The choice of an input-output table embedded in regional econometric input-output models

In this paper, we investigate the role of input-output data sources in regional econometric input-output models. While there has been a great deal of experimentation focused on the accuracy of alternative methods for estimating regional input-output coefficients, little attention has been directed to the role of accuracy when the input-output system is nested within a broader accounting framework. The issues of accuracy were considered in two contexts, forecasting and impact analysis focusing on a model developed for the Chicago region. We experimented with three input-output data sources: observed regional data, national input-output, and randomly generated input-output coefficients. The effects of different sources of input-output data on regional econometric input-output models revealed that there are significant differences in results obtained in both forecast and impact analyses. The adjustment processes inherent in the econometric input-output system did not mask the differences imbedded in input-output tables derived from different data sources. Since applications of these types of models involve both impact and forecasting exercises, there should be strong motivation for basing the system on the most accurate set of input-output accounts.