Constructing Interregional Commodity-Industry Accounts for U.S. States

West Virginia University Research Corporation, Morgantown WV

Investigators

Abstract

Various mechanisms link the fortunes of regional economies to one another. These linkages can be political, social, and economic, and can involve not only flows of information, but also flows of goods and services (commodities). Through the exchange of information and commodities (interregional trade), economic impulses are transmitted throughout the regions in an economic system. Hence, economic growth in one region can stimulate other regional economies, and likewise, downturns in the economy of one region can have negative impacts on other interdependent regions. Understanding the nature of these interregional linkages can be enhanced by providing a formal representation of information and commodity flows among regions. This research will provide such a representation in the form of interregional trades of commodities among US states, delineating both industry and institutional origins and destinations. The project focuses on the estimation of interstate exchanges of commodities, leaving the estimation of interregional factor flows and interregional inter-institutional flows as avenues for future research. Information from two sources is used in estimating the trade flows. The first is a commercially available dataset that enumerates intraregional commodity, factor and institutional flows, and the second is publicly available transportation shipment data from the Commodity Flow Survey (CFS) conducted by the Bureau of Transportation Statistics. Because disclosure rules and statistical reliability problems make it impossible to use the unmodified CFS data, the project uses a three-phase method to generate an interregional commodity flow accounting framework that is consistent with published national data. First, spatial regularities within the CFS data are estimated econometrically. Second, optimization techniques are applied to estimate gross interregional flows by commodity. Third, the structure of these relationships is used to map the intraregional accounts to a consistent multiregional system. The interregional database that results from this project will provide a foundation for a wide variety of analytical research advancing knowledge and understanding of the US state and interstate economic system. Analyses that will flow from this database include studies of economic structure and structural change, and the identification of key industry sectors and critical interstate linkages by state. The database will find use as the foundation of a range of extended models formulated specifically to analyze the economic impacts of various policies, including those that focus on trade, transportation infrastructure, and economic development.