On the multiplier concept in regional analysis

Authors

  • Novica Supić Univerzitet u Novom Sadu, Ekonomski fakultet Subotica, Departman za evropsku ekonomiju i biznis Novi Sad, Srbija

DOI:

https://doi.org/10.2298/PAN0601089S

Keywords:

Regional economy, Multiplier model, Marginal propensity to consume local products, Leakage effect

Abstract

Major aim of the paper is to explain how Keynesian multiplier model can be used to estimate the effect of expenditure changes on regional economy especially regional income and employment. Among many factors, marginal propensity to consume locally produced goods plays a crucial role in determining regional multiplier effects. A critical feature of the regional multiplier is an extent to which expenditure injections leak out of a region and special attention has therefore been paid to identifying the nature of this leakage. Regional multiplier analysis has undoubtedly proved to be of a substantial value not only for defining and operating regional policy but also in providing an explanation of how regional economies actually function. It nevertheless has its weaknesses, the primary one being that it does not provide detailed information of economic effects of the expenditure injections. As a response to this criticism, regional econometric models which provide far greater details have been developed.

Key words: Regional economy, Multiplier model, Marginal propensity to consume local products, Leakage effect.
JEL: R11, R13, R15.

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Published

2006-10-10

How to Cite

Supić, N. (2006). On the multiplier concept in regional analysis. Panoeconomicus, 53(1), 89–103. https://doi.org/10.2298/PAN0601089S

Issue

Section

Original scientific paper