Regional planning insights from a portuguese bi-regional input-output model – the potential impact of agri food industry

Abstract

In Portugal, the public debate at regional level is typically engaged in the discussion of asymmetries amongst the ‘interior’ and the ‘coast’. What is often discussed, with political and social relevance, is the extent of the interior’s delay (in terms of development) comparatively to the coastal region, and into what extent the dynamics of the economy, or eventually the ‘bias’ introduced by public policies, contributes to this drawback. Interestingly, however, the Portuguese regional science has miscarried this debate, largely on the grounds that the official statistics do not include this cleavage. Indeed, the design of the NUTS II in Portugal splits the country horizontally, forgetting the vertical gap that splits the interior regions from the coastal ones. The first objective of this paper is therefore to refocus the debate - in scientific terms – on the actual territorial disparity in Portugal: the contrast Coast-Interior. Accordingly, this paper starts by presenting the structure of a bi-regional Input-Output (IO) model for the Portuguese Economy. We consider a rectangular IO model (431 products by 125 industries), decomposing the Portuguese economy into two regions with comparable territorial sizes (the Coastal Region, comprising 44% of the Portuguese continental area, and the Interior Region). the model is ‘closed’ for the private consumption of households below 65 (which is supposed to be endogenous, as it depends on regional employment and therefore on households’ earnings. Multi-regional IO models describe the inter-sectoral dependencies both within the region and between the regions. The main aim is then to assess how the effects of a shock that hits only one of the regions are ‘distributed’ among the two regions. In particular, we intend to analyse at a greater detail the role of the agri-food sector in the Interior Region. Overall results illustrate the dependence of the Interior on the Coastal region, and that the (positive or negative) effects of a shock that hits the Interior Region tend to leak significantly to the Coastal Region, while an exogenous event in the Coastal Region tends to see its effects relatively more contained within the region.Thus, this analysis can be particularly relevant to policy-makers in dealing with regional and territorial planning, as they are better informed about the root causes of some outcomes. Accordingly, a summary of the key lessons learned and a discussion of their policy relevance, both at regional and national levels, will be offered.