On the dynamics of net versus gross multipliers

Industries often promote their interests by arguing that they have a big impact on the rest of the economy. To substantiate such claims usually some measure of size (employment or value added) is labelled the direct effect and is then multiplied with the corresponding (gross) multiplier to calculate what is labelled the total impact of the sector or project at hand. To avoid double-counting impacts and to solve the endogenous/exogenous mix-up involved the net multiplier concept was introduced (Oosterhaven and Stelder, 2002). Both the standard (gross) multiplier and the new net multiplier are essentially static concepts. When applied in a dynamic setting the question of stability rises. The stability of the gross multipliers from the standard input-output model is based on the stability of its input coefficients. The stability of net multipliers is also based on the stability of its additional exogenous demand/total output ratios, which are unstable by definition. This note will argue that this property should not be seen as a vice but as an additional virtue of the net multiplier concept. In a closed economy, assuming fixed input price ratios, the stability of the input coefficients is a technological feature. In an open regional or national economy, with growing exogenous demand, gross multiplier stability also implies the absence of import substitution. This is unlikely whenever the growth of exogenous demand is substantial. The net multiplier concept forces the user to consider not only import substitution but also export substitution explicitly. Depending on the relative size of import versus export substitution, the net multiplier may either rise or fall, whereas the gross multiplier only rises when the economy grows. From this, the paper argues that using net multipliers is more appropriate than using gross multipliers not only in a static setting but also in a dynamic setting, that is when judging the relative importance of industries is the issue.

Indirect economic effects of a rail link along the afsluitdijk

New transport infrastructure has a myriad of short and long run effects. The effects on population and economic activity are most difficult to estimate. This paper introduces three different models to estimate the impacts of new infrastructure on labour supply and demand, and carefully explains how the interaction between the models and their outcomes should be handled. The methodology is applied to a proposal for a magnetic levitation rail system from Groningen across the Afsluitdijk to Schiphol. This benchmark it is then used to derive a qualitative assessment for different trajectories and slower type of new rail infrastructure all using the Afsluitdijk. Finally, this paper discusses the remarkable differences in the quantitative outcomes with a comparable Maglev proposal that does not use the Afsluitdijk but runs through the polders of the former Zuiderzee.

On the definition of key sectors and the stability of net versus gross multipliers

Industries often promote their interests by arguing that they have a large impact on the rest of the economy. The same line of reasoning is used when so-called key sectors for economic development are searched for. In both cases, a one-sided view of the dependence of the rest of the economy on the sector at hand is used, and sectors with large forward and backward linkages are selected as being strategically important to the region or nation at hand. This onesided approach, however, disregards that the sectors selected may be heavily dependent on the rest of the economy, and may therefore in fact not be able to generate the growth impulses that their larger linkages are assumed to pass on to the rest of the economy. To avoid doublecounting impacts and to reckon with the two-sided nature of the dependency between a sector and the economy at large, the net multiplier concept is shown to provide an adequate solution. However, both the standard (gross) multiplier and the new net multiplier are essentially static concepts. When the search is for strategic sectors for future development, the question of the stability of both measures unavoidably arises. Besides the stability of the input-output coefficients, the stability of net multipliers is also based on the stability of its additional “exogenous demand/total endogenous output” ratios, which are unstable by nature. We argue that this property should not be seen as a vice, but as an additional virtue of the net multiplier concept, as it forces the analyst to explicitly consider this inherent instability instead of assuming the problem away as is usually done when gross multipliers are used.

Regional Labour Productivity in The Netherlands - Diversification and Agglomeration Economies

This paper studies the extent to which diversification and agglomeration effects account for regional differences in labour productivity levels and labour productivity growth. Using a large set of regional data for The Netherlands for 40 labour market areas between 1990-2001 we find that roughly 60% of the explained variation in regional productivity differences and 55% of the regional growth differences can be attributed to indicators of diversification and agglomeration effects. A sensitivity analysis shows that these effects are fairly robust.

Indirect economic effects of a rail link along the afsluitdijk

New transport infrastructure has a myriad of short and long run effects. The effects on population and economic activity are most difficult to estimate. This paper introduces three different models to estimate the impacts of new infrastructure on labour supply and demand, and carefully explains how the interaction between the models and their outcomes should be handled. The methodology is applied to a proposal for a magnetic levitation rail system from Groningen across the Afsluitdijk to Schiphol. This benchmark it is then used to derive a qualitative assessment for different trajectories and slower type of new rail infrastructure all using the Afsluitdijk. Finally, this paper discusses the remarkable differences in the quantitative outcomes with a comparable Maglev proposal that does not use the Afsluitdijk but runs through the polders of the former Zuiderzee.

Effects of Transport Improvements on Commuting and Residential Choice

This paper develops a commuter location model able to explain and simulate residential location changes of commuters that result from transport improvements. The core model is based on the assumption of constant commuting time, while two extensions incorporate substitution possibilities having an upward effect on total commuting time. Estimation errors of the residential location of the working population with the existing transport system are limited to 7%. With the extended model, the impacts on commuting and residential choice are investigated for six higher speed rail connections between Amsterdam, located in the urban core of the Netherlands, and Groningen, located in its rural periphery. The model outcomes strongly influenced the public policy debate in the Netherlands.

HYBRID INTERREGIONAL INPUT-OUTPUT CONSTRUCTION METHODS: APPLIED TO THE SEVEN REGION SPANISH INPUT-OUTPUT TABLE

This paper searches for an optimal combination of non-survey methods when constructing a Spanish interregional input-output table for the region of Madrid and the five provinces of the region of Castilla-La Mancha (CLM), given thirteen Spanish regional input-output (IO) tables for the period between 1999 and 2005. Hence, we develop different regression analyses to obtain the trade submatrices of the table. These regression analyses are based on statistical data on the road transport of goods, on input-output interpolation and extrapolation techniques to calculate the necessary coefficients. Finally a procedure is devised to tally the summation of the provincial and rest of Spain IO submatrices with the National IO table.

On the development of raem: The dutch spatial general equilibrium model and it's first application to a new railway link

This paper describes the development of a spatial computable general equilibrium model aimed at estimating the indirect economic effects of major transport infrastructure projects on Dutch regions. The RAEM model is based in the so-called new economic geography literature. It employs monopolistic competition for fourteen sectors as the basic market form, and calibrates most of its coefficients on recently constructed bi-regional input-output tables for the Netherlands. The general outline of the model is described and the way it fits in with evaluation schemes presently adopted by the Dutch government and the European Commission. A first version of the model has been applied to a base scenario for the year 2020 and has been used for evaluating the indirect economic effects of a new railway link between Amsterdam and Groningen. The paper describes the results of this exercise and discusses the way the RAEM model will be developed further in the near future.