Theoretical and Operational Issues in Sub-regional Economic Modelling, Illustrated Through the Development and Application of the LINE Model

Regional economic models have traditionally focussed on the market for goods and services and have usually been input-output based, utilising large regional units. Sub-regional or local economic modelling has, on the other hand, traditionally been concerned with specific, isolated (and often urban) economic phenomena, such as labour markets, commuting, tourism and shopping. Theory and models linking the regional economy and activities at sub-regional level are weakly developed, even though the links between these two levels are fundamental in understanding basic mechanisms in the spatial economy at the sub-regional level and, therefore, ultimately also at the regional level. This article examines theoretically the nature of these links through the perspective of a recently developed disaggregated subregional general equilibrium economic model, LINE, and discusses related operational problems and strategies. A concrete application of the model to analyse the effects of changing transport costs and bridge tolls in Denmark on economic activity at sub-regional level is presented, illustrating the issues raised. (C) 2003 Elsevier B.V All rights reserved.