Summary
There are three major criteria which determine whether or not an economic development program or any of its elements (such as a new plant) can make a positive contribution to the economic development and welfare of a city or region. These criteria, relating to income, public finance, and environmental quality, can be presented symbolically in terms of the model presented. The necessary conditions are:
Where:X H =regional personal incomes,G=regional government expenditures,T=regional government revenues,P=regional population,Q=environmental benefits,C=environmental costs,B=cost of environmental restoration, andt=time period.
The values for these variables are determined after all of the direct, indirect, and induced effects have been worked out through the general equilibrium model for any proposed development program or project.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
For an appraisal of social goals to be sought in city planning see Harvey S. Perloff, “New Directions in Social Planning,”Journal of the American Institute of Planners, XXXI, No. 4, (November, 1965), p. 299.
For discussion of interindustry models see W. W. Leontief,The Structure of American Economy, 1919–1939 (2nd ed.; New York: Oxford University Press, 1951); Hollis B. Chenery and Paul G. Clark,Interindustry Economics (New York: John Wiley & Sons, Inc., 1959); W. Duane Evans and Marvin Hoffenberg, “The Interindustry Relations Study for 1947,”Review of Economics and Statistics, XXXIV, No. 2, (May, 1952), pp. 97–142; William H. Miernyk,The Elements of Input-Output Analysis, (New York: Random House, 1965). For discussion of regional interindustry models see Walter Isardet al, Methods of Regional Analysis, New York: John Wiley & Sons, Inc., 1960), chap. 8; Werner Hochwald, Herbert E. Striner, and Sidney Sonenblum,Local Impact of Foreign Trade (Washington, D.C.: National Planning Association, 1960); Roland Artle,Studies in the Structure of the Stockholm Economy, (Stockholm: Business Research Institute, Stockholm School of Economics, 1959); andThe Impact of Space and Space-Related Activities on a Local Economy (Boulder: Bureau of Economic Research, Institute of Behavioral Science, University of Colorado, July, 1965); NASA Research Grant No. NSG-474, Part I, “The Input-Output Analysis,” by William H. Miernyk, Ernest R. Bonner, John H. Chapman, Jr., and Kenneth Shellhammer; Part II, “The Income-Product Accounts,” by Don Seastone, Ernest R. Bonner, Charles M. Franks, and William McCormick. For a critique of the interindustry approach see Charles M. Tiebout, “Regional and Interregional Input-Output Models: An Appraisal,”The Southern Economic Journal, XXIV, No. 2, (October, 1957), pp. 140–47.
In matrix notation, [X]=[I−a]−1. [Y], see Appendix I. Dynamic properties over time can be observed by appropriate time phasing of entries in the capital formation column. Conceptually, the model can be made dynamic through use of capital coefficients but data deficiencies and other problems have prevented the development of fully operational dynamic intersectoral models. See Richard M. Goodwin, “The Multiplier as Matrix,”Economic Journal, LIX, No. 236 (December, 1949), pp. 237–55; Wassily W. Leontief, “Dynamic Analysis,”Studies in the Structure of the American Economy (New York: Oxford University Press, 1953), pp. 53–90; Robert N. Grosse, “The Structure of Capital,”ibid, pp. 185–242; R. Dorfman, P. Samuelson, and R. Solow,Linear Programming and Economic Analysis (New York: McGraw-Hill, 1958), chaps. 11, 12; and Hollis B. Chenery and Paul G. Clark,Interindustry Economics (New York; John Wiley & Sons, Inc., 1959), pp. 71–80.
Walter Isard and Robert Coughlin,Municipal Costs and Revenues Resulting from Community Growth, Federal Reserve Bank of Boston and American Institute of Planners, (Wellesly, Mass,: Chandler-Davis Publishing Co, 1957); Werner Z. Hirsch, “A General Structure For Regional Economic Analysis,” and discussion in Werner Hochwald, ed.,The Design of Regional Accounts (Baltimore: Johns Hopkins University Press, for Resources For the Future, Inc., 1961), pp. 1–37; Louis K. Loewenstein, “The Impact of New Industry on the Fiscal Revenues and Expenditures of Suburban Communities,”National Tax Journal, XVI, No. 2, (June, 1963), pp 113–36; Harold M. Groves and John Riew, “The Impact of Industry on Local Taxes, A Simple Model,”National Tax Journal, XVI, No. 2, (June, 1963), pp. 137–45; Mabel Walker,Business Enterprise and the City (Princeton, New Jersey: Tax Institute, Inc.).
Jesse Burkhead has emphasized the importance of bringing the public sector explicitly into development planning models through construction of detailed public finance accounts. See “Public Finance as an Integral Part of Regional Accounts,” in Committee on Regional Accounts, Werner Z. Hirsch, ed.Elements of Regional Accounts, (Baltimore: Johns Hopkins University Press, for Resources For the Future, Inc., 1964).
