INTEGRATING REGIONAL ECONOMETRIC AND INPUT-OUTPUT MODELS - AN EVALUATION OF EMBEDDING STRATEGIES

A number of integration strategies that embed input-output relations w ithin dynamic econometric models of regional employment determination are examined. By viewing the alternative approaches in the literature as specific cases of restricted estimation a number of important metho dological issues associated with model misspecification are identified and examined analytically. Additional insight as to the importance of these issues is provided by means of a series of Monte Carlo simulati ons. The results suggest that the relative performances of the various approaches towards integration are sensitive to errors associated wit h the form of the intersectoral linkages, labor-productivity coefficie nts, and regional purchase coefficients. The previous finding that the embedding strategies provide indicators of the strength of regional i ntersectoral linkages is shown to be potentially misleading.