(extract from "In the Spirit of Miyazawa: Multipliers and the Metropolis")

In this paper I explore the transactions and Miyazawa style multipliers between the inhabitants of an inner-city neighborhood and their neighbors in the surrounding metropolitan region. For this I use a compact community accounting matrix (CAM) based on the detailed accounts presented "Community Accounting in an Inner-city Neighborhood" (Cole, 1994). Because there are substantial variations in economy and demography within and across the neighborhoods and the suburbs, we should expect an exploration of inter-relational - inter-regional multipliers to be instructive. In the spirit of Miyazawa, I use the CAM as a sketch pad to explore several issues. This includes feedback via inter-regional links, mutual dependence, local economic networks, the steady state growth properties of local economies, and the contribution of the informal sector (shown shaded) to neighborhood multipliers. The conventional wisdom is that neighborhood multipliers are too small to play a useful role in inner-city redevelopment. The following calculation challenges this notion and show that informal economic activities by households can make a sizable contribution to neighborhood multipliers.. This is important because, in the 1990's, there has been a revival of interest in how neighborhoods can be rebuilt through a variety of territorial strategies, most of which are based on import-substitution and local downstream synergies (e.g. Taylor, 1990).

Community Accounting Matrix (amounts in $million).

The inter-relational multipliers are calculated using the lagged Leontief inverse method given in Cole (1987), which is adapted to show the contribution of individual accounts and transactions as a variant of structural decomposition analysis. This permits a rather simple calculation of time varying multipliers and their decomposition to show the contribution of specific spatial linkages and classes of transaction.

The household multipliers for the neighborhoods and the metropolitan region exhibit an asymmetry. For households, the self-multipliers are 1.48 and 1.99 respectively, and the inter-relational multipliers are 0.91 and 0.18. This indicates that there is a rather strong trickle up effect from the neighborhood to the metropolitan region. This affirms that income transfers from the rich to the poor can provide a boost to an economy. In the present case, the impact on total household income of a one dollar transfer to neighborhood households is $2.39, compared to total loss of $2.17 from a unit tax on metropolitan households.

The disparity in multipliers contributes to the spiral of decline promoted by the decades-long shift of economic activity from the city to the suburbs, as well as the shift from manufacturing to services. This leads to the notion that growth leads to "trickle up", rather than the vaunted "trickle down".

Informal activity makes a significant contribution to the household multipliers. In absence of recycling via the informal sector, the self-and inter-relational household multipliers decrease considerably. For the neighborhood and the metro-region the self-multipliers now are 1.10 and 1.64 respectively, and the inter-relational multipliers are 0.66 and 0.05.

This calculation shows that it is rather important to account for both the size and the structure of the informal sector in input-output tables, despite the empirical difficulties of measurement. It challenges the common interpretation of welfare policy in the inner city neighborhoods that welfare payments will have rather little downstream effect on the dynamics of an inner-city neighborhood. Indeed, if the neighborhood household multiplier really is as high as 1.48, then any direct assistance to households can have a useful downstream impact on households, even when it does little to stimulate the formal economy.

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