In his pioneering efforts to develop a general structure for regional analysis, Werner Z. Hirsch formulated a remarkably comprehensive regional interaction model which explicitly considers the impact of development on the “private sector environment,” the “public sector environment,” and on the “amenities of life.” The private and public sector environments are included as regular accounts, and effects upon amenities are identified as a final step. Conceptually, Hirsch's model is an interindustry model, even though it is not presented in typical interindustry format, and could be formulated to analyze the policy variables emphasized in this study. See Werner Z. Hirsch, “A General Structure for Regional Economic Analysis,” in Werner Hochwald, ed.,Design of Regional Accounts (Baltimore: Johns Hopkins University Press, for Resources For the Future, Inc., 1961) pp. 1–32, and comments by Roland Artle and Harold J. Barnett, pp. 33–7.
United States Department of Health, Education, and Welfare,Report on Pollution of Lake Erie and Its Tributaries, Parts I, II, and III, (Washington, D.C.: Public Health Service, July, 1965).
As an indication of accumulating environmental impacts of industrialization, see The President's Science Advisory Committee, “Restoring the Quality of Our Environment,” Report of the Environmental Pollution Panel, (Washington, D.C., November, 1965). See also M. Neiburger, “Diffusion and Air Pollution,”Bulletin of the American Meteorological Society, XXXXVI, No. 3 (March, 1963), pp. 131–34.
Paul W. McGann “Technological Progress and Minerals,” in Joseph J. Spengler, ed.,Natural Resources and Economic Growth (Ann Arbor, Michigan, 1960). Conference sponsored by Resources For the Future, Inc. and Committee on Economic Growth of the Social Science Research Council, University Microfilms, Inc.
Francis T. Christy, Jr., and Anthony Scott,The Common Wealth in Ocean Fisheries (Baltimore: Johns Hopkins University Press, for Resources For the Future, Inc., 1965).
University of Maryland, Bureau of Business and Economic Research, “Tidewater Maryland Development Problems,”Studies in Business and Economics, XV, No. 2 (College Park, Maryland: Regional Industrial Centers, September, 1961), pp. 19–20.
Harold A. Thomas, Jr. “The Animal Farm: A Mathematical Model for the Discussion of Social Standards for the Control of the Environment,”Quarterly Journal of Economics, LXXVII, No. 1 (February, 1963), pp. 143–48. Thomas points out that setting a quality criterion is the equivalent of imputing a cost-benefit ratio.
For an excellent discussion of environmental factors see Orris Herfindahl and Allan V. Kneese,The Quality of the Environment (Baltimore: Johns Hopkins University Press, for Resources For the Future, Inc., 1965). The environmental factor rows and columns in the interindustry model presented here can be regarded as summarizing all of the data which would be generated from comprehensive analysis of environmental factors and externalities as discussed by Herfindahl and Kneese considered in a framework of general equilibrium analysis of the total development process. See also Allen V. Kneese,The Economics of Regional Water Quality Management (Baltimore: Johns Hopkins University Press, for Resources For the Future, Inc., 1964).
See John E. Moes,Local Subsidies for Industry (Chapel Hill: University of North Carolina Press, 1962), and the following articles in theSouthern Economic Journal XXIV, No. 2 (October, 1962): W. David Maxwell, “‘Review of Local Subsidies for Industry’, by John E. Moes,” pp. 137–9; Irving J. Goffman, “Local Subsidies for Industry,” pp. 111–4; James H. Thompson, “Local Subsidies for Industry, Comment,” pp. 114–9; and John E. Moes, “Local Subsidies to, Industry, Reply” pp. 119–26. See also Andre Simmons, “Review of Local Subsidies for Industry,”The American Economic Review, LII, No. 4 (September, 1962) pp. 881–3; and Douglas Jay, “Review of Local Subsidies for Industry,”The Economic Journal, LXXII, No. 290, (June, 1963), pp. 315–7.
On the economics of historic preservation and tourism see Tony P. Wrenn, “The Tourist Industry and Promotional Publications,”Historic Preservation, XVI, No. 3 (1964). pp. 111–8, which suggests that Virginia could have justified the restoration of Colonial Williamsburg on the basis that the added revenues from the gas tax alone exceeded the $60 million spent on restoration. See also, Robert L. Montague, III and Tony P. Wrenn,Planning for Preservation (Chicago: American Society of Planning Officials, 1964).
The need for national perspective on regional development has been noted by John Friedman in “Regional Development in Post-Industrial Society,”Journal of the American Institute of Planners, XXX, No. 2, (May, 1964), pp. 84–90.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Cumberland, J.H. A regional interindustry model for analysis of development objectives. Papers of the Regional Science Association 17, 65–94 (1966). https://doi.org/10.1007/BF01982510
Issue Date:
DOI: https://doi.org/10.1007/BF01982510