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  • From the Desert to the Glaciers:

    Exploring Interregional Connections

    of the Chilean Economy

    International Workshop on General Equilibrium

    Modeling, Universidad Adolfo Ibañez

    Viña del Mar, December 3-4, 2018

    Eduardo Haddad Denise Li Karina Sass Keyi Ussami Sofia Arantes

  • 2

    Research team – NEREUS

    Eduardo Amaral Haddad (coordinator)

    Ademir Antônio Moreira Rocha

    Bruno Proença Pacheco Pimenta

    Denise Leyi Li

    Karina Simone Sass

    Keyi Ando Ussami

    Lucas Cardoso Correa Dias

    Raphael Pinto Fernandes

    Sofia Marques Arantes

    Department of Economics, University of Sao Paulo

  • Outline

    1. Introduction

    2. Structure of the interregional data

    3. Basic socioeconomic indicators

    4. Theoretical background

    5. Multiplier analysis

    6. Linkage analysis

    7. Next steps

    Department of Economics, University of Sao Paulo 3

  • From the Desert to the Glaciers

    Department of Economics, University of Sao Paulo 4

  • 5

    Introduction

    As part of the development of an interregional CGE (ICGE) model

    for Chile, a fully specified interregional input-output database was

    developed under conditions of limited information.

    Such database is needed for calibration of the ICGE model.

    Lack of adequate data is a problem: but do you wait until the data

    have improved sufficiently, or do you start with existing data, no

    matter how imperfect, and improve the database gradually?

    Department of Economics, University of Sao Paulo

  • 6

    Structure of interregional Input-Output models

    Department of Economics, University of Sao Paulo

  • 7

    Data demanding process

    Department of Economics, University of Sao Paulo

    Large amount of data

    Problem?!

  • 8

    Chilean interregional input-output system, 2014

    Department of Economics, University of Sao Paulo

  • 9

    List of sectors

    Department of Economics, University of Sao Paulo

    S1 Agropecuario-silvícola y Pesca

    S2 Minería

    S3 Industria manufacturera

    S4 Electricidad, gas, agua y gestión de desechos

    S5 Construcción

    S6 Comercio, hoteles y restaurantes

    S7 Transporte, comunicaciones y servicios de información

    S8 Intermediación financiera

    S9 Servicios inmobiliarios y de vivienda

    S10 Servicios empresariales

    S11 Servicios personales

    S12 Administración pública

  • 10

    List of regions

    Department of Economics, University of Sao Paulo

    R1 XV De Arica y Parinacota

    R2 I De Tarapacá

    R3 II De Antofagasta

    R4 III De Atacama

    R5 IV De Coquimbo

    R6 V De Valparaíso

    R7 RMS Región Metropolitana de Santiago

    R8 VI Del Libertador General Bernardo O'Higgins

    R9 VII Del Maule

    R10 VIII Del Biobío

    R11 IX De La Araucanía

    R12 XIV De Los Ríos

    R13 X De Los Lagos

    R14 XI Aysén del General Carlos Ibáñez del Campo

    R15 XII De Magallanes y de la Antártica Chilena

  • 11

    Basic socioeconomic indicators – GDP and population

    Department of Economics, University of Sao Paulo Source: Banco Central de Chile.

  • 12

    Basic socioeconomic indicators – GDP per capita and labor

    Department of Economics, University of Sao Paulo Source: Banco Central de Chile.

  • 13

    Main sectorial activity by region

    Department of Economics, University of Sao Paulo

    Region Main activity % of

    Region Total

    % of Sector Total

    R1 De Arica y Parinacota Transporte, comunicaciones y servicios de

    información 18% 1.3%

    R2 De Tarapacá Minería 35% 8.1%

    R3 De Antofagasta Minería 48% 50%

    R4 De Atacama Minería 31% 7.9%

    R5 De Coquimbo Minería 27% 8%

    R6 De Valparaíso Industria manufacturera 28% 14%

    R7 Región Metropolitana de Santiago Comercio, hoteles y restaurantes 19% 70%

    R8 Del Libertador General Bernardo O'Higgins Minería 20% 9,4%

    R9 Del Maule Industria manufacturera 21% 4,5%

    R10 Del Biobío Industria manufacturera 36% 4%

    R11 De La Araucanía Industria manufacturera 19% 16%

    R12 De Los Ríos Industria manufacturera 25% 2,6%

    R13 De Los Lagos Industria manufacturera 33% 5,8%

    R14 Aysén del General Carlos Ibáñez del Campo Agropecuario-silvícola y Pesca 49% 7,7%

