Conjoining an Input-Output Model and a Policy Analysis Model: A Case Study of the Regional Economic Effects of Expanding a Port Facility

Abstract

A 484-sector Massachusetts static input-output (MIO) model is conjoined with the Massachusetts Economic Policy Analysis (MEPA) model which includes supply relationships, industrial location responses to changing costs, and a production function allowing substitution among inputs. This makes it possible to draw upon the distinctive features of both models. The technique is demonstrated by a study that analyzes the effect on the Massachusetts economy of the expansion of a container port facility at Boston. The approach presented here has general applicability to policy analysis and planning studies that require both the detailed regional interindustry interactions captured by a disaggregated input-output model and the cost, price, supply, location, and demand interdependencies which are endogenous in the best regional forecasting and policy simulation models.