Networks in Japanese regional agro-food economies: an empirical exploration of the network linkage model

Abstract

Network linkage is important in evaluating macroeconomic performance since input‒output networks across industries are asymmetric and respond differently to external shocks. While most studies implicitly assume elastic substitution between intermediates and factors using Cobb‒Douglas models, this is often improbable since the input‒output structure may change due to the shocks, which would be observed as nonlinearities in macroeconomic impacts on sectoral shocks. Additionally, considering regionally located sectors such as the agriculture and food-processing industries, the propagation of sectoral shocks can be interregionally correlated. This study employs the network linkage model to empirically verify the interaction of agro-food sectoral shocks in regional outcomes. By comparing the network effects influencing the national economy and regional economy, the superiority of considering intraregional networks among agro-food sectors is empirically verified; thus, productivity shocks arising in these industries propagate more intensively within their own region.