INJECTION LEAKAGES, TRADE REPERCUSSIONS AND THE REGIONAL INCOME MULTIPLIER*
| Date | 01 November 1981 |
| DOI | http://doi.org/10.1111/j.1467-9485.1981.tb00088.x |
| Author | Philip A. Black |
| Published date | 01 November 1981 |
Scortish Journalof Political
Economy,
Vol.
28,
No.
3, November 1981
0
1981
Longman
Group
Llmited 0036-9292/8 1/00190227
S02.00
INJECTION LEAKAGES, TRADE
REPERCUSSIONS AND
THE
REGIONAL
INCOME MULTIPLIER*
PHILIP
A.
BLACK
Pennsylvania State University and Rhodes University
The regional income multiplier has been frequently modified during the past
several years. Most of these changes have resulted in an extension
of
the
multiplicand or numerator of the simple Kahn multiplier. Archibald
(1967)
and Wilson
(1968)
have argued, for example, that
a
substantial proportion of
any given increase in regional investment expenditure is likely to leak to other
regions in exchange
for
imported capital goods, that is,
before
the multiplier-
accelerator process
of
income expansion is set in motion. While the latter
authors both considered the effect of induced investment on regional income,
Brownrigg
(1971)
pointed out that induced investment itself is subject to an
“injection leakage” prior to undergoing multiplier expansion. Similarly, Miller
(1966; 1969),
Brown
(1967),
Steele
(1969),
Krumme
(1970)
and Greytak
(1970)
have all studied the effect
of
inter-regional trade repercussions
on
the income
of the region-defined as the effect
of
increased regional imports on the income
and imports of other regions, and the resultant feedback effect on the exports
and income level
of
the region in question.
Although these modifications have provided useful insights into the
operation
of
the multiplier within
a
regional context, the model as it presently
stands is unsatisfactory in at least one important respect
:
that is, its failure to
recognise that the above injection leakages represent autonomous injections
into other regions which may induce, via the multiplier-accelerator process, an
additional repercussionary effect
on
the exports and income level
of
the region.
This
Zeakage-induced
repercussionary (LIR) effect is different from the
abovementioned repercussionary effect-referred to below as the
Brown-
Steele
repercussionary
(BSR)
effect’ -in the sense that the latter arises
exclusively from the initial net
(of
leakages) increase in the region’s income.
The total repercussionary effect may thus be defined as the sum of the LIR and
the
BSR
effects.
This paper attempts to incorporate both the LIR and BSR effects into an
expanded model of the regional income multiplier, and also to assess their
retative importance empirically. The paper itself falls into four parts
:
section
1
*I
am
grateful to Professor Monroe Newman and Bruce Benson of the Department
of
Economics, Pennsylvania State University, and the editor of this journal, for helpful comments on
earlier drafts of the paper.
Both authors adopt the same (Keynesian) multiplier formulation used in the present study.
Date of receipt of final manuscript:
15
April
1981.
I6
321
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