Consistent Regional Commodity-by-Industry Input-Output Accounts

A long-standing regional science problem domain focuses on the identification of structural economic change. One of several approaches reliles on the use of historical final demand series and a comparison of observed inudstry output to an estimate of what output would have been were economic structure static. However, these methods were first developed before the introduction of today’s commonly used commodity-by-industry (CxI)input-output (IO) accounting frameworks, and before the application of these methods to regional economies. Correctly formulating the supporting accounting structures for these analyses is essential, but can be challenging even for experienced analysts. Related textbook and journal articles often imply a simplicity that belies two important barriers to understanding. First, although modern IO accounts are now almost universally compiled and distributed as CxI accounts, IO methods presentations are very commonly founded on interindustry accounts. Second, introductions to many IO-based methods tend to focus on national IO accounting, for which the implications of degree of openness of the economy are seldom – if ever – discussed. The implication is that the path from published national data to a coherent set of regional CxI accounts is simple and straightforward when, in fact, there are several key considerations to be taken and assumptions to be made along the way. In this paper, we lay out the mathematical foundations of a CxI version of traditional interindustry regionalization and structural change analyses, and in so doing, clarify appropriate regional commodity-by-industry impacts assessment formulations.