Microsimulation as a Tool in Developing Interregional InputOutput

Microsimulation as a Tool in Developing Interregional Input-Output Tables - A Case-Study of the Cairngorms National Park in Scotland – Yoshifumi Ishikawa, Eveline van Leeuwen and Peter Nijkamp Free University Amsterdam, The Netherlands

PLAN OF PRESENTATION 1 Introduction～The purpose of this study 2 A framework of input-output table –A three region interregional Input-output Table 3 The use of microsimulation for compiling the IO table 4 The application to Cairngorms national park, Scotland 5 Conclusion

Advantages of regional input-output table • To study interdependences among different sectors in an economy; • To identify the indirect demands concerning intermediate consumptions; • To obtain an extensive picture of important macroeconomic aggregates, such as: • production; • demand; • trade flows.

Some problems of regional input-output table • Most statistical offices have not provided regional input-output tables for small region. • Most regional IO tables are compiled in the form of intraregional Input-output table. This type of table does not take into consideration Interregional feedback effects. • Due to luck of regional specific data, It is difficult to construct regional input-output tables. Survey, Non-survey and Hybrid approach

Feedback Effects among Regions Region１ Final demand △F Region２ Export to Region 1 Intermediate consumption Import from Region 2

OBJECTIVES • To propose a three-region interregional input-output framework which covers a small region where inputoutput tables is not available. • To present a new hybrid approach that combines microsimulation based on survey data with existing input-output tables. • To construct a three-region interregional input-output table for the Cairngorms national parks, Scotland the UK

Three region interregional IO Framework Rest of the World Region 3 Region M E 3 M 2 E 1 N 12 N 32 Region 1 M 1 N 31 N 21 Region 2 M 3 N 23 N 13

Rest of the Country (Region 3) Region"M" Foreign Trade Region 2 Trade Region 1 Trade ※It is assumed that Input-Output tables for the whole country and region M are already prepared, But, Input-output table for region 1 (small region) has not been constructed.

Three region interregional Input-output table Region 1 Region 2 Region 3 Exp ort Outp ut Region 1 X 12 X 13 F 11 F 12 F 13 E 1 X 1 Region 2 X 21 X 22 X 23 F 21 F 22 F 23 E 2 X 2 Region 3 X 31 X 32 X 33 F 31 F 32 F 33 E 3 X 3 Import MI 1 MI 2 MI 3 Subtotal Z 1 Z 1 D 2 D 3 1 L 12 L 13 2 L 21 L 22 L 23 3 L 31 L 32 L 33 1 C 12 C 13 2 C 21 C 22 C 23 3 C 31 C 32 C 33 S 1 S 2 S 3 Subtotal of VA V 1 V 2 V 3 Output X 1 X 2 X 3 Taxes less subsidies Compensa tion of employees Gross operating surplus

Region 1 Region 2 Region 3 Ex out por put t E X Region 1 T 11 A 1 X 1 (1 -N 3 M-MM)(1 -T 22) A 2 X 2 R 1 NM 3 A 3 X 3 T 11 f D 1 (1 -N 3 M-MM) (1 -T 22) F 2 R 1 NM 3 F 3 E 1 X 1 Region 2 T 21 A 1 X 1 (1 -N 3 M-MM) T 22 A 2 X 2 (1 -R 1)NM 3 A 3 X 3 T 21 f D 1 (1 -N 3 M-MM) T 22 F 2 (1 -R 1)NM 3 F 3 E 2 X 2 (1 -NM 3 M 3+NM 3 M 3)F E 3 X 3 Intermediate Demand Region 3 T 31 A 1 X 1 N 3 MA 2 X 2 Final Demand (1 -NM 3 M 3+NM 3 M 3) A 3 X 3 M 3(1 -NM 3) A 3 X 3 Import M 1 A 1 X 1 MMA 2 X 2 Subtotal Z 1 Z 2 Z 3 G 11=h 11 g X 1 G 12 = h 12 G 2 G 13 = h 13 G 3 G 21=h 21 g X 1 G 22 = h 22 G 2 G 23 = h 23 G 3 G 31=h 31 g X 1 G 32 = h 32 G 2 G 33 = h 33 G 3 1 L 11=p 11 l X 1 L 12 = p 12 L 2 L 13 =p 13 L 3 2 L 21=p 21 l X 1 L 22 = p 22 L 2 L 23 = p 23 L 3 3 L 31=p 31 l X 1 L 32 = p 32 L 2 L 33 = p 33 L 3 1 C 11=q 11 c X 1 C 12 = q 12 C 2 C 13 =q 13 C 3 2 C 21=q 21 c X 1 C 22 = q 22 C 2 C 23 = q 23 C 3 3 C 31=q 31 c X 1 C 32 = q 32 C 2 C 33 = q 33 C 3 1 Tax on 2 Products 3 Taxes less subsidie s Compen sation of employe es Gross T 31 f D 1 N 3 M F 2 3 M 1 f D 1 MM F 2 M 3(1 -NM 3)F 3 D 1 D 2 D 3

