In addition to using the many models that REAL has developed for policy applications, project evaluation and impact assessment, many of the graduate assistants working in REAL have been able to orient their doctoral dissertations and masters’ theses to projects that take advantage of the unique data bases and analytical capabilities of the various models that have been constructed. Some recent examples are provided below.
Pollution and Structural Change in the Chicago Region, 1990-2010
Oliver Fritz (Ph.D., 1996) used the Chicago Region Econometric Input-Output Model [CREIM] to assess the impact of structural change on pollution generation in the Chicago region. Since the model endogenously changes the structure of relationships between industry over time, even without changes in the relationship between pollution and production levels, it is likely that some types of pollutants would increase while others would decrease. A base scenario provided emissions projections for the years 1995-2006. Without further abatement efforts or technological improvements that result in a cleaner production technology, SO2 emissions are projected to gradually increase to a level 7.7% higher than the 1988/92 level. A look at the development of the sectors with the highest total pollution elasticities, reveals that of the four SO2 key sectors, only utilities show decreasing output levels, while petroleum, wholesale & retail, and hotels, personal and business services are expected to expand. The same structural pattern arises for NO2, but the shrinking sector – utilities – has a very high total pollution elasticity, so that overall NO2 levels will only slightly increase. For all other pollutants – PM10, VOC and most significantly CO – industrial emissions are projected to drop due to decreasing output levels in the primary metals sector. The implications of these findings for policy-makers is the need to consider the role of structural change in assessing whether a region is likely to be in compliance with air quality standards at some future time period. One of the major sources of decline in some pollution levels is the increasing concentration of output in a smaller set of more technologically advanced establishments. If reductions in pollution generation continue as new, cleaner technologies are adopted, it is likely that the drop in some emissions levels will occur without the need for market intervention.
While considerable attention has been directed towards the estimation of the impacts of international trade on state economies and some of the large percentage increases that have been recorded in these flows, for many states, international exports are only a small fraction of a state’s export profile. Using estimates generated by REAL’s models for the states of Wisconsin, Illinois, Indiana, Ohio and Michigan, and data provided in the Commodity Flow Statistics for 1993 compiled by the Bureau of Transportation Statistics of the US Department of Transportation, REAL has been able to estimate state-to-state flows. For 1993, the magnitude of the commodity flows among these five states was in excess of $250 billion – a figure roughly the size of the flows between the NAFTA economies of US, Canada and Mexico. On average, each Midwestern state exported 37% to the remaining four states and imported 57% from these states; Indiana was the most dependent on its Midwestern neighbors, Ohio the least dependent. When the balance of trade was estimated (exports-imports), Ohio ended up with a negative balance of trade with all four states while Wisconsin had a positive balance.
In addition to these estimates, a set of interstate multipliers was calculated for each sector. Referring to the automobile sector, REAL was able to show that 37% of the indirect effects from an increase in production in Michigan would be concentrated in the other Midwest states while, for auto production in Ohio, about 31% of these effects would accrue to the Midwest states.
Regional Competition and Complementarity
One of the major changes that has occurred in the US in the last two decades has been the change in the allocation of gross national product across broad regions (such as the Census regions). REAL has modeled these changes as a competition for shares and has been able to reveal the degree to which gains and losses in these shares are reflected by changes in gains or losses by other regions. When a region increases its share of GNP, those regions that also benefit (through increasing their shares) are referred to as complement regions; the remainder, who lose share, are referred to as competitor regions. The Great Lakes and Far West regions seem to enjoy a positive relationship with the remaining regions while the Mid-East and South West seem to be competitive with most of the regions. The implications of these findings may be revealed in two ways. First, given the enormous volume of trading that the Interstate Trade study revealed, changes in the economic health of one region have the capability to generate important impacts in other parts of the US. Secondly, many of these regions enjoy different international trading linkages – the dominant partner in the Great Lakes region is Canada, while the Mid-East region trade most often with Europe and the Far West with Asia. Hence, changes in the international trading volumes have the potential to spill-over – indirectly – into other parts of the country. The research reveals that the patterns of international and interregional trade are become ever more complex, generating the need to explore these changes and their future implications.
Creating and Expanding Trade Partnerships within the Chicago Metropolitan Area: Applications using a Miyazawa Accounting System
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The ideas and approaches adopted in understanding how regions within a country or countries themselves are linked with each other are used to explore the complex interdependencies that exist within the Chicago metropolitan area (hereafter, Chicago). The methodology that has been developed will form the basis for analysis that can explore the benefits to all parts of the area from economic initiatives generated in one region and begin to provide the basis for the notion that the gains from free trade that are promoted at the international level can also be realized within metropolitan areas. The analysis will be based in part on two models – a comprehensive econometric-input-output model for Chicago and a Miyazawa-styled social accounting system for a four-fold division of this area (see Hewings et al., 1999, for a collection of papers illustrating applications of the Miyazawa framework). Given time constraints and lack of reliable data, a full social accounting system could not be developed; however, for the clients’ needs, the addition of income flows proved to be the single most valuable source of additional information beyond that provided in standard input-output models. The research was provided to a Chicago organization that has been primarily focused on enhancing economic development in parts of the region in which a large percentage of the residents are either African-American or Hispanic. There were three major objectives: (1) Analysis of the nature and strength of existing economic interdependence between four regions in Chicago, with particularly attention directed to predominantly minority areas on the south and west parts of the city of Chicago; (2) Assessment of the potential gains to all regions from economic development within either of the two targeted regions; and (3) Identification of existing impediments to further trade expansion.
Freight Transportation and the Midwest Economy
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Presentation delivered at the Freight Transportation Conference, Chicago by Geoffrey J.D. Hewings
A Microsoft PowerPoint 2000 presentation is available