MRIO: Considerations when using Multi-Regional Input-Output Analysis

Building your Economic Analysis with multiple regions utilizing MRIO (Multi Regional Input/Output) enhances your study. That is, MRIO demonstrates how an impact in your Study Area disperses into other regions and allows you to see how these effects in surrounding areas create additional local effects. For each Industry, MRIO not only tracks the imports from every other Industry, but also where those Imports are coming from. Each region’s production relationships and local purchasing abilities remain distinct. While the MRIO model will still lose the same dollar amounts as imports within the defined local area, these impacts will be visible in the linked models. Additionally, MRIO can look back to the original regional model and capture expenditures made in auxiliary regions that will impact the original local model, capturing impacts that are completely untraceable without MRIO capacity.

In the past, other MRIO methodologies have been attempted as the best available option, but were not true MRIOs. The following considerations demonstrate the problems that may be caused if MRIO is not utilized.

1. To create a comparable analyses, the Sector of the larger Model file will need to be modified to demonstrate local relationships.

The Industry relationships at the state or U.S. level would need to be forced to be the same as the Industry at the local level. This means that the US or state level Model’s Industry must have the same Output Per Worker, Earnings Per Worker, etc as the local Industry. This is the only way to attempt to adequately represent how the local Industry is making its purchases relative to the larger Model. However, this is just an approximation; the actual relationships with which the larger region would purchase products are unknown in this instance.

For additional information on performing this type of analysis click here.

 2. The local region and the larger region will have differences in internalized Imports, which cannot be adjusted.

The ability of a product to be sourced locally may be significantly higher at the state or U.S. level than at the local level (or in some rare instances, they may be lower). This in turn will impact the Multipliers of the model.

Additionally because there is no way to separate out the local region’s economy in standard analysis, the two studies and impacts must be considered as two completely independent impacts. Since the larger geographic region may include local purchases to what would be considered Imports in the regional Model, there may also be increased impacts resulting in the regional portion of the Model. Therefore even with the modifications in Consideration 1, the regional impacts which will accurately represent the local region cannot just be “subtracted” from the larger area.