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DOI: 10.14530/reg.2014.
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STRUCTURAL LINKAGES AND ECONOMIC GROWTH: REGIONAL PLANNING INSIGHTS FROM A SOCIAL ACCOUNTING MATRIX
The paper focuses on the resolution to study the structure of regional economy by means of Social Accounting Matrix (SAM) and provide a brief description of this method. Following the description SAM is applied to Khabarovsk region economy and based on this key sectors of the regional economy are identified.
Social accounting matrix, region, structural linkages, multiplier, key sectors, Khabarovsk region
ЗАХАРЧЕНКО
Наталья
Геннадьевна
Кандидат экономических наук, научный сотрудник Институт экономических исследований ДВО РАН, ул. Тихоокеанская, 153, Хабаровск, Россия, 680042
ZAKHARCHENKO Natalia Gennadyevna
Ph.D. in economics, research fellow
Economic Research Institute FEB RAS, 153, Tikhookeanskaya Street, Khabarovsk, Russia, 680042
zakharchenko@ecrin.ru
СТРУКТУРНЫЕ СВЯЗИ И ЭКОНОМИЧЕСКИЙ РОСТ: АНАЛИЗ НА ОСНОВЕ РЕГИОНАЛЬНЫХ МАТРИЦ СОЦИАЛЬНЫХ СЧЕТОВ
В работе определены основные возможности структурного анализа региональных экономических систем на основе матрицы социальных счетов (МСС). На примере Хабаровского края показаны возможности метода МСС в определении структурного ядра (ключевых секторов) региональной экономической системы.
Матрица социальных счетов, регион, структурные связи, мультипликатор, ключевые секторы, Хабаровский край
This article is prepared on the basis of report for Young Leaders Training and Research Program in Regional Cooperation (YLP) organized by the Northeast Asia Economic Forum (NEAEF), The Republic of Korea, 16-30 August, 2014.
Работа основана на материалах доклада, подготовленного в рамках Школы молодых лидеров в области регионального сотрудничества, организованной Экономическим форумом стран Северо-Восточной Азии (Республика Корея, 16-30 августа 2014 г.).
© Захарченко Н.Г., 2014
Работа выполнена № 13-12-27005
при поддержке гранта
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Today the key priority of developing of the Russian economy as a whole and its regions is structure improvement, which includes weakening of heavy reliance on raw materials resources and increasing higher value-added outputs. The problem of structural changes is connected with arranging of different economic interests: national interest in expanding of market boundaries and making close relations between the regions of the Far East and Eastern Siberia; regional interests in maximizing multiplier effects generated by investment and external demand growth; corporate interests in strengthening of competitive positions at the global market and increasing the shareholder value. But just declaration of problem doesn't provide practical results. It's important to determine possibilities and concrete directions of structure developing.
In the recent years the notion of key sectors or industries has become an accepted component of development strategy. A number of attempts have been made to identify key sectors at the regional level. In either case, it's believed that if resources can be concentrated on these key sectors, output and income in the region will grow more rapidly than if resources were allocated in some alternative way. In other words it's obviously true that some patterns of resource allocation are more efficient than others, in the meaning that they will result in higher rates of growth.
In this context, we can formulate 3 main questions, which are considered by regional economists. They are as follows.
- What kind of sectors will be able to produce the greatest multiplier effects (it means output and income growth)?
- Are the industries sufficiently large to generate significant impulses across the greater economy?
- If not, then what alternative paths of impulse propagation can be found?
Searches for answers to these questions require evaluation of the role of each sector in
the regional economy. This task isn't new, but prospects for it solving are uncertain. There are conventional measures of sector significance, for example share in the gross regional product, share in the budget revenue, share in the regional employment and so on. When we use some standard measures we assume that the regional economy could be represented as an additive set of all industrial sectors. But obviously that system of all kind including regional economy is much more than simply summarizing of all industrial sectors.
