Canadian Political Science Association Conference on Statistics 1964: Papers on Regional Statistical Studies 9781487583149

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Canadian Political Science Association

CONFERENCE ON STATISTICS 1964

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Canadian Political Science Association Conference on Statistics 1964 Prince of Wales College, Charlottetown, P.E.I.

PAPERS

ON REGIONAL STATISTICAL STUDIES edited by SYLVIA OSTRY and T. K. RYMES PUBLISHED FOR THE CANADIAN POLmCAL SCIENCE ASSOCIATION BY UNIVERSITY OF TORONTO PRESS

©

University of Toronto Press 1966 Printed in Canada Reprinted in 2018 ISBN 978-1-4875-8186-2 (paper)

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PROGRAM OF THE CONFERENCE Saturday 13 June D. W. Slater, Queen's University, chairman Urban Transportation Studies W . L. Garrison, Northwestern University Urban Shadow, Urban Theory, and Regional Planning Leonard O. Gertler, formerly H. G. Acres and Company, now University of Waterloo Discussants : R. I. Wolfe, Department of Highways, Ontario A. J. Dakin, University of Toronto

J. K. Mann, Dominion Bureau of Statistics, chairman Regional Statistics and Their Uses : A Geographical Viewpoint R. S. Thoman and G. McGrath, Queen's University Developing Regional Statistics for Policy Purposes : The Prediction of Trade Centre Viability in Saskatchewan Gerald Hodge, University of Toronto Multivariate Socio-economic Regionalization: A Pilot Study in Central Canada D. Michael Ray and Brian J. L. Berry, University of Chicago Major discussant: z. W. Sametz, Department of Citizenship and Immigration Sunday 14 June J. A. Sawyer, University of Toronto, chairman Problems of Regional, Industrial, and Occupational Mobility in Relation to Disarmament G . Rosenbluth, University of British Columbia Inter-Industry Study of the Economy of the Atlantic Provinces Kari Levitt, McGill University Discussants : P.R. Pitts, Dominion Bureau of Statistics S. J. May, Department of Trade and Commerce

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A.G. Green, Queen's University, chairman The Changing Economic Structure of the Atlantic Region and the Impact of this Change on Manpower Utilization F. J. Doucet, Atlantic Development Board Some Quantitative Aspects of Retardation in New Brunswick A. L. Levine, University of New Brunswick Discussant: Z. Linkletter, Province of Nova Scotia

J. H. Dales, University of Toronto, chairman Effects of Regional Differences in Taxes and Transportation Charges on Automobile Consumption F. H. Hanna, Duke University The Localization of Manufacturing Activity in Central Canada,

1870-1890

E.J. Chambers, University of Washington, and G. Bertram, Los Angeles State College Discussants: H. E. English, Canadian Trade Committee K. A . H. Buckley, University of Saskatchewan

Hon. Leo Rossiter, Department of Industry, Natural Resources, and Fisheries, Prince Edward Island, chairman Development and Use of Statistical Data for Economic Analysis on a Provincial and Subprovincial Level O. M. Schnick, Department of Economic and Development, Ontario La Statistique regionale et les zones d 'influence Y. de Jocas, Bureau of Statistics, Quebec Le Bureau de Statistique de Quebec: son rOle et son orientation R. Gagne, Bureau of Statistics, Quebec Major discussant : S. Merritt, Department of Industry and Commerce, Manitoba

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PREFACE The Canadian Political Science Association's 1964 Conference on Statistics was held in Charlottetown on June 13 and 14. The general theme of the Conference was Regional Statistical Studies. Twelve papers were presented and of these nine are included in this volume. The Conference Committee is much indebted to the provinces of Nova Scotia, Saskatchewan , Quebec, Ontario, Manitoba, and Alberta and to the Central Mortgage and Housing Corporation for their generous financial support of the Conference. The Dominion Bureau of Statistics was kind enough to make available their typing, duplication, and mailing services, thereby greatly contributing to the success of the Conference. To authors, discussant, and chairmen of all papers and sessions, the Committee wishes to express its gratitude. Professor Gilles Paquet at Carleton University helped greatly in the preparation of two-language summaries of the various papers presented at the Conference . Finally this volume has been published with the help of a grant from the Social Science Research Council of Canada, using funds provided by the Canada Council, and a grant from the Department of Industry. Sylvia Ostry T . K. Rymes

April 1966

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CONTENTS Program

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Preface

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Urban Transportation Studies, by W. L. Garrison

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Urban Shadow, Urban Theory, and Regional Planning, by Leonard O. Gertler

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Regional Statistics and Their Uses: A Geographical Viewpoint, by R. S. Thoman and G. McGrath

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Developing Regional Statistics for Policy Purposes: The Prediction of Trade Centre Viability in Saskatchewan, by Gerald Hodge

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Multivariate Socio-economic Regionalization : A Pilot Study in Central Canada, by D . Michael Ray and Brian J. L. Berry

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Comment on the last three papers by

z. W.

