OUTPUT DETERMINATION AND INVESTMENT SPECIFICATION IN MACROECONOMETRIC MODELS OF OPEN REGIONS

This article concerns incorporating the 'regional' aspect into investment specifications of regional macroeconometric models and the treatment of output determination for sectors whose markets are national rather than local. It presents an approach to modeling output and investment determination that preserves the general Keynesian structure but puts greater emphasis on the supply side and allows for explicit introduction of locational influences. The investment specification is based on factor demand theory, locational theory and a dynamic adjustment process. Output determination depends heavily on the stock of capital and regional factor prices. Comments on empirical implementation are also offered. © 1979.