Regional economic impacts: input-output models and spatial econometricsWed 4th Nov 2015
This impact case study is based on research concerning the estimation of regional economic impacts through input-output models (IO models) and spatial econometrics. An IO model is a quantitative economic technique that represents the interdependencies between different branches of a national economy or different regional economies, whilst spatial econometrics facilitates econometric analysis taking into account the impact of regional interdependencies. The major elements of this research that underpin its impact include new techniques for the development of IO models, the construction of Regional Accounts and the widespread application of these and associated spatial econometric modelling techniques.
The development of the IO model was the centre of a wider research program examining the impact of industrial structure and the diversity of that structure on sub-regional GDP through the application of spatial econometric models. Members of the research group have pioneered the use of spatial econometrics in some regional applications demonstrating that empirical conclusions can be altered by inclusion of spatial effects through spatial lag and error models. The results were amongst the first to highlight the different employment dynamics and spatial spillovers characterising different industries.
An important initial source of funding involved grants from the South West Regional Development Agency (SWRDA), primarily for the construction of regional accounts, the building of input-output models and research on spatial linkages. The Accounts brought together sources of published and unpublished economic data in a structured way and became an integral part of economic intelligence and analytical capacity within the region.
Benefits and impact
- Software based on the model was made available as a public good since the mid-2000s and has been used by SWRDA, local authorities and other private and public organizations. SWRDA’s use included informing the Agency’s Regional Economic Strategy, regular economic bulletins and its use as the basis for the economic evaluation and re-appraisal of the agency’s priority sectors.
- Several Local Authorities have made use of the accounts for impact analysis and investment appraisal (e.g. Somerset Council’s 2011 Economic Strategy).
- The Stockholm Environment Institute at the University of York used the Regional Accounts for carbon foot-printing of key sectors in the region. Insights from the research were utilised and further developed in the construction of Welsh Input-Output tables (in collaboration with University of Cardiff) and for evaluating the impact of foreign manufacturing.
- The adaptable nature of the modelling techniques can be demonstrated by a wide range reports produced for clients including the economic assessment of the move of the Met. Office to Exeter, the sinking of HMS SCYLLA as a diving attraction, the proposed Marine Science Park in Plymouth, the case for a New Devon Airport and several reports of the economic impact of Devonport dockyard in Plymouth.
- The research has been applied to the development of Plymouth’s Low Carbon Action Plan.
In 2010 Plymouth City Council (PCC) received funding for a government Low Carbon Framework pilot scheme. This involved councils working with individuals, businesses and communities to develop effective ways to build a low‐carbon future. As part of the process PCC commissioned a report measuring the low carbon economy in the city, forecasting the potential for growth and examining the implications for skills and strategic priorities. The report was the first detailed study of the nature and extent of the local LCE and was based on an adapted form of the IO model with a low carbon sector. Hence it built upon and extended previous research conducted by the group. The low carbon study was publically disseminated for consultation providing an opportunity for the workshop participants interested organisations/community groups to discuss the findings of the study. The final report provided the baseline detail against which low carbon economic targets could be considered, the definition of the Low Carbon Economy adopted by the PCC for future policy and underpinned recommendations in the Action Plan.
Bishop, P., Brand, S. & McVittie, E. (2000) The use of input-output in local impact analysis, Local Economy, 15.3, 238-250.
Bishop, P. and Gripaios, P. (2010) Spatial Externalities, Relatedness and Sector Employment Growth in Great Britain, Regional Studies, 44.4, 443-454.