REAL-IO: Analytical Toolbox of Inter-regional Input-Output Analysis

1. REAL-IO: Analytical Toolbox of Inter-regional Input-Output Analysis Norihiko Yamano, Chun-Hua Wu and Geoffrey Hewings

2. Outline • Goal of REAL-IO (originally designated as PyIO) • Functions of REAL-IO • Single region/country analysis • Multi region/country analysis • Future additions

3. Evolution of IO software in REAL, University of Illinois • PyIO 1.0the first version (Nazara, Guo, Hewings and Dridi; 2003) • PyIO 2.0Windows based interface is created (Wu, 2009) • REAL-IO 2011 • Analysis modules are transferred to R language environment. • Capable of flexible additions of new functions • Multi country/region time series comparable indicators • Improved graphics output

4. Goal of REAL IO • It is a package of user-interface software and function modules for input-output analysis. • It provides simple and more complex methods of analysis based on input-output, social accounting and computable general equilibrium models. • REAL-IO is a tool enhancing use of IO-related systems for policy analysis

5. Potential Role of REAL IO for WIOD • Data being generated by WIOD needs to be complemented by provision of analytical tools to quickly process and interpret findings • REAL-IO has been self-financed – hence development has been slow • Exploring alternative funding options • The preliminary (Feb 2011) inter-country I-O tables are loaded as example

6. Python/R-based Hybrid model • Python is retained as the basis of user interface for several reasons • Python has great computational capability • The codes are trans-platform (Windows/ Mac/ Linux) • Python is free • R is chosen as the function operations • The codes for analytical functions can be written in intuitive way • R is free

7. Functions of REAL IO • I-O Table Operations • Basic I-O Analysis • Advanced I-O analysis (Single region / Interregional I-O) • Trade indicators • Cross-country/Regional comparisons of indicators

8. Loading datasheet and quick browsing of industrial structure Database name

9. Basic I-O Analysis • Calculate Leontief Inverse • Calculate Ghoshian Inverse • Do an Impact Analysis • Calculate Output Multiplier • Calculate Income Multiplier • Calculate Employment Multiplier • Calculate Input (or Supply) Multiplier

10. Basic I-O Analysis Multipliers • The output multiplier is calculated as the column sum of the Leontief inverse. • The computation of income multiplier requires the use of wage vector (in the primary input table) to calculate the household input coefficient. • The employment multiplier would require the use of sectoral employment to calculate the labor input coefficient. • The input (or supply) multiplier is computed from the Ghoshian inverse.

11. More Advanced single country I-O analysis • Import contents of exports • Key Sector Analysis • Output Decomposition • Multiplier Product Matrix (MPM) Analysis • Extracting Method • Pull Analysis • Push Analysis • Field of Influence

12. Field of Influence • The underlying idea of the field of influence is to assess the changes in the Leontief inverse matrix resulting from the changes in one or more direct input coefficients in the inverse Leontieof matrix. • Used to identify inverse important entries and to identify subset of coefficients or flows for updating

13. Example (Field of influence)

14. Focus on Trade and Global Production Network • International and interregional trade growing faster than respective gross products • Nations and regions “hollowing out” as a result of increased fragmentation (Kierzkowski and Jones) in production • As WIOD generates increased supply of intercountry and interrgional databases, PyIO will provide capability to explore different facets of trade structure

15. Vertical specialization • Demand side: Induced intermediate imports by unit export (Hummels et al.,2001) • Supply side: Imported intermediates end-up in exports (Meng et al., 2011)

16. Example(demand-side VS)

17. Production chain: Average propagation length (APL) • Ideas of Dietzenbacker and Romero building on earlier work by Robinson and Markandya • How complex is an economy – how many “rounds of spending” to generate supply chain to meet final demand? • Complement this idea with issues of • Sectoral and spatial propagation – paths of dependence and interdependence • Ideas of criticial supply chains and critical linkages (re-work ideas of field of influence) • How have changes in firm organization affected length and location of propagation process (Romero et al. revealed complex analysis of changes for Chicago over last 3 decades)

18. Example (APL)

19. Interregional analysis • Inter-regional feedback decomposition • Inter-regional production chain decomposition (APL) • Regional aggregation (e.g. EU15, Asia, North America)

20. Inter-regional domestic feedback

21. Inter-country APL

22. Trade indicators • Glubel Loyd Intra industry trade • RCA • Trade by industry and end-use (intermediate, capital and household consumption)

23. Bilateral trade by industry and end-use (BTDIxE) Intermediate for assembly Other intermediate Capital Household consumption PC & Passenger Cars Unspecified

24. Future Additions • Address demographic challenges • Consumption, aging etc. • Links between trade in goods and services and migration • Handle integrated models • Econometric-IO • CGE – multiregional and multinational • Economy-environment interactions