A new approach to the hypothetical extraction method: regional full extraction

This paper proposes a generalisation of the regional extraction method used by Dietzenbacher at el. [(1993). The regional extraction method: EC input-output comparisons. Economic System Research, 5(2), 185-206. ]. The production system represented by an input-output table is broken down into three flow matrices: intermediate input, final demand, and value added. The approach of Dietzenbacher et al. [(1993). focuses on the input matrix to obtain both the backward and forward dependencies. The present paper, offers an alternative approach includes the final demand matrix to calculate the backward dependencies, while the value-added matrix is included for the forward dependencies. These two approaches are then compared by applying them to the empirical data based on the EUREGIO database. The results indicate that the Dietzenbacher et al. approach underestimates the dependencies, and the difference between these two approaches could lead to a different ranking of the dependence of the regions.