Regional input-output modelling in Germany: The case of North Rhine-Westphalia

The political system of Germany is characterized by strong federalist elements, which means that many important decisions of economic policy are made by the governments of the federal states or Länder. Unfortunately the statistical offices of the Länder do not produce regional input-output tables, claiming that they lack the resources (i.e. manpower) to do so. The lack of official input-output tables for the Länder forms a significant obstacle to the study of regional economic developments and hampers the ability of economists to provide well-informed advice to regional policy-makers. A similar situation prevails in many other European countries. This paper attempts to meliorate the situation by describing the process of constructing a regional input-output table (RIOT) for North Rhine-Westphalia (NRW), the largest federal state in terms of GDP and population. A first approximation is produced by applying the CHARM method to the national input-output table on the basis of regional and national employment data. This first approximation is then improved upon by adding additional information from various sources, including the statistical office of NRW and the household survey of income and expenditure. We conclude that it is possible to construct a meaningful RIOT even when resources (time and money) are severely limited if the available information is used in an efficient manner.