Supply Multipliers in Two Regional Economies

Abstract

This paper focuses on the analysis of the economic impact that sectorial total factor productivity – or valued added - gains have on two regional Spanish economies (Catalonia and Extremadura). In particular it is studied the quantitative effect that each sector’s valued added injections has on household welfare (real disposable income), on the consumption price indices and factor relative prices, on real production (GDP) and on the government and foreign net income. To do that, we introduce the concept of supply multiplier. The analytical approach consists of a computable general equilibrium model, in which it is assumed perfect competition and cleared markets of goods and factors. All the parameters and exogenous variables of the model are calibrated by means of two social accounting matrices, one for each region under study. The results allow identifying those sectors with the greatest multipliers impact on consumer welfare as the key sectors in the regional economies. Keywords: efficiency gains, supply multipliers, key sectors, computable general equilibrium. JEL Classification: C68, R13.