A new proposal to model regional input–output structures using location quotients. An application to Korean and Spanish regions

Abstract

This paper is based on the use of Flegg’s location quotients (FLQ) and proposes a novel procedure for the estimation of the unknown parameter δ in regions with and without input–output frame availability. Applied to data for the Korean regions for the year 2015, firstly the determination of the optimal δ is addressed by solving a general optimization problem and, secondly, a regression equation is proposed to estimate the value of δ from the explanatory variables of interregional road freight transport (IRFT) and imports from the rest of the world (IROW). The results obtained show a lower bias in regard to the true values of the regional inputs coefficients in relation to other methods based on location quotients.