In accordance with system approach a Social Accounting Matrix (called SAM for short) is one of the most effective methods of structural economic analysis. The SAM is being developed within the context of National Accounting System and is devoted to estimate intersectoral relations. Matrices, and the various measures of structural dependence which can be derived from them, give a valuable insight into the interdependence of different sectors of an economy, and can be used as an important step in the identification of potential areas of project development and evaluation. This paper will assign a role to the use of Social Accounting Matrix as an empirical tool in the regional analysis process.
Brief description of Social Accounting Matrix as a basis for regional analysis
In essential we can distinguish 3 levels of regional analysis which is based on the Social Accounting Matrix: interregional, intersectoral and sectoral levels (table 1). In this case we'll consider the second level of regional analysis. The aim of this analysis is to define so-called structural core of the regional economy or in other words its key sectors which make more than average impact upon the rest of the regional economy. We'll come to the first and to the third levels of regional analysis once again, when we discuss the further work.
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KerUOHanHCTUKa DOI: 10.14530/reg.2014.3
Table 1
Three levels of regional analysis based on SAM
Level of complexity Dimension of SAM Main use
Interregional Multi-region Multi-industry (aggregated) Definition of forms of mutually beneficial economic cooperation between different regions.
Intersectoral Single-region Multi-sector (aggregated) Determination of key sectors which make more than average impact upon the regional economy.
Sectoral Single-region Multi-sector (disaggregated) Estimation of the relations between the specific sectors of the regional economy and definition of an industrial development strategy.
At present time the Social Accounting Matrix is a comprehensive and widely used type of balance model which allows to see snapshot of the socioeconomic system for any year.
From the point of view of statistics the SAM is framework that incorporates all major transactions within a socioeconomic system and combines data from different sources. As a part of the SAM construction data gaps can be identified and corrected. That's why the SAM provides a classification and organizational scheme for the data useful for analysts and policymakers. We can distinguish 4 types of accounts in the basic SAM. They are: production activities; factors of production; current transactions of economic agents; capital and financial transactions of economic agents.
From the point of view of economics the SAM captures a circular flow of income: from producers to consumers and vice-versa. So, the analysis based on SAM is concerned not only with the structure of production, but also with the distribution of disposable income both in a private sector and in a public sector. In general, the private sector includes households, companies, the rest of the country, the rest of the world. The public sector includes the local and federal government.
The SAM can also be used as a conceptual framework and as a basis for modeling. The movement from SAM to the model structure requires that each account should be defined as endogenous or exogenous. The choice of exogenous accounts depends on the region specific characteristics and the objectives underlying the building of the SAM. If we study intraregional linkages we define the accounts of the federal government, the rest of the country, and the rest of the world as exogenous accounts. The inverse of an open static model allows to estimate multiplier effects generated by export, federal transfers, investment of extra regional companies etc. According to SAM-based multiplier model exogenous impulse goes from producers to households and other economic agents as a value added and then goes to producers again as final consumption expenditures.
The process of multiplier formation could be represented as a series of direct and indirect effects that are explained by intermediate and final consumption growth. The networks are a good means of doing in that way [1, p. 42].
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SAM-based multiplier model applied to Khabarovsk region economy
Khabarovsk region is taken as a case to show how to apply the SAM multipliers for intersectoral analysis. The choice of this region was determined by several causes.
The first, Khabarovsk region has relatively diversified economy. This region is considered as a prospective development area that might be suitable for deployment of industries with the wide trade and financial networks in East Asia.
The second, Khabarovsk region is a host to a number of large-scale projects that follow «the eastern direction» of Russian policy. «The eastern direction» means the focus on construction of energy infrastructure and new mining and processing facilities in the eastern regions of Russia.
The third, the leading plants in Khabarovsk region are restructured towards creation integrated companies. That's why external financial flows play a significant role for investment process in the region.
