Interregional input-output modeling: spillover effects, feedback loops and intra-industry trade

The resurgence of interest in the spatial location and organization of economic activity generated by the development of new economic geography has once again directed attention to the way in which the regions of a national economy interact. Over the last three decades, production systems have become more fragmented, with different phases in the production system often allocated to different locations in space. As a result, interregional and international trade flows have been growing at rates in excess of the corresponding rates of growth of gross regional or national domestic product. This process has been propelled in part by a significant spatial reorganization of value chains over the past two or three decades, and the concomitant logistical issues associated with the most efficient coordination of production systems has generated a complex system of interdependent flows, linking regions in one country with regions in another. This process of hollowing out (namely, the substitution of external sources of inputs and sales for intraregional transactions) has seen intra-economy multipliers decreasing while interregional spillovers are increasing; this phenomenon is occurring at the interregional and at the international scale.