Sametz

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Problems of Regional, Industrial, and Occupational Mobility in Relation to Disarmament, by G. Rosenbluth

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Inter-Industry Study of the Economy of the Atlantic Provinces, by Kari Levitt

151

Comment by G. Rosenbluth

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Effects of Regional Differences in Taxes and Transportation Charges on Automobile Consumption, by F. H. Hanna

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The Localization of Manufacturing Activity in Central Canada, 187 0-1890, by E. J. Chambers and G. Bertram

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URBAN TRANSPORTATION STUDIES W. L. Garrison The urban transportation study and the transportation problems to which it is responsive are direct consequences of our increased affluence and our increased aspirations. We are less willing to tolerate congestion and the lack of comfort and safety in urban transportation, just as we are less willing to tolerate slums, slum education, and other features of urban living that we now think of as obnoxious and unnecessary. In the transportation instance, our greater affluence inclines us to use the automobile instead of transit, to travel more frequently, and to travel farther. The latter is also related to the increased desire of many of us to live in suburbs, where we can choose the quality and mix of municipal services and where we can consume more space. Urban transportation study is placing new demands upon statistical agencies of government, upon other organizations, and upon individuals concerned with urban data systems and with research into urban problems. Studies require detailed information on aspects of urban growth and development and they require the ability to model relationships among entities in the development process. A distinctive feature is the disaggregation of relationships and of the requisite statistical data. Many of the traditional activities of statistical agencies have been geared to production of summary "statistics" for use by national policy-makers and much effort in model construction has been at a commensurate level. What is now required are urban statistical data systems that can produce and manage a variety of disaggregated data. Of equal importance is the ability to model those processes for which these data are the desiderata. Additional interesting aspects of urban transportation studies are: 1. The studies involve a number of kinds of research and planning decisions. Public action includes identifying problems, developing the research plan, implementing research on the data collected by means of analysis and the making of plans, and, finally, choosing what is to be done. Public organizations involved range from local to national. In these and other respects, transportation studies provide interesting instances of political, planning, and engineering decisions in relation to action programs of data collection and evaluation, decision-making, and policy formation. 2. The urban transportation study is causing an interaction between social scientists and engineers, as was pointed out above. In the past such relationships were limited largely to those of psychologists and industrial engineers concerned with man-machine relationships. In the transportation study, we are concerned with relationships between physical systems and social systems. 3. Expansion of the transportation system is undertaken to meet certain kinds of demands. Determining the distribution of public and private costs and gains from transportation investment requires unravelling many of the relationships of modern urban life. 1 Papers on Regional Statistical Studies Printed in Canada

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4. At certain times during the day portions of the transportation system are congested; capacity is in short supply. An alternative to investment in new facilities is the rationing of existing capacity through pricing. A set of interesting and somewhat parallel fiscal questions are raised by the large requirements for investment in urban transportation. Solutions are needed for these economic and fiscal problems. 5. Transportation investment affects the character of urban growth and development. Because of the impact of transportation on urban development patterns, investment in transportation affects the magnitude, place, and timing of other public investments. It also makes a large impact on private investment. 6. These are studies for which new personnel must be found and new research, planning, and action agencies created. A new public activity must be developed within the span of a few years. In spite of the many interesting subjects that this list may suggest, the objectives of the present paper are slim. The main objectives are simply to sketch some of the features of the studies and stress what seem to be some of the more important questions we should be asking about them. The former will be accomplished by presenting a fragmentary overview of these studies. The latter will be met by identified places where there seems to be need for work and where the returns from work will be great. The spirit is, "here it is, come on in, the water is fine. 11 There is much need for development of competence in transportation studies and there is plenty of room for many points of view and many kinds of talents. In the final section of the paper special attention is given to land use forecasting models. This will point up some major gaps in our abilities to model and study urban life and urban development processes. This section gives substance to some of the preceding material which is rather general.

