CARERA The Impact of CAP Reform on the Employment Levels in Rural Areas

1. CARERA The Impact of CAP Reform on the Employment Levels in Rural Areas CaReRa Description of I-O regionalization methodology: preliminary application to AMT region Loizou E., Tsakiri M. and Mattas K. Aberystwyth, 3rd meeting, October 27, 2006 Aberystwyth 3rd meeting, October 27, 06

2. Methodological approaches to construct Regional I-O tables CaReRa Three methodological approaches: I. Survey Techniques • Regional I-O tables are constructed same way as the national I-O, by full scale surveys • Despite the superiority of survey techniques, they are time consuming and costly. Aberystwyth 3rd meeting, October 27, 06

3. Methodological approaches to construct Regional I-O tables CaReRa • Thus, regional I-O tables are mainly constructed using national I-O tables and other information. II. Non-Survey Techniques • Simple Location Quotient (SLQ) • Purchases Only Location Quotient (PLQ) • Cross-Industry Location Quotient (CILQ) • The Method of Flegg et al., (FLQ) • many other alternative forms of LQ’s III. Hybrid or Partial Survey Techniques • The RAS Method • The Imports or Exports Only Method • Regression methods • Entropy Methodology • The GRIT Method Debate in the literature between Survey and Non-survey methods Aberystwyth 3rd meeting, October 27, 06

4. GRIT Method CaReRa • Hybrid (partial-survey) Technique • Based on Non-Survey Techniques (Location Quotients) • External Data from surveys or other secondary sources (superior) can be inserted at various stages of the procedure. • Widely used in empirical studies Aberystwyth 3rd meeting, October 27, 06

5. Empirical Specification of the GRIT Regionalization methodology CaReRa Main Steps of the GRIT Method 1. Sectoral Aggregation • Usually, sectoral aggregation is done after the regionalization of the direct requirements matrix. However, sectoral aggregation at this stage may be necessary in cases where the aggregation scheme of the available employment data is less than that of the national I-O table. In this case the national table is aggregated into the same scheme with the regional and national employment data. 2. Reallocation of International Trade • If the national transactions table includes total flows (imports are included in the intermediate transactions), not only domestic, then this step is not necessary. However, in cases when the national transactions are expressed in domestic flows, the imports row must be reallocated proportionally within the relevant rows of the secondary?? sectors in the national table. • If an imports matrix is available then imports are redistributed to the original sectors. Aberystwyth 3rd meeting, October 27, 06

6. Empirical Specification of the GRIT Regionalization methodology CaReRa Main Steps of the GRIT Method 3. Computation of the National Direct Requirements Matrix • The application of the location quotients during the regionalization process is done on the direct requirements matrix so the matrix needs to be calculated. • Before the computation of the national direct requirements matrix, the intrasectoral flows in the main diagonal of the national transactions matrix are deleted. This is because intrasectoral flows include interregional trade. So by maintaining these flows within the table, when deriving the regional table, the regional intermediate purchases might be overestimated. • Also at this step any non-existent sectors in the region are eliminated (column coefficients of non-existing sectors are added to exports vector while row coefficients are added to the imports vector). 4. Computation of the Regional Direct Requirements Matrix • Application of the location quotients (FLQ) to separate the national technical coefficients into regional purchase and import coefficients. A location quotient measures the relative importance of an industry in a region compared with its importance nationally. Aberystwyth 3rd meeting, October 27, 06

7. Empirical Specification of the GRIT Regionalization methodology CaReRa Main Steps of the GRIT Method 5. Sectoral Aggregation of the Regional DRM • Definition of the classification scheme at regional level. Until this stage it was assumed that the economic structure (number of sectors) is the same in the region and in country; usually this is not true for small regions with low economic activity (low diversification). Therefore the dimensions of the regional I-O tables should be adjusted (aggregated-disaggregated) such that to reflect adequately the economic conditions in the region. Small and un-important sectors with very low economic activity (low employment or output levels) must be aggregated. • In order to proceed to the aggregation the regional direct requirements matrix as well as the regional import coefficients vectorare adjusted by weighting them with regional employment weights. • Use of superior data Aberystwyth 3rd meeting, October 27, 06

8. Empirical Specification of the GRIT Regionalization methodology CaReRa Main Steps of the GRIT Method 6. Computation of the Complete Regional Input-Output Table • Need to transform first of all the direct requirements matrix and the imports coefficients vector into monetary flows. For doing so we need the vector of regional sectoral output (regionalize using the SLQ and regional to national employment shares, if the regional output is not known from secondary sources). • Having the regional sectoral output vector we calculate the regional transactions matrix and imports vectorin flows. • Then we have to estimate the sectoral final demand elements (Consumption, Exports and other final demand). First we estimate the total final demand as the difference between total sectoral regional output and total sectoral intermediate sales. Then using the regional to national employment shares and the SLQ we regionalize the national final demand categories (consumption and exports, other FD is calculated as residual). • For the estimation of the Primary Inputs categories the same approach is followed (Compensation of employees, imports and other PI is calculated as residual). Aberystwyth 3rd meeting, October 27, 06

9. CHARACTERISTICS OF THE CARERA REGIONAL I-O MODELS TO BE CONSIDERED CaReRa I. Methodological characteristics of the CARERA I-O model to be considered: 1. Classification scheme • Number and type of sectors the regional tables to have • Must follow NACE/SIC classification system 2. Technology assumption • industry, commodity or mixed technology assumptionassumption • USE and MAKE format the national I-O tables 3. Valuation of transactions • Currency; current prices; basic values. 4. Impact analysis base year • The reference year of the partners’ national tables  5. The regionalisation methodology • Issues to be discussed if the GRIT is to be used: • Adjustment of international trade (use table with total flows or domestic flows (if domestic reallocation? of imports and how)? • Elimination of main diagonal (intrasectoral trade)? • Aggregation weighted with employment? • FLQ to be used? 6. The model and linkages • Open I-O model or closed (if data available) • Linkages to be computed and impacts assessment Aberystwyth 3rd meeting, October 27, 06

10. CHARACTERISTICS OF THE CARERA REGIONAL I-O MODELS TO BE CONSIDERED CaReRa Partners’ I-O tables characteristics ..\Carera_IO_characteristics.doc Aberystwyth 3rd meeting, October 27, 06

11. SUPERIOR DATA CaReRa Superior Data for key regional sectors: • Secondary sources • Small scale surveys (Questionnaires) AMT_case study\Question-Forestry.doc Aberystwyth 3rd meeting, October 27, 06

12. The Greek Regional I-O Table (AM&T region) CaReRa The Greek case study data: AMT_case study\GAUSSdataReg.xlsAMT_case study\EUAMTprg.e.docAMT_case study\EUAMT_results.xls Aberystwyth 3rd meeting, October 27, 06