Comparing Gross Multiplier Coefficients with Net Multiplier Coefficients in terms of Regional Economy (Case study: Markazi Province)

اقتصاد و توسعه منطقه ای

Article 2, Volume 25, Issue 16, October 2018, Pages 51-66   

Document Type: Research article

DOI: 10.22067/erd.v25i15.62825

Authors

Ali Azadinejad^{* 1}; Sayed Yahya Abtahi²

¹Maybod university

²Islamic Azad University of Yazd

Abstract

Extended Abstract
Input-outputtable is a suitable way to identify the key sectors of regional economy. Multiplier coefficients of demand and supply extracted from input-output table may be used to calculate the innovating sectors of demand and supply and consequentially their key sectors. Multiplier coefficients are classified as gross and net (innovated by Oosterhaven&Stelder, 2002).. This study attempts to calculate the gross and net multiplier coefficients for the province of Markazi. The results show that for regional studies the gross multiplier coefficients work better than the net multiplier coefficients. The net multiplier coefficients divide economic activities in two groups of supply or demand; therefore, they cannot be used to create regional key sectors in Iran. However, the gross multiplier coefficients divide the regional economic activities into four groups and can be used to identify the key sectors in Iran.

Methodology
Regional analysis is, in fact, an important branch of economics. One of the most common methods for studying regional economics is the use of regional input-output tables. To identify key sectors, the multiplier coefficients of supply and demand are used. The multiplier coefficients derived from the output-output table are called grossmultiplier coefficients. In this sense, Oosterhaven and Stelder(2002) haverecently introduced a new version called net multiplier coefficients.
In a n-section economy, the relation between sections is expressed in the formula when x is the level of production, A is the technical coefficients Matrix, and f is the final demand. When the equation is solved, the Leontief formula ( ) would be obtained. The gross multiplier coefficient is computed from the sum of the Leontief matrix column. This equation is .where is the gross multiplier coefficient of demand and i is a row vector of one. Oosterhaven and Stelder believe that the application of these coefficients in determining the economic importance of a sector leads to an overestimation of the importance of that part.
Oosterhaven and Stelder (2002) introduce the net multiplier coefficient with where is the gross multiplier coefficient of demand,while is a diagonal matrix where its main diameter is filled by the ratio of final demand to output . Dietzenbacher and Miller (2009) haveproved that if net multiplier coefficient of a sector is greater than one, means that this sector very dependent to other sectors.. It is safe to say that the net multiplier has the ability to interpret interdependence among the sections.

Results
After calculating the net and gross multiplier coefficients for Markazi Province, interesting results were obtained from net multiplier coefficients and gross multiplier coefficients. Gross multiplier coefficients classified the sectors into four groups where the first cell reports the key sectors. Key sectors in gross multiplier are:
“Manufacture of paper and paper products”;“Manufacture of chemicals and chemical products”;“Manufacture of basic metals”;“Manufacture of fabricated metal products, except machinery and equipment”;“Manufacture of machinery and equipment" and “Electricity“
There is no key section in net multiplier coefficients. The net multiplier coefficients divide economic activities in two groups of supply or demand and as result cannot be used to create regional key sectors in Iran.

Keywords

input-output table; regional economy; gross multiplier coefficients; net multiplier coefficients

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