ON THE APPROPRIATE USE OF LOCATION QUOTIENTS IN GENERATING REGIONAL INPUT-OUTPUT TABLES

This paper examines the conventional use of location quotients (LQs) to estimate regional input-output coefficients from national data. A new LQ-based adjustment formula is developed. By allowing for relative regional size, this new formula should overcome the tendency of conventional formulae to overstate regional multipliers. Furthermore, it is demonstrated that the conventional approach of first producing an aggregated regional model and then using LQs to adjust the coefficients is likely to produce biased estimates of regional multipliers; it is argued that it would be more sensible to adjust the data prior to aggregation. The arguments are illustrated using data for the English county of Avon.