I Urban transportation studies are by no means new, and the studies vary from city to city, of course, as well as from nation to nation. This variety constrains somewhat the generality with which statements about urban transportation studies can be made, and the generality of this paper is reduced somewhat more by my main reference to the situation in the United States. Needs for transportation studies and the studies are more widespread, of course. There are some twenty or so urban transportation studies in process in the United States and more are being formulated,(}) The chief stimulus of studies has been the need for increased investment in highway transportation. Some studies predate the freeway programs undertaken after the Second World War, but most of the

----Y. Including studies in Pittsburgh, Seattle, Philadelphia (Penn-Jersey),

Chicago, Tucson, Boston, Los Angeles, Buffalo and New York. A iood comparati_ve survey of a number of these studies is R. M. Zettel and R.R. Carll, Summary Review of Major Metropolitan Area Transportation Studies in the United States". (Institute of Traffic and Transportation Engineering, University of California, Berkeley, 1962). Recent issues of Traffic Quarterly (Eno Foundation for Highway Traffic Control, Inc., Saugatuck, Conn.) have contained a number of articles on study topics. . My knowledge of Canadian materials is limited, although I have examined some excellent material from the Ontario Department of Highways.

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studies were started in response to the Interstate Highway Program. Plans for the urban extensions of the Interstate Highway System, created by the Highway Act of 1956, specified the general orientation of those freeways within metropolitan areas, and begged planning questions of exact locations, as well as questions of locations and capacities of complementary routes. In some areas, interest in mass transit has been great and emphasis on the highways has excited a counter -interest in transit. There has been continuing pressure at the federal level for the appropriate planning of urban transportation facilities including articulation with general plans, and this has manifested itself in several ways. For one, highway planning survey funds and other funds< 2>which are largely federal in origin are available to support planning activities. This overcomes many of funding obstacles to planning at the metropolitan and local levels. The fifty states through their state highway departments or similar organizations act as agents of the Bureau of Public Roads in carrying out several highway construction programs. The states traditionally have had large highway engineering and traffic programs and consequently have cadres of professionals in these areas. In contrast, few cities have had transportation specialists and city engineering departments have not acted in consort with the federal goverrunent in transportation matters. In many of the large metropolitan areas, planning has been but little related to transportation. Given these funding, personnel, and administrative arrangements, it is not surprising that the states have been the strong agents in the urban transportation study and planning process. As would also be expected, engineers have played a strong role in carrying out the studies, though professional planners have also played strong roles. Studies typically operate under policy and other committees representing the units of goverrunent concerned, say, by the state, the county, and the cities involved., and the importance of this cannot be overemphasized, Emphasis on the systems analysis approach may be contrasted with attempts to solve problems using emphasis on partial analysis. Most of the so-called engineering economy studies are of the latter category. A benefit-cost format might be used to ask if construction of a toll bridge would be warranted. This would be an example of an engineering economy investigation at the partial level. Partial analysis will certainly continue to have a role in urban analysis, but certainly considering transportation questions as systems questions will have a salutary effect upon analysis. But just the use of systems analysis does not guarantee the efficacy of the study. Ackof:t'< 6) has contrasted the roles of controllable and uncontrollable variables in urban systems using the model: Uj = f(Pij• Ckj)

i=l, •.• , n; k=l, ... , m

U·, the utility obtained from the j-th activity, is a function of n vfriables under the planner 1s control, the Pij 's, and it is. a function of m other variables which are not under his control the Ckj 1 s. Even though systems analysis replaces this simple causal chain with a conceptual analysis device in which there may be feedbacks, the system may not be controllable in terms of the public policy decisions, i.e., selecting levels of the Pij variables. This is an important enough idea that it should be stated another way. The task in urban transportation studies is to find ways to reach certain goals, albeit crudely specified. It is an important step forward to realize that we must investigate complex systems in connection with identifying and reaching these goals. Yet simply indentifying the system and goals may not be enough. It is still questionable whether or not the range of action available to planners, and thus the range of choices by political decision-makers, can materially influence the levels of goals achievable. I shall now discuss some data management and forecasting problems and then return to some of the complex questions in the consideration of the city as a system, Requirements for geographical detail compound the data management problem. The urban area is divided into cells and a desire for detail boosts the number of cells rather quickly. Analysis of a metropolitan area twenty by ten miles and divided into cells each a square mile in size would require the analysis of 200 cells. A variety of statistical problems are encountered. Certain statis---5. See Britton Harris, "Some Problems in the Theory of Intra-Urban Location," Operations Research, 9 (1961), pp. 696-721. . " . . 6 . R. L. Ackoff, "Toward Quantitative Evaluation of Urban Services, m Pubhc Expenditure Decisions in the Urban Community, H.G. Schaller, ed . (Resources Tor"tne Future, 1963).