The mentioned characteristics as well as other specific features of Khabarovsk region economy defined the structure of its SAM. It's worth noting that this SAM has relatively detailed production module which includes accounts of 29 sectors. On the whole input-output matrix (29x29), final demand (29X6)1, modules of current and capital transactions among economic agents (6x6) are extracted in the SAM. What's more in this case exogenous accounts are defined as income and outlays of the following economic agents: the federal government, the rest of Russia (including extra regional companies) and the rest of the world. So, assuming that exogenous impulse increases the output of certain sector gives a
DOI: 10.14530/reg.2014. _
1 Accounts for current and capital transactions are estimated for households, companies, the regional gov-
ernment, the federal government, the rest of the country (including extra-regional companies), and the rest of the world.
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chance to estimate how this sector influences the rest of regional economy.
Structural linkages and key sectors in economy of Khabarovsk region
There are 2 criteria for selection of key sectors in regional economy. The first criterion is a broad network of structural linkages maximizing impulse transmission. The second one is a large enough scale to influence the growth rate of the overall regional economy.
As for the first criterion in order to check it it's necessary to compare multipliers of different sectors. Figure 1 shows multiplier values for main sectors in economy of Khabarovsk region. According to the estimation results output growth of electricity, transportation, construction, manufacture of oil products and manufacture of transport equipment leads to the greatest changes in the regional output. For example let's take electricity. The SAM-model estimates that each ruble of electric power generation through the regional respending process leads to 2.8 rubles of additional output.
These results of ranking are explained by complexity of structural linkages and ratio between volumes of intraregional and external trade. So, the first three priorities were given to electricity, transportation and construction due to their responsibilities for formation of the regional infrastructure. The next two priorities were given to manufacturing sectors due to their functions of generating growth in other sectors.
As for the second criterion its checking requires combination of 2 factors - multiplier effect of sector and effective demand for sector's product. In order to consider both factors it's necessary to estimate how much the total output of economy would decrease if a particular sector were not present2. With regard
This task is closely related to the «hypothetical extraction» method developed for Input-Output models (for more details see [2]). There are different versions of «hypothetical extraction» method that are defined in
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(1) Electricity (2) Transportation
(3) Construction
(4) Oil products (5) Transport equipment
(6) Wood products
(7) Electrical equipment
(8) Mining of metal ores
(9) Fishing (10) Metal products (11) Trade (12) Forestry
0,5
1,5
2
2,5
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Rubles of additional output in the regional economy per ruble of final demand for sector's product
Figure 1. Multiplier values for main sectors of Khabarovsk region's economy, 2012
to the results of that estimation the system of sectors priorities was changed (figure 2). At the same time positions of electricity, transportation and construction were not changed significantly. It means that these sectors are really important for regional economy and we can see them as the key. As for the manufacturing sectors instability of their priorities indicates that opportunities of these sectors to stimulate regional growth were not realized in the best way. For example, let's take manufacture of wood products and manufacture of metal products. We can't see them as the key because the former has a small scale and the latter has a narrow network of structural linkages.
accordance with the way of removing transactions of a particular sector from balance model. In this case estimations are based on G. Cella and B.J. Clements's version assuming extraction of all sector's transactions [3; 4].
Structural analysis of the regional economy: an extension
In order to find some options for improving this situation it's necessary to solve the optimization tasks that are formulated in table 2.
We can solve the first task by means of interregional analysis, the second task by means of sectoral analysis. It's very important to understand possibilities and logic of interregional and sectoral analysis. The way of disaggregating SAM is crucial for differences between two levels of regional analysis mentioned above.