Intermediate Demand Region 1 Region 2 Region 3 Region 1 T 11 A 1 X 1 (1 -N 3 M-MM)(1 -T 22) A 2 X 2 R 1 NM 3 A 3 X 3 Region 2 T 21 A 1 X 1 (1 -N 3 M-MM) T 22 A 2 X 2 (1 -R 1)NM 3 A 3 X 3 N 3 MA 2 X 2 (1 -NM 3 M 3+NM 3 M 3) A 3 X 3 MM A 2 X 2 M 3(1 -NM 3) A 3 X 3 Region 3 Import T 31 A 1 X 1 M 1 A 1 X 1

Region 2 Rest of the Country (Region 3) Region 2 Region"M" Region 1 Foreign Trade Import into Region 2 from Region 1 Import into Region 2 from Region 2 Import into Region 2 from Region 3 Import into Region 2 from foreign countries

Region 3 Rest of the Country (Region 3) Region"M" Region 2 Foreign Trade Region 1 Import from Region 1 into Region 3 Import from Region 2 into Region 3 Import from Region 3 into Region 3 Import from foreign countries into Region 3

Region 1 Rest of the Country (Region 3) Region"M" Foreign Trade Region 2 Region 1 Trade Import from Region 1 into Region 1 Import from Region 2 into Region 1 Import from Region 3 into Region 1 Import from foreign countries into Region 1 Microsimulation as a tool in simulating local trade

Use of Microsimulation (MSM) • MSM is a technique that focuses on individual decision makers such as persons, firms or households with the aim to develop large scale datasets. • This technique builds large-scale data sets on the attributes of individual units such as persons, households, and firms or orgagizations. • It has the ability of complementing sample data. We can obtain precise information on a small region at low cost.

Procedure of constructing three region IO table Phase 1 Preparation of IO tables for the middle region and country, and some data Phase 2 Survey for small region (Region 1) Phase 3 The estimation of regional trade coefficients and other coefficients Phase 4 Compilation of the three region interregional IO table Phase 5 Adjustment of IO table →Microsimulation

