Input-Output Systems in Regional and Interregional CGE Modeling

As models used in economic analysis become more and more complex, issues of reliability, tractability and analytical importance take on a greater role in the allocation of resources for model construction and updating. In this chapter, attention is directed to the role of input-output tables in broader, economy-wide models; while a number of papers have addressed this issue, the approaches have varied, in large part due to different motivations in the use or applications of the economy-wide models. Essentially, there are two types of issues that need to be addressed. The first is related to the source of the input-output data; how important is the quality of the input-output data that are to be incorporated into the economy-wide model? The second issue refers to the way the input-output structure is specified in the model, i.e., the functional form for the production system.