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1. What are the differences between national income expenditure and regional

income expenditure?

The first different is import. The regional imports is broader than national imports.

The income term in finding the imports ( Mr = M + mYr ) is disposable income after

tax where tax, t is regional tax rate. The equation also will be like this

Yr = C + Ir + Gr + Xr + M

1- (c-m) (1-t)

The way to find multiplier also will differ from national income

kr = 1

1- (c-m) (1-t)

The second different is the investment. Investment is part dependent on regional

income rather than national is not primary dependent. The reason is local business

confidence and the willingness of banks to provide loans to local business in order to

improve flows of information between firm and customers and also improve the

efficiency of local labour market. (through agglomeration externalities).

The last different is in government expenditure. In national income, government

expenditure is considered as exogenous (political issues). In regional, it is part

dependent. It is inversely relationship between government expenditure and level of

local regional income. In example low-income areas are eligible for public subsidies

from regional policy funds. The high income will receive less public expenditure. The

equation for regional income expenditure is

Gr = G + gYr (1-t)

And the equation regional income expenditure is

Yr = C + Ir + Gr + Xr - M

1- (c-m) (1-t)

And the multiplier function is

kr = 1

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1- [(c-m) + (i- g)] (1-t)

The different between equation the addition (i-g), marginal propensity to invest, reflects the

total private local investment flow associated with local income, net of public expenditure

withdrawals associated associate with increasing regional income

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2. How can a Keynesian regional multiplier framework be made consistent with an

economic base model?

Even economic base multiplier and Keynesian multiplier model are different conceptually

from each other but both of them still can be made compatible from each other. In order to

see this, we have to separate the income expenditure multiplier

Yr = __C+I+G+Xr-M_ _

1-[(c-m)+(i-g) ](1-t) into an export base multiplier model

Yr = Xr + C + I + G M__1-[(c-m)+(i-g) ](1-t) 1-[(c-m)+(i-g)](1-t) which is quite similar to the economic

base model T= _No_ + _B_

1-n 1 1-n 1. In the first term on the right-hand-side of the export

base multiplier, the equation only represent the export activity only, while the second term on

the right-hand-side represent the other local activities only. This is quite similar to the

economic base model where the first term in the right-hand-side represent the non-basicemployment activity that consist of the economic condition interval to the local economy,

while, the second term of the right-hand-side in the economic base model represent the basic

employment activity that consist of the economic condition external to the local economy or

demand outside of the local economy. Next, if we consider the changes in regional exports

X r the corresponding change in regional income Y r which can be represented as

Yr = Xr_______

1-[(c-m)+(i-g) ](1-t) , is looked to be quite equivalent to the economic base model,where, changes in the employment level in the basic sector, B, will affect the total regional

employment, T which can be represented in the equation

T = 1_ B

1-n . In the equation [(c-m)+(i-g)](1-t), it shows the income expenditure which

are quite similar to the coefficient n that reflect the expenditure in the basic-non-basic sector.

C + I + G M equation in the Keynesian regional multiplier model represent the elements

that will give the level of regional income which independent or without the regional export.

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