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tics, such as means, may be desired for each of the cells. A formidable sampling job is required simply because of the larg_e number of cells. Because cells may differ in composition, different sampling strategies may be required for each cell. Another matter compounding the situation is the desire for data on certain betweencell relations. Travel information is desired on a between-cell basis and other considerations of the relationships of one part of the urban area to another are on a between-cell basis. A large number of cells means a large nwnber of cell pairs. In the twentyby-ten-mile area used as an example, some 39,800 between-cell relationships are possible. While sampling for statistics descriptive of between-cell relationships might pose no theoretical obstacles, one can certainly appreciate the practical problems of dealing with such a large number of relationships. A remark should be made with respect to aggregation problems. In travel and land use relations the main behavioural entities are households. Households make choices with respect to disposal of income and generation of traffic. Other entities that generate traffic are firms, urban government activities, and so forth. But at practical levels one must work with cells. Properties of, say, the households within a cell are imputed to that cell and the cell is the unit on which computations are made. Persons who have worked with spatial statistics are well aware of biases introduced because of such aggregations. Urban growth depends upon demographic and economic growth, and forecasts are made of growth. While dependence is recognized among these three elements, recognition is mostly one way. Demographic forecasts are made. Economic forecasts are based upon the demographic forecasts as well as upon knowledge about the expansion of the economy. Forecasting geographical detail of urban growth follows the demographic and economic forecasts. The facts that the level of the economy might affect changes in demographic characteristics and that the nature of urban growth and development might effect economic growth are not considered. Also, there is a tendency to behave as if forecasts will indeed come true, and to firm up plans based upon those expectations. There seems to be little or no recognition of the rather obvious point that studies and plans ought to take account of the fact that they may be based upon wrong information. Following some remarks on factors to be considered in urban systems analysis, I shall return to forecasting in the instance of land use forecasts. The urban transportation study is divided into several welldefined analysis activities, such as forecasting, data management, trial placement of transportation capacity, traffic assignment, and land use· assignment and a systematic way of linking the parts of the analysis is required. A model, diagram, or chart of the analysis is established that links the separate activities into an articulated study and decision and action device, At an informal level, this linkage can be described simply as the steps in the analysis, But it is also an identification of feedbacks and interrelationships that describe the entire system of urban growth and development, There is a certain correspondence between the structure of the research and the model of the urban system.

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One feature of the articulation of the parts of the analysis is the necessity for treating leads and lags. What comes first in urban growth and development, where are the feedbacks? One can point to a variety of possible sequences: freeway development, light industry development, and subsequent development of residential and commercial facilities, Another sequence is the sprawl of residences into the countryside, followed by commercial establishments, then followed by transportation developments to service these new land developments. Still another sequence is the development of express-ways or transit routes, followed by residential land use and then commercial and industrial development, There may be differences from time to time in land use changes. Industrial growth from sector to sector varies from time to time as does the demand for residential housing and the mix of household types demanding housing. Housing demand is not always at the periphery of the city, as it witnessed by the continuing expansion of centrally located apartment type facilities. The leading agent in land development is sometimes accessibility, but it can also be availability of sewage facilities, water supply, schools, changes in style of living, and changes in government regulations and policies, In spite of other possibilities, the structures of most of the studies reveal the implicit assumption that transportation follows urban expansion. Expected land use is forecast without reference to the placement of transportation facilities, and the generation of traffic among cells is also forecast without reference to the availability of transportation. Also, the structure of transportation studies mainly incorporate notions of short-run relationships between transportation, land use, and the utilization of facilities. It is assumed that a new transportation route will serve simply to divert traffic from other routes. It is not recognized that improved transportation might cause an increase in consumption. Improved transportation service might occasion more travel in the form of more frequent trips. In the long run, however, increased use of transportation might be achieved by taking longer trips.< 7) The home owner may relocate his residence farther in the suburbs, or the operator of a commercial or industrial distribution system may centralize his operation at places that serve larger tributary areas. Economies of scale within the plant or warehouse would be important inducements in the latter case and an opportunity to enjoy increased residential space would be an important element in the former case. A final matter in this section is to return again to the question of reaching goals through urban transportation research and consequent investment and/ or policy decisions. My concern is largely with the relationships between the control of the expansion of the transportation system and the control of other factors in the expansion of the city. The centralized transportation study agency and the centralized control of transportation investment are quite different from the decentralized controls of certain other public agencies, especially those that control land utilization. Furthermore, many decisions with respect to land uses are made in the private sector and are but little influenced by public policy such as zoning, For many suburban towns and villages, goals to be achieved through land

---7. This point has been stressed especially by Lowdon Wingo, Jr .

