Development and Application of Regional Employment IO Model

Author Name NAKAMURA Ryohei (Faculty Fellow, RIETI)
Creation Date/NO. September 2016 16-P-011
Research Project Regional Economic Structural Analysis and its Application to Regional Creation
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The major concern for local municipalities aiming at regional vitalization is enhancing or maintaining employment rather than increasing regional income or output. This is becoming particularly important in the era of declining population.

Using employment coefficients in the regional input-output (IO) table, we can calculate employment inducement effects for final demand by industrial sectors. However, the changing process of employment through industrial relations cannot be verified. To investigate the process, we need to construct a Leontief-type inverse matrix based on employment coefficients.

In this study, we replace commodity price-based regional tables into employment-based IO tables and analyze the employment effects by the changes in final demand. Furthermore, endogenizing final consumption enables separation of the total inducement effects of employment change into the Leontief effect and the Keynes effect. By clarifying the relationship between economic base models and the predetermined IO model, we show that all industrial sectors including the service industries can become a basic industry, and accordingly, we can grasp the employment effect by treating all of the industries as basic industries. Traditionally, industries such as the primary industry and manufacturing industries were the predetermined basic industries.

Those development of regional IO application would substantially contribute to policy making and implementation of a comprehensive regional strategy for local municipalities