Linking regions to the world: simplifying gravity equations to embed regions within global input-output models

Abstract

Multiregional input-output (MRIO) tables composed of nations are often used to measure national participation in global value chains (GVCs) as well as the environmental spillovers affiliated with a nation’s production. But a lack of detailed regional trade data deters the inclusion of subnational economies into global MRIO accounts. To facilitate more-ready development of multi-scale MRIO accounts, we identify a gravity model simplification. We illustrate our approach by spatially disaggregating two hypothetical countries and embedding their regions within a global MRIO model. Our results suggest that it is possible to reduce information requirements while producing relatively accurate multi-scale MRIO accounts.