPM) following Sonis et al. (1997) and introducing the so-called structural path analysis landscape, or "three-dimensional landscape" so we will discuss the main approaches to structural analysis. To conclude this review, we will include the cGe modeling and the future possibilities of this complementary approach. This paper discusses about determination of key sectors of an economy. we have a clear that a well defined key sector structure represents an important concept to analyze problems effectively allocating resources or regional planning progress. we want to emphasize the desirability of extending the analysis beyond the foundations of input-output data advocating the use of models of greater endogeneity either SAM and cGe. Information from these types of models can give enough information to design economic policies to promote economic activity focused in certain activities in order to achieve an integrated regional development and increased effectiveness of efforts regional policy. In addition to its statistical content, being square matrices that allow close circular flow of income, social accounting matrices are a modeling tool for the evaluation of interventions taking place in the economy, since economic policy national or regional. The level of disaggregation of the matrix with which we work will depend on the aspect that our research is focused (distribution of family income, changes in the tax system or public sector transfers, savings, foreign sector, etc.). The approach to identify key sectors have been made through four different methodologies: key sector approach from Rasmussen (1956) and/or Augustinovics (1970); followed by hypothetical extraction methodology dietzenbacher et al. (1993); multiplier product matrix by MPM - Sonis et al. (1997) - for a path analysis or dimensional landscape; and finally by computable general equilibrium models and cardenete et al. (2013). We have shown how some traditional techniques of input-output methodology can be improved using a wider and higher socioeconomic detail database, such as SAM, and help to better understand the relationships between agents, products, consumers, government and rest of the world. we can also extract work how more traditional methods (i.e. Rasmussen), with all the limitations that have for their simplicity, lead to results very similar to other more sophisticated techniques (i.e. hypothetical extraction). Thus, we can conclude that no one method is better than another, but are complementary in understanding economic path. Finally, the idea of combine sites of industrial concentration with a development strategy exploiting endogenous characterization of each region and its own internal dynamism, makes it convenient to study those sectors capable of generating growth and deliver value added in both a national economy and/or regionally. Economic analysis provides therefore several options to try to resolve an issue that is very important as the promotion of economic growth. The efficient and effective use of scarce public resources requires suitable policies based on rigorous analysis and contrasted conceptually and empirically. This is a distinct advantage of cross-sectional models that we have presented in this paper and constitute a part of fundamental analysis in the tools of the applied economist.
Original languageEnglish
Pages (from-to)131-146
JournalRevista de Estudios Regionales
Issue number100
Publication statusPublished - 1 Jan 2014

Keywords

  • Applied general equilibrium models
  • Input-output tables
  • Keysectors
  • Social accounting matrices

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