The Tuscany Interregional Input-Output Model (TIM): Mathematical Structure and Preliminary Results

Martellato, D. (1982). The Tuscany Interregional Input-Output Model (TIM): Mathematical Structure and Preliminary Results. IIASA Collaborative Paper. IIASA, Laxenburg, Austria: CP-82-030

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Abstract

Specialization is one of the foremost traits of modern industrial development. Technical and commercial factors have interacted to make large-scale production more profitable than earlier. This process has been concomitant with a regional concentration of production activities according to the prevailing comparative advantages. Even large, and strong, economic regions tend to have an insufficiently differentiated economy. In Tuscany, Italy, it is the leather, footwear, and textile industries that constitute the economic backbone of the region. They are complemented by, and competitive with, the traditional tourist industry.

Technical progress and the development of factor costs have entailed a shift in international and interregional comparative advantages. Those industries demanding only low-skilled labor have expanded in low cost countries or regions. How these factors will affect the long-term development is a general problem of strongly specialized regions in industrialized countries.

Such questions are also at the core of the case study of systems analysis for regional industrial development undertaken by the Regional Development Group, IIASA, in collaboration with the Regional Institute for Economic Planning of Tuscany (IRPET). A third party in this collaboration is the Institute for Applied Systems Analysis (IASI) of the National Research Council, Rome. In the case study, a system of economic forecasting and policy evaluation models that address the above-mentioned development issues are being built. The models have a stronger emphasis on interregional and international dependencies than earlier regional studies. Moreover, the role of the regional authorities in policy generation and evaluation is more clearly designed here than elsewhere. The aim of the work is to develop a computerized model system for more or less permanent use, with a direct applicability to other urbanized regions of the Tuscany type.

The Tuscany interregional input-output model (TIM) described in this paper forms the core of the economic forecasting and policy-evaluation model system. TIM is a linear static recursive system of equations of small dimensions that is intended as a tool for analyzing the trade relations of Tuscany. Tuscany and the Rest-of-Italy are considered as two regions in TIM. Each one is linked to the rest of the world where exports are exogenously determined. Foreign trade is taken into account by distinguishing between national and international flows. Complementarity and competitiveness of imports are considered in this model.

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