Economic Impact Analysis of Regional Policy: An interregional input-output model considering interregional commuting and consuming regions

Author Name ISHIKAWA Yoshifumi (Nanzan University) / NAKAMURA Ryohei (Faculty Fellow, RIETI)
Creation Date/NO. October 2017 17-J-061
Research Project Regional Economic Structural Analysis and its Application to Regional Creation
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Various types of policies related to economic promotion and population growth have been implemented for regional revival. The economic effects of these policies are generally estimated using an intra-regional input-output model, and these policies are evaluated by indexes such as production, value added, and labor income. However, one major issue with the intra-regional model commonly used is how to endogenize private household consumption that can be linked to labor income. Labor income estimated by the conventional model is not the net regional income, but rather, the gross regional income. That is, the gross regional income is distributed to the other region due to interregional commuting, and some part of the consumption demand of households living in a region is allocated to the other region. Therefore, the conventional model may overestimate the economic effects of the own region.

In this study, we developed an interregional input-output model with interregional commuting and consuming regions and considered a new method for analyzing the economic effects of such promotion policies for a small region. As an example, we analyzed the effects of some regional policies for Fuji City using this model and found that analysis using the conventional model overestimates the economic effects of Fuji City.