Perhaps, one of the most relevant issues in constructing regional input-output tables is the estimation of interregional trade flows. Hence, the Regional Statistical Office of Andalusia (Spain) is promoting new research on survey-based estimates of trade flows between the own region and the rest of Spain. Especially, survey approach has been seen to result more reliable outcomes (Eding & Nijmeijer, 1998) than non-survey constructs. This paper will focus on survey design features, sample methods, treatment of sampling and non-sampling errors and others aspects concerning data collection and processing in the case of Andalusia (Spain).

José Manuel Rueda-Cantuche

English

Research Papers in Economics

45
th Congress of the European Regional Science Association, Amsterdam, 23-27 august 2005  
Estimating interregional trade flows in Andalusia (Spain) 
 
 
 
JOSÉ M. RUEDA-CANTUCHE
* 
Universidad Pablo de Olavide. Departamento Economía, Métodos Cuantitativos e Historia Económica 
Carretera de Utrera, km. 1, 41013, Sevilla 
E-mail: jmruecan@upo.es  
 
 
 
 
ABSTRACT 
One of the most important tasks for constructing regional use and supply tables is the 
accurate estimation of interregional trade flows, which can be carried out indirectly by 
non-survey  statistical  and  mathematical  methods  or  directly  by  surveys.  The  former 
methods allow estimating interregional trade at a low cost though assuming many times 
certain  arbitrary  hypothesis.  Nevertheless,  the  enlargement  of  a  yearly  yet  existing 
survey  with  a  wide  coverage  of  firms,  such  as  the  Annual  Regional  Accounts  in 
Andalusia (Spain), elaborated by the Institute of Statistics of Andalusia, can provide 
two  important  advantages  at  a  low  cost:  the  estimation  of  interregional  trade  for  a 
certain  region  and  the  estimation  of  the  structure  of  distributive  channels  for  each 
product and industry, both on a yearly basis. With both purposes, this paper makes a 
proposal  for  incorporating  interregional  trade  flows  to  the  present  yearly  regional 
accounts survey for the Andalusian economy. 
 
KEYWORDS: Interregional trade, trade margins, input-output analysis. 
JEL CODES:   D57; C82; F14. 
 
 
 
 
 
 
 
 
 
 
 
* This work has been financially supported by the Institute of Statistics of Andalusia by means of a 
Research Contract with Pablo de Olavide University.    1 
1.  Introduction 
One of the most important tasks for constructing regional use and supply tables is the 
accurate  estimation  of  interregional  trade  flows.  Besides,  the  precise  knowledge  of 
interregional trade not only is crucial for analysing interregional interdependencies but 
allows  for  knowing  the  actual  spatial  organization  of  markets  within  a  regional 
economy. Moreover, there is an increasing interest in the literature for developing new 
procedures that may provide more accurate estimations of interregional trade and its 
consequences on regional economic development, i.e. Pulido & Llano (2002) and Llano 
(2004a,  2004b)  for  Spain,  Kauppila  (1999)  and  Piispala  (2000)  for  Finland  and 
Boomsma & Oosterhaven (1992) and Eding &Oosterhaven (1996), for the Netherlands. 
   Interregional  trade  can  be  estimated  indirectly  by  non-survey  statistical  and 
mathematical methods
1 or directly by surveys. The former methods allow for estimating 
interregional  trade  at  a  low  cost  though  assuming  many  times  certain  arbitrary 
hypothesis. For instance, in most of the outcomes of non-survey procedures no cross 
hauling is possible. That is, a region is either an exporter or an importer, but not both at 
the  same  time  (Piispala,  2000).  Therefore,  these  kinds  of  methods  permanently 
underestimate interregional trade (Harris & Liu, 1998; Susiloto, 1996).  
  Additionally, there are national accounting based interregional trade estimates, 
which use ratios of e.g. production, value added and intermediate or final consumption. 
However, some a priori criteria are needed and sometimes these lead to unreliable and 
not  accurate  results.  Nevertheless,  there  are  recently  published  efforts  to  improve 
national interregional trade estimates (Llano, 2004a, 2004b) using physical interregional 
transport flows.  
In this sense, we argue that non-survey methods or indirect procedures through 
proxy variables are indeed second best options. Given limited resources, it is the best 
choice for estimating interregional trade. In contrast, the enlargement of a yearly yet 
existing survey with a wide coverage of firms can provide two important advantages at 
a low cost: the estimation of interregional trade for a certain region; and the estimation 
of the distributive channels structure for each transaction, both on a yearly basis. This is 
the  case  of  the  Annual  Regional  Accounts  in  Andalusia  (Spain),  elaborated  by  the 
Institute of Statistics of Andalusia. 
                                                 
￿￿See e.g. Millar & Blair (1985, ch.9) for a full description of the methods.   2 
Following Wilson (1970), Susiloto (1996), Kauppila (1999) and Piispala (2000), 
the  best  way  to  conduct  accurate  interregional  trade  flows  estimates  consists  of 
surveying establishments at a low cost. This would lead to improvements not only in 
trade  issues  but  in  other  economic  figures  including  the  whole  national  or  regional 
accounting system. Thus, this paper proposes to enlarge the existing Annual Regional 
Accounts survey in Andalusia to include a limited number of new questions regarding 
trade flows. 
 
