The Regionalization of National Input–Output Tables: A Review of the Performance of Two Key Non-survey Methods

This chapter reviews the available empirical evidence on the performance of Flegg’s location quotient (FLQ) and Kronenberg’s Cross-Hauling Adjusted Regionalization Method (CHARM), a relatively new non-survey technique that accounts explicitly for cross-hauling when constructing regional input–output tables. The performance of the FLQ and related formulae is evaluated using official data for 20 Finnish and 16 South Korean regions. The results confirm previous findings that the FLQ can produce far more accurate estimates of regional output multipliers than can simpler LQ-based formulae such as the SLQ and CILQ. We also explore possible ways of determining suitable values for the unknown param…

The regionalization of national input-output tables : A study of South Korean regions

This paper uses survey‐based data for 16 South Korean regions to refine the application of Flegg's location quotient (FLQ) and its variant, the sector‐specific FLQ (SFLQ). These regions vary markedly in terms of size. Especial attention is paid to the problem of choosing appropriate values for the unknown parameter δ in these formulae. Alternative approaches to this problem are evaluated and tested. Our paper adds to earlier research that aims to find a cost‐effective way of adapting national coefficients, so as to produce a satisfactory initial set of regional input coefficients for regions where survey‐based data are unavailable. Este documento utiliza datos basados en encuestas de 16 reg…

A new approach to modelling the input-output structure of regional economies using non-survey methods

AbstractThis paper proposes a new approach to the regionalization of national input–output tables where suitable regional data are scarce and analysts are considering using location quotients (LQs). We focus on the FLQ formula, which frequently yields the best results of the pure LQ-based methods, and develop an enhanced way of implementing this approach. We use a modified cross-entropy (MCE) method, along with a regression model, to estimate values of the unknown parameter δ in the FLQ formula, specific to both region and country. An analysis of survey-based data for 16 South Korean regions reveals that the proposed FLQ+ approach yields more accurate estimates of both input coefficients an…

Testing and implementing a new approach to estimating interregional output multipliers using input-output data for South Korean regions

Flegg's location quotient (FLQ) is a useful tool for estimating intraregional output multipliers. This paper uses it as one component when estimating interregional multipliers. Using statistical information criteria and official data for 16 South Korean regions, it is found that the best approach is to combine the FLQ with a simple trade model. The paper explains how the proposed procedure can be implemented for both multiple and individual regions, and also how a region-specific value for the unknown parameter δ in the FLQ formula can be determined. Finally, an illustrative case study of one of the regions is carried out.

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

Flegg A. T. and Tohmo T. Estimating regional input coefficients and multipliers: the use of FLQ is not a gamble, Regional Studies. This paper re-examines the Finnish evidence presented by Lehtonen and Tykkylainen on the use of location quotients (LQs) in estimating regional input coefficients and multipliers. They argue that the choice of an LQ-based method is a gamble and that there is no single method that can be recommended for general use. It is contended here that this evidence is erroneous and that the FLQ (Flegg's location quotient) yields results far superior to those from competing formulae, so it should provide a satisfactory way of generating an initial set of input coefficients.…

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

Flegg A. T. and Tohmo T. Regional input – output tables and the FLQ formula: a case study of Finland, Regional Studies. This paper examines the use of location quotients (LQs) in constructing regional input – output tables. Its focus is on the modified FLQ formula proposed by Flegg and Webber in 1997. Using data for twenty Finnish regions of widely different size, a regression model is developed to assist in the selection of a value for the unknown parameter δ in this formula. It is found that the FLQ yields results far superior to those from standard LQ-based formulae. The FLQ-based initial set of regional input coefficients could be used to build the non-survey foundations of a hybrid mod…

Correction to: A new approach to modelling the input–output structure of regional economies using non‑survey methods

Using CHARM to Adjust for Cross-hauling: The Case of the Province of Hubei, China

Data for the Chinese province of Hubei are used to assess the performance of Kronenberg's Cross-Hauling Adjusted Regionalization Method (CHARM), a method that takes explicit account of cross-hauling when constructing regional input–output tables. A key determinant of cross-hauling is held to be the heterogeneity of commodities, which is estimated using national data. However, contrary to the authors’ findings for Finland, CHARM does not generate reliable estimates of Hubei's sectoral exports, imports and volume of trade, although it is more successful in estimating sectoral supply multipliers. The poor simulations of regional trade are attributed to the fact that Hubei is a relatively small…

"A Comment on Tobias Kronenberg's "Construction of Regional Input-Output Tables Using Nonsurvey Methods: The Role of Cross-Hauling"

This article examines the effectiveness of a new non-survey regionalization method: Kronenberg’s Cross-Hauling Adjusted Regionalization Method (CHARM). This aims to take into account the fact that regions typically both import and export most commodities. Data for Uusimaa, Finland’s largest region, are employed to carry out a detailed empirical test of CHARM. This test gives very encouraging results. CHARM is suitable for studying environmental questions, but it can only be applied in situations where foreign imports have been included in the national input–output table. Where the focus is on regional output and employment, location quotients (LQs) can be used for purposes of regionalizati…