Refining the Isard Multiregional Input–Output Model: Theory, Operationality and Extensions

Abstract

Isard demonstrated as early as 1951 that traditional (national) I–O models are inadequate because they cannot capture the effects of linkages and interactions among regions. To examine the full (short-term) impacts of unexpected events, such as terrorist attacks or natural disasters on the U.S. economy, the economic links among states (e.g. interregional trade, based on detailed shipments data) had also be analyzed. IMPLAN provided State input–output data. Few MRIO models have been implemented (since Polenske’s attempt in 1980), but the potential increased after 1993 when the Commodity Flow Surveys (CFS) were introduced. This chapter introduces our model, the National Interstate Economic Model (NIEMO) which is an attempt to operationalize Isard’s ideas fully, and covers 52 regions (the 50 States, Washington DC, and the “rest of the world”) and 47 (29 commodity and 18 service) sectors. This was made possible by the expansion of the data base and the dramatic improvement in computer capacity. Much of the chapter explains how the model was built. A key step was the creation of conversion tables to make IMPLAN and CFS data compatible, and two sets of coefficients (industrial trade and regional interindustry). Model extensions were also introduced, TransNIEMO (to integrate the national highway network), FlexNIEMO (to relax the standard I–O assumption of fixed production coefficients), and adding induced impacts to indirect impacts in interregional trade analysis.