On the accuracy of gravity-RAS approaches used for inter-regional trade estimation: evidence using the 2005 inter-regional input–output table of Japan

Abstract

In contrast to international trade, it is still difficult to find regional trade statistics within a nation. Given that the gravity model continues to be very popular, we test two gravity-RAS approaches used for interregional trade estimation: a standard one and an extended version, which additionally estimates intra-regional flows. We assess the accuracy with the help of two measures and for different sectoral aggregation levels. For that, we use the survey-based 2005 interregional input–output table of Japan as a benchmark. Results show high overall accuracy levels for the standard approach, better than when using international data, albeit with heterogeneous errors for sectors and regions. We further find that the results of a multiregional input-output model are highly sensitive to the trade estimation approach and that errors slightly increase for increasing sectoral disaggregation levels. Results from an experiment based on a random number generator show how RAS influences results.