 
2. Methodology 
Surveys  are  the  most  important  instrument  for  collecting  reliable  information  on 
interregional trade. However, we can design surveys directly to establishments asking 
for the geographical destination of the products they sell, or surveys to wholesalers and 
retailers, which would imply an indirect approach. But actually, both direct and indirect 
approaches do not need to be opposites. In the literature, we can find significant works 
by Siddiqi and Salem (1995) for Canada, Kauppila (1999) for Finland and Eding et al. 
(1999) for the Netherlands. 
As a result of these experiences, some initial considerations should be taken into 
account in order to design and collect all the needed information in the Andalusian case.  
 
Some initial considerations 
(a) The difficulty of estimating in a short period of time the geographical distribution by 
commodity of the total sales of surveyed establishments and the doubtful knowledge of 
that information by the own firms, make us adopt the industry approach. That is, we 
will be interested in the geographical distribution of the total sales of a firm instead of 
the total sales of each commodity produced by a firm. However, this would lead to 
introduce  later  additional  assumptions  about  the  geographical  distribution  of  each 
produced commodity. 
 
(b)  Establishments  know  the  geographical  distribution  of  their  sales  better  than  the 
geographical  origin  of  their  purchases.  This  leads  to  assume  an  exporter  approach, 
which is based on the destination of commodities produced rather than on the origin of 
purchases.  Many  times,  the  type  of  client  is  better  known  than  geographical  issues 
concerning sales.   3 
 
(c) The geographical areas considered would be: Andalusia, rest of Spain, rest of the 
European Union and rest of the world. Alternatively, we can additionally consider rest 
of Spain in a more detailed way (NUTS 2 regions)
2 but however, this would be far 
beyond the purpose of this paper. 
 
  Similarly to what it is being done in the Netherlands (KvK, 1996), we propose to 
collect information on interregional trade flows within the framework of an existent and 
yearly survey with a wide coverage of firms. This is the case of the Annual Regional 
Accounts  in  Andalusia  (Spain),  which  is  elaborated  by  the  Institute  of  Statistics  of 
Andalusia (IEA, onwards). The below considerations should therefore be considered. 
 
  In addition, survey-based interregional trade information is not the only valid 
data source to be taken into account. Other sources such as transport statistics could be 
of much help. Actually, the accuracy and consistency of interregional trade estimates 
depend greatly on the variety of sources used for the analysis. 
 
Estimation procedure 
For a commodity j, let Vj be its total production; MEj their total imports from the rest of 
Spain; MUj their total imports from the rest of the European Union and MMj, their total 
imports from the rest of the world. Then, it is verified that: 
 
j j j j j j j j j j V +ME +MU +MM = U +C +I +XE + XU +XM              (1) 
 
where for a commodity j, Uj is the total intermediate consumption; Cj, the total final 
consumption; Ij, total investments (including changes in stocks); and XEj, XUj and XMj 
total exports to the rest of Spain, rest of the European Union and rest of the world, 
respectively.  
 
   
                                                 
2  NUTS (Nomenclature des Unités Territoriales Statistiques) is the regional classification system of the 
European Union. Level 2 regions in Spain would be: NORTHWEST (Galicia, Asturias and Cantabria), 
NORTHEAST (Basque Country, Navarra, La Rioja and Aragón), MADRID, CENTER (Castilla León, 
Castilla La Mancha and Extremadura), EAST (Catalonia, Valencian Community and Balearic Islands) 
and SOUTH (Andalusia, Murcia, Canary Islands, Ceuta and Melilla).   4 
Within equation (1), all variables except for imports and exports are collected yearly by 
the Annual Regional Accounts survey (IEA) and, therefore, they are known. Regarding 
foreign exports and imports, information is also very well-known through the Spanish 
Institute  of  Foreign  Trade  (ICEX).  However,  we  do  not  find  accurate  and  reliable 
information about domestic exports and imports. To solve that, an enlargement of an 
existent survey is proposed to estimate XEj (exports to the rest of Spain) and then, 
residually, the total imports from the rest of Spain MEj.  
  Nevertheless, as a result of the residual difference, we know that it could be 
possible to find negative imports from the rest of Spain in some cases. Anyway, it 
would be advisable in those cases to look for other additional sources on imports or 
even asks for experts’ opinions. 
  At this point, we are getting very near to the so-called double-entry methods for 
constructing regional input-output tables on the basis of not only exports but imports, 
using the latter to verify the accuracy of the former, or vice versa. 
 
