A price-responsive framework for interregional input-output

In interregional analysis, supply models are based typically on defined sets of 'representative firms' with given 'averaged' technological and cost coefficients, such that, when aggregated as identical units into both sectors and regions, they reproduce the total output of each s...

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Bibliographic Details
Published in:The Annals of regional science 1997-07, Vol.31 (3), p.285-298
Main Author: ROY, J.R
Format: Article
Language:English
Subjects:
Bgi / Prodig
Convergence
Demand
Economic models
Economics
Handles
Human geography
Marketing
Mathematical models
Optimization
Political and economic geography
Probabilistic methods
Probability theory
Regional economics
Regional economy and planning
Regionalism
Regions
Spatial dimension
Studies
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Summary:In interregional analysis, supply models are based typically on defined sets of 'representative firms' with given 'averaged' technological and cost coefficients, such that, when aggregated as identical units into both sectors and regions, they reproduce the total output of each sector in each region. Then, deterministic models obtain profit-maximising patterns of input demands and corresponding output, prior to aggregating these quantities as if the firms were truly identical and homogeneous. In this paper, the above optimisation models are replaced by a probabilistic framework, which nevertheless guarantees convergence to the above classical deterministic solutions in the limit. The models are estimated on 'observed' flows, technological coefficients and prices, and a CES function (optionally) handles substitution between primary factors. These new input-output models become explicitly price-responsive, allowing tâtonnement with spatial models of final demand.[PUBLICATION ABSTRACT]
ISSN:0570-1864
1432-0592
DOI:10.1007/s001680050050