    R15 De Magallanes y de la Antártica Chilena Industria manufacturera 29% 1,7%

  • 14

    Regional output share by sector

    Department of Economics, University of Sao Paulo

    Region Agropecuario-

    silvícola y Pesca Minería

    Industria manufacturera

    All Sectors

    R1 De Arica y Parinacota 1,4% 0,2% 0,5% 0,7%

    R2 De Tarapacá 0,9% 8,1% 1,3% 2,4%

    R3 De Antofagasta 0,4% 49,7% 4,6% 10,6%

    R4 De Atacama 1,5% 7,9% 0,3% 2,5%

    R5 De Coquimbo 5,1% 8,0% 0,6% 2,9%

    R6 De Valparaíso 8,3% 7,4% 13,6% 9,4%

    R7 Región Metropolitana de Santiago 9,2% 7,8% 41,7% 44,2%

    R8 Del Libertador General Bernardo O'Higgins 16,2% 9,4% 4,5% 5,0%

    R9 Del Maule 10,4% 0,4% 4,0% 3,6%

    R10 Del Biobío 12,6% 0,0% 16,1% 8,9%

    R11 De La Araucanía 6,6% 0,0% 2,5% 2,6%

    R12 De Los Ríos 4,4% 0,0% 2,6% 1,6%

    R13 De Los Lagos 14,0% 0,0% 5,8% 3,7%

    R14 Aysén del General Carlos Ibáñez del Campo 7,7% 0,2% 0,2% 0,8%

    R15 De Magallanes y de la Antártica Chilena 1,3% 1,0% 1,7% 1,2%

    Total 100% 100% 100% 100,0%

  • Trade Balance (billions CLP 2014)

    > 2,000

    1,000 - 2,000

    0 - 1,000

    (-1,000) - 0

    (-2,000) - (-1,000)

    ≤ (-2,000)

    RoW

    3

    4

    14

    5

    2

    9

    13

    10

    11

    1

    12

    15

    8

    6

    7

    Trade (billions CLP 2014)

    < 250

    250 - 1,000

    1,000 - 2,500

    2,500 - 5,000

    > 5,000

    3

    4

    14

    5

    2

    9

    10

    11

    1

    12

    15

    13

    8

    6

    7

    Trade

    Antofagasta

    RMS

    RoW

    La Araucanía

    RoW

  • 16

    Transport system in Chile x Average travel time

    Department of Economics, University of Sao Paulo

  • 17

    Theoretical background – Conventional Input- Output model

    The conventional input-output model is given by the system of matrix

    equations:

    (1) 𝑥 = 𝐴𝑥 + 𝑦

    (2) 𝑥 = (I – A)-1 y = By

    Where 𝑥 and 𝑦 are respectively (nx1) dimension vectors of gross output and

    final demand;

    𝐴 is a (nxn) matrix of input coefficients 𝑎𝑖𝑗 defined as the amount of product i

    required per unit of product j (in monetary terms), for i, j = 1,…, n;

    and B is a (nxn) dimension matrix known as the Leontief inverse.

    Department of Economics, University of Sao Paulo

  • 18

    Theoretical background – Interregional Input- Output model

    In an interregional context, with R different regions:

    𝑥 = 𝑥1

    ⋮ 𝑥𝑅

    ; 𝐴 = 𝐴11 ⋯ 𝐴1𝑅

    ⋮ ⋱ ⋮ 𝐴𝑅1 ⋯ 𝐴𝑅𝑅

    ; 𝑦 = 𝑦1

    ⋮ 𝑦𝑅

    𝑎𝑛𝑑 𝐵 = 𝐵11 ⋯ 𝐵1𝑅

    ⋮ ⋱ ⋮ 𝐵𝑅1 ⋯ 𝐵𝑅𝑅

    so that (2) will be:

    (3) 𝑥1 = 𝐵11𝑦1 + ⋯ + 𝐵1𝑅𝑦𝑅

    𝑥𝑅 = 𝐵𝑅1𝑦1 + ⋯ + 𝐵𝑅𝑅𝑦𝑅

    Department of Economics, University of Sao Paulo

  • 19

    Theoretical background – Interregional Input Output model

    The final demand 𝑦 can be decomposed in expenditures from domestic

    regions (𝑣) and from the foreign region (𝑒):

    𝑣 = 𝑣11 ⋯ 𝑣1𝑅

    ⋮ ⋱ ⋮ 𝑣𝑅1 ⋯ 𝑣𝑅𝑅

    ; 𝑒 = 𝑒1

    ⋮ 𝑒𝑅

    so that (3) will be:

    (4) 𝑥1 = 𝐵11(𝑣11+ ⋯ + 𝑣1𝑅 + 𝑒1) + ⋯ + 𝐵1𝑅(𝑣𝑅1+ ⋯ + 𝑣𝑅𝑅 + 𝑒𝑅)

    𝑥𝑅 = 𝐵𝑅1(𝑣11+ ⋯ + 𝑣1𝑅 + 𝑒1) + ⋯ + 𝐵𝑅𝑅(𝑣𝑅1+ ⋯ + 𝑣𝑅𝑅 + 𝑒𝑅)

    A region’s output depends on demand originating from itself, on demand

    from other regions (degree of interregional integration) and also on foreign

    demand.

    Department of Economics, University of Sao Paulo

  • 20

    Regional Distribution of the Average Total and Net Output Multipliers (in %)

    Department of Economics, University of Sao Paulo Source: calculations by the authors.

    Total output Multiplier Net output Multiplier

    Intraregional share

    Interregional share

    Intraregional share

    Interregional share

    R1 De Arica y Parinacota 80,61 19,39 48,19 51,81

    R2 De Tarapacá 81,12 18,88 50,20 49,80

    R3 De Antofagasta 81,41 18,59 51,66 48,34