Developing an Interregional Input–Output Table for Cross-Border Economies: An Application to Lao People's Democratic Republic and Thailand

Abstract

This paper constructs a modified interregional input–output (IRIO) table to link the economies of the province of Mukdahan in Thailand and the neighboring Lao People's Democratic Republic province of Savannakhet using the CheneryMoses model in conjunction with popular data reduction methods such as the simple location quotient method in the input–output (IO) tables literature. A hybrid approach was used to construct the IRIO table. This involved using primary data collected from a specially conducted survey to develop the Savannakhet portion of the table and indirect methods to construct the Mukdahan portion of the table as well as the trade flows. Results showed that the value of trade of these provinces with the rest of the world was much higher than the trade between them. The results also showed that in both provinces, industries in the services sector were found to have generally higher value-added multipliers than industries in the manufacturing sector. The agriculture and forestry industry in Savannakhet and the manufacturing industries in both provinces had high backward and forward linkages. Exports to the rest of the world and consumption were found to have the highest employment multipliers in Mukdahan and Savannakhet, respectively. Mukdahan was also found to have higher net foreign exchange earnings, implying that the Thai province may be able to add greater value to its exports than the Lao PDR province. Finally, the study outlines some key data and methodological issues that could bias the quality of the findings, and suggests solutions to enhance the accuracy and reliability of the results.