Testing and implementing a new approach to estimating interregional output multipliers using input-output data for South Korean regions

Abstract

Flegg's location quotient (FLQ) is a useful tool for estimating intraregional output multipliers. This paper uses it as one component when estimating interregional multipliers. Using statistical information criteria and official data for 16 South Korean regions, it is found that the best approach is to combine the FLQ with a simple trade model. The paper explains how the proposed procedure can be implemented for both multiple and individual regions, and also how a region-specific value for the unknown parameter δ in the FLQ formula can be determined. Finally, an illustrative case study of one of the regions is carried out.