Region 1 Region 2 Region 3 Ex out por put t E X Region 1 T 11 A 1 X 1 (1 -N 3 M-MM)(1 -T 22) A 2 X 2 R 1 NM 3 A 3 X 3 T 11 f D 1 (1 -N 3 M-MM) (1 -T 22) F 2 R 1 NM 3 F 3 E 1 X 1 Region 2 T 21 A 1 X 1 (1 -N 3 M-MM) T 22 A 2 X 2 (1 -R 1)NM 3 A 3 X 3 T 21 f D 1 (1 -N 3 M-MM) T 22 F 2 (1 -R 1)NM 3 F 3 E 2 X 2 (1 -NM 3 M 3+NM 3 M 3)F E 3 X 3 Intermediate Demand Region 3 T 31 A 1 X 1 N 3 MA 2 X 2 Final Demand (1 -NM 3 M 3+NM 3 M 3) A 3 X 3 M 3(1 -NM 3) A 3 X 3 Import M 1 A 1 X 1 MMA 2 X 2 Subtotal Z 1 Z 2 Z 3 G 11=h 11 g X 1 G 12 = h 12 G 2 G 13 = h 13 G 3 G 21=h 21 g X 1 G 22 = h 22 G 2 G 23 = h 23 G 3 G 31=h 31 g X 1 G 32 = h 32 G 2 G 33 = h 33 G 3 1 L 11=p 11 l X 1 L 12 = p 12 L 2 L 13 =p 13 L 3 2 L 21=p 21 l X 1 L 22 = p 22 L 2 L 23 = p 23 L 3 3 L 31=p 31 l X 1 L 32 = p 32 L 2 L 33 = p 33 L 3 1 C 11=q 11 c X 1 C 12 = q 12 C 2 C 13 =q 13 C 3 2 C 21=q 21 c X 1 C 22 = q 22 C 2 C 23 = q 23 C 3 3 C 31=q 31 c X 1 C 32 = q 32 C 2 C 33 = q 33 C 3 1 Tax on 2 Products 3 Taxes less subsidie s Compen sation of employe es Gross T 31 f D 1 N 3 M F 2 3 M 1 f D 1 MM F 2 M 3(1 -NM 3)F 3 D 1 D 2 D 3

A Case-Study of the Cairngorms National Park in Scotland

CNP • 17, 000 persons; • 8, 000 households; • Several villages; • 11, 000 economic active persons; • 1200 firms; • 30% of value added from tourism. Aim: To get a better picture of the CNP economy and to simulate effects of sustainability policies.

Regional division of this case-study United Kingdam Region 2 (Rest of Scotland) Region M (Scotland) Rest of the World Region 3 (Rest of UK) Region 1 (Cairngorms: CNP ) ・Input-output tables have been constructed for UK and Scotland, ・The Sector number is 42

2004 UK Symmetric IO Table (123 sectors) 2004 UK Symmetric IO Table (108 sectors) 2007 UK Supply and Use Table (108 industries) 2007 Scotland Symmetric IO Table(126 secors) Microsimulation Statistical data for CNP Data for IO compilation (Compensation of employee, Consumption expenditure by Households in CNP) RAS Method 2007 UK Symmetric IO Table (108 sectors) Questionnaire Survey in CNP 2007 Scotland Symmetric IO Table(108 secors) The estimation of regional trade coefficients and other coefficients Three region Interregional Symmetric IO Table (42 sectors) Regional trade

23 -12 -2021 Response • Only 20 firms > need to rethink our approach; • 100 households of which we know where they buy which products, where they work, income level, etc. • On average they buy 37% of all products in the park and 54% of all services. • 45% of the households has at least one job in the Park.

23 -12 -2021 MSM to link databases 100 surveys 2, 000 detailed attributes 8, 000 totals basic attributes

23 -12 -2021 Links households Attribute Survey Database Totals HH size x x x HH income x x x Occupation x x x Job location x Years of residence x x Total purchases x x Products/Services x x Location purchases x x We will use a deterministic approach to simulate the households.

Direct input from own region by the demand for each industry

Economic effects on own region by the increase of demand for each industry

Economic effects of household consumption in CNP on each region Consumption by CNP household estimated by microsimulation Million ￡ total of CNP 59 48% total of region 2 54 44% total of region 3 11 9% Leontief Inverse Matrix based on three region interregional IO

Economic effects of household consumption in CNP on each region Economic effects of Consumption by CNP household Million ￡ Consumption Effects CNP 59 48% 77 31% Rest of Scotland 54 44% 115 46% Rest of UK 11 9% 60 24%

Economic effects on CNP economy

Economic effects on each economy

CONCLUSION １． This research has developed a three-region interregional input-output framework by dividing the whole country into three regions with the concept of hierarchical structure ２．We proposed a new hybrid technique for compiling a three region input-output table using microsimulation. ３．By applying this method into Cairngorms National Park, we have investigated the economic structure in terms of regional interdependence, and economic impacts of consumption by household in CNP.