To evaluate the possibilities of structural changes it's sufficient to use SAM constructed for the certain region. In particular figure 3 shows the example of structural relations between electricity and construction which exist in economy of Khabarovsk re-
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The first criterion
Figure 2. Comparison of ranking results based on two criteria
Table 2
Key sectors in economy of Khabarovsk region
Benchmark and deviations from it Sectors Optimization task Basis for solving the optimization task
Two criteria are fulfilled Electricity, transportation, construction —
The second criterion isn't fulfilled Oil products, transport equipment, wood products, electrical equipment If a particular sector had wide networks of structural linkages, but at the same time its scales were not still significant, how could final demand change in order to increase the scales? Interregional analysis
The first criterion isn't fulfilled Fishing, metal products, forestry, mining of metal ores, trade If a particular sector had significant scales, but at the same time its structural linkages were not wide, how could structural linkages change in order to increase the multiplier effect? Sectoral analysis
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Figure 3. Structural linkages in economy of Khabarovsk region: the case of relation between electricity and construction
gion . Based on a lot of such structural relations between electricity and other sectors we can make the following conclusions.
- Electricity has impact mainly on construction, trade, mining of coal, manufacture of food products.
- Electricity's multiplier effects are generated by not only direct relations, but also indirect relations.
- And key intermediate elements of those indirect relations are manufacture of oil products and metal products.
If we know the structure of relations between different sectors, we will define how to improve them. In such way we can study the relations between different regions. But for that purpose it would be necessary to extend SAM in a direction of disaggregating accounts of the external economic agents (or transactions). The construction of the SAM for group of regions is the aim of further work. That SAM allows to solve the problem of optimization mentioned above and what's
Estimations of structural relations are based on structural path analysis developed by J. Defourny and E. Thorbecke [5].
more could be applied as a part of more complicated model.
Список литературы
1. Захарченко Н.Г., Демина О.В. ТЭК в экономике региона: оценка мультипликативных эффектов // Пространственная экономика. 2013. № 1. С. 33-54.
2. Захарченко Н.Г. Структурное ядро экономической системы региона: методы оценки // Пространственная экономика. 2014. № 3. С. 111-137.
3. Cella G. The Input-Output Measurement of Interindustry Linkages // Oxford Bulletin of Economics and Statistics. 1984. Vol. 46. Pp. 73-84.
4. Clements B.J. On the Decomposition and Normalization of Interindustry Linkages // Economic Letters. 1990. Vol. 33. Pp. 337-340.
5. Defourny J., Thorbecke E. Structural Path Analysis and Multiplier Decomposition within a Social Accounting Matrix Framework // The Economic Journal. 1984. March. Vol. 94. № 373. Pp.111-136.
References
1. Zakharchenko N.G., Dyomina O.V. The Role of the Energy Sector in Regional Economy: Esti-
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mating Multiplicative Effects. Prostranstvennaya economika [Spatial Economics]. 2013. No. 1. Pp. 33-54. (In Russian)
2. Zakharchenko N.G. Structural Core of the Region's Economic System: Assessment Methods. Prostranstvennaya economika [Spatial Economics]. 2014. No. 3. Pp. 111-137. (In Russian)
3. Cella G. The Input-Output Measurement of Interindustry Linkages. Oxford Bulletin of Economics and Statistics. 1984. Vol. 46. Pp. 73-84.
4. Clements B.J. On the Decomposition and Normalization of Interindustry Linkages. Economic Letters. 1990. Vol. 33. Pp. 337-340.
5. Defourny J., Thorbecke E. Structural Path Analysis and Multiplier Decomposition within a Social Accounting Matrix Framework. The Economic Journal. 1984. March. Vol. 94. No. 373. Pp. 111-136.
DOI: 10.14530/reg.2014. _
Для цитирования:
Захарченко Н.Г. Structural Linkages and Economic Growth: Regional Planning Insights from a Social Accounting Matrix (Структурные связи и экономический рост: анализ на основе региональных матриц социальных счетов) // Регионалистика. 2014. Т. 1. № 3. С. 61-68. For citing:
Zakharchenko N.G. Structural Linkages and Economic Growth: Regional Planning Insights from a Social Accounting Matrix. Regionalistica [Regionalistics]. 2014. Vol. 1. No. 3. Pp. 61-68. (In Russian)
