Abstract:
The purpose of the paper is to discuss experiences from the ongoing project for estimating and validating interregional trade in the new multiregional input-output (MRIO) tables at Statistics Sweden. In the paper we investigate a novel method for estimating interregional trade flows in sectors where no or little survey data of trade patterns are available.
The project is part of a quality assurance initiative to develop interregional input-output tables for research, policy assessment and planning. For this effort to be successful, it is necessary to add further resources for the collection of interregional trade statistics and the consistent modelling of interregional trade using a combination of survey and non-survey tools.
There are many techniques for updating or estimating multiregional input-output tables using non-survey methods. A common method for estimating trade matrices is the gravity-RAS approach where unobserved trade flows are estimated using a gravity model in combination with the RAS-algorithm for fitting the estimated matrix to total production and consumption in each region. This is the method used in both previous Swedish MRIO-projects as well as in the process for estimating Production-Consumption-matrices for the Swedish National Freight Transport model SAMGODS.
A drawback of the used method is that it requires survey data on regional commodity flows, which can be expensive and difficult to collect. The estimation procedure uses survey data to estimate parameters in a gravity model. This model is then utilized to generate à priori matrices that is fitted to data on regional production and consumption using RAS-balancing.
In this paper, we investigate an alternative method for estimating the parameters in the gravity model using an error function that penalizes errors in the marginal constraints. This way, we can use regional data already available to find the most likely gravity model trade patterns that fits the data.
Comparisons of estimated gravity models using historical trade flows for Sweden have shown that the method, in many situations, produces results that are similar to more traditional survey based estimations techniques. In this paper we investigate the properties of this new method further in a simulation study where different ways of estimating MRIO-matrices are compared using Monte Carlo simulations.