Distributive channels  
Following the European System of Accounts (1996) consider a use matrix U 
with order (n x m) comprising commodities i consumed by industries j, and a supply 
matrix V of order (m x n) showing the produce of industries i in terms of commodities j. 
Notice that there are m industries and n commodities. 
EUROSTAT imposes for each member state of the European Union and each 
region, the publication of a supply table at basic prices and two use tables which differ 
by  valuation;  one  is  valued  at  purchasers’  prices  and  the  other  at  basic  prices. 
Particularly, net commodity taxes, and trade and transport margins matrices are needed 
to  transform  the  former  into  the  latter  (see  ten  Raa  and  Rueda-Cantuche,  2004,  for 
further details). 
  Trade  margins  are  addressed  in  particular  for  the  Andalusian  economy  in 
Asensio, Rueda-Cantuche and Titos (2005). These authors assume the most frequent 
distributive channel in each one of the types of transactions included in the use matrix. 
Besides, the type of channel involved in each transaction is estimated on the basis of a 
research carried out by the Finance Regional Ministry of Castilla-León (Spain) in 1990, 
which is not so satisfactory than it was fifteen years ago. Hence, new research urges.   
 
   5 
Indeed, our proposal allows for collecting information about the share of each 
transaction that has been made directly to consumers or through wholesalers and/or 
retailers. For instance, 
 
  In  this  example,  percentages  (which  can  also  be  interpreted  in  probabilistic 
terms) would be survey-based estimates. Then, the share of total sales which has been 
made e.g. through wholesalers and retailers would be simply 0.3*0.8 = 0.24, i.e. 24%. 
The rest of figures would be 10% for directly consumed goods, and 6% and 60%, for 
those  goods  delivered  only  by  either  wholesalers  or  retailers,  respectively.  It  is 
straightforward that the sum of all these percentages must be equal to a hundred. Notice 
that we assume implicitly that retailers always sell directly to consumers. 
  This  procedure  can  be  carried  out  as  detailed  as  desired  since  it  allows  to 
distinguish for each transaction different shares of each distributive channel and not the 
most frequent, as it is being done so far. 
   
Information requirements 
The following scheme illustrates the additional required information on interregional 
trade to be included in the Annual Regional Accounts survey: 
 
 
Manufacturing industries: 
Total sales  100% 
    Direct sales    
Andalusia   
Rest of Spain   
Rest of EU   
Rest of the world   
   
SALES 
Consumption 
Wholesaler 
Retailer 
Retailer 
Consumption 
Consumption 
10% 
60% 
30% 
80% 
20% 
100%   6 
Sales to wholesalers    
Andalusia   
Rest of Spain   
Rest of EU   
Rest of the world   
    Sales to retailers    
Andalusia   
Rest of Spain   
Rest of EU   
Rest of the world   
 
Wholesale industry: 
Total sales  100% 
    Ventas directas    
Andalusia   
Rest of Spain   
Rest of EU   
Rest of the world   
    Sales to retailers    
Andalusia   
Rest of Spain   
Rest of EU   
Rest of the world   
 
 
3. Conclusions 
The estimation of interregional trade is one of the most important issues and at the same 
time, one of the less frequently analysed features within a Regional Economic System 
of Accounts. The great difficulty and implicit cost of collecting the required information 
as well as the availability of interregional trade flows only every five years, due to 
input-outputs frameworks, motivate the search for new procedures that may improve the 
accuracy and reliance of interregional trade estimates at a reasonable cost.  
  Hence,  the  Annual  Regional  Accounts  survey  provides  the  best  choice  to 
additionally include the required information about trade, which would allow for:   7 
   
 
(a) Obtain on a  yearly basis more  accurate estimates of  Andalusian  exports and 
imports to and from the rest of Spain, rest of the European Union and rest of the 
world. 
(b) Estimate the shares of each type of distributive channel within each transaction 
of a regional use table. Even a geographical distinction can be derived. 
 
Perhaps in the literature, other lower cost methods can be found but all of them 
are mainly statistical and mathematical devices that assume implicitly certain arbitrary 
hypothesis. Our proposal deals with real data and the results may provide accurate and 
reliable estimates as well as yearly information to include in annual regional statistics. 
Actually,  all  regional  or  national  statistical  offices  may  profit  from  adopting  this 
procedure to improve the quality of their respective annual statistics. 
 
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Estimating interregional trade flows in Andalusia (Spain)

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Estimating interregional trade flows in Andalusia (Spain)

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