Entropy, information theory and spatial input-output analysis

Abstract: Interindustry transactions recorded at a macro level are simply summations of commodity shipment decisions taken at a micro level. The resulting statistical problem is to obtain minimally biased estimates of commodity flow distributions at the disaggregated level, given various forms of aggregated information. This study demonstrates the application of the entropy-maximizing paradigm in its traditional form, together with recent adaptations emerging from information theory, to the area of spatial and non-spatial input-output analysis. A clear distinction between the behavioural and statistical aspects of entropy modelling is suggested. The discussion of non-spatial input-output analysis emphasizes the rectangular and dynamic extensions of Leontief's original model, and also outlines a scheme for simple aggregation, based on a criterion of minimum loss of information. In the chapters on spatial analysis, three complementary approaches to the estimation of interregional flows are proposed. Since the static formulations cannot provide an accurate picture of the gross interregional flows between any two sectors, Leontief's dynamic framework is adapted to the problem. The study concludes by describing a hierarchical system of models to analyse feasible paths of economic development over space and time.