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use controls are local in character. These goals reflect local demands for types of neighbourhoods and the levels and kinds of municipal services to be available. Also, they reflect local willingness and ability to pay. Goals of the metropolitan area transportation activity are less sensitive to small area differences. Geographically, objectives are more global - local desires may be sacrificed in an effort to achieve some over-all level of service . Suboptimization is still present, of course, because of the constraining goals to matters having to do rather closely with transportation. V The discussion will now centre upon models used to forecast land uses within small areas. Several examples will be cited in order to provide substantive examples of some of the problems that are encountered within studies. These models will illustrate in a more penetrating way some of the points made earlier and they will provide some new materials. Several studies have emphasized land use forecasting devices that attempt to incorporate essential features of consumer choice in the site selection process. The selection of sites for particular uses is the way in which urban land uses change, of course. In the Penn-Jersey study the site selection process is contained within a linear programming format.< 8) The site selectors or locators are households that are seeking housing for one reason or another. The objective function maximizes the value of sites, subject to conditions that all locators find housing and that no land availability constraints are violated. Execution of the model requires information on the availability and properties of housing at different locations, and, on the demand side, knowledge of the number of persons seeking new residential space, their resources, and their preferences. The latter information is to be developed from studies of census data specially obtained for the study. Households are assigned to locations by the model at five-year intervals, when there is also assignment of manufacturing plants and service facilities. Accessibility is one of the properties held by sites and articulation of the household location activity to developments of transportation is through changing measures of accessibility following revision of the capacity of the transportation system. Another model that treats locators was proposed in the RAND study .< 9) Levels of four variables are determined by the model consumption of residential space, automobile ownership, type of mode used in the journey to work, and the length of the journey to work. Independent variables include, among others - income, age, number of workers in the household, and sex. The unit of reference is the i-th worker in the j-th working place (area). In a study using Detroit data, it was necessary to aggregate properties of employees and study the 11 average 11 worker in ----S. The model is discussed in J.D. Herbert and B. Stevens, "A Model for the

Distribution of Residential Activity in Urban Areas•, Journal of Regional Science, 1 ( 1959), pp. 75-83 and in Britton Harris, Penn-Jersey d1ScuSS1on paper number 20, and •Experiments in the Projection of Transportation and Land Use", Traffic Quarterly, 16 (1962), pp. 305-19. 9. J. F. Kain, "A Multiple Equation Model of Household Locational and Tripmaking Behavior", RAND Memorandum RM-3086-FF, 1962.

10 the j-th area. Other difficulties arose in the definition of variables. For example, for consumption of residential space it was necessary to use measures of the percentage of housing in single-family dwelling, the percentage in multiple family, and the remainder. The model was basically a four-equation model, one equation for each dependent variable. Use of surrogates for variables required, hO\vever, that nine equations be estimated. This model was developed as part of a broad RAND Corporation urban transportation study and it was designed to answer some of the central questions with respect to changes in residential land use and transportation within cities. For example, the impact of a 10 per cent increase in income on the length of the journey to work was investigated. It was found that the increase decreased the length of the journey to work by approximately 2 per cent, one-half of which was direct effect and one-half of which was indirect effect. The indirect effect arose because of the arrangement of dependent and independent variables in the equations. It was first necessary to determine the effect of change in income on consumption of residential space. Use of residential space was among those variables which affected the choice of mode and automobile ownership, and all were pertinent to the length of the journey to work. Determination of the new length of journey to work required investigating the direct income effect upon the journey to work and indirect effects through variables such as net residential density . Of special interest and not mentioned until now was the use of a rent proxy as an independent variable. In the instance of the Detroit data, this rent proxy was a gradient from the central business district, determined by subtracting distance from the centre of the city from 11. 5, but with a special rule that no place had a rent proxy less than • 5. This rent proxy is of special interest because an examination of the partial correlation coefficients indicates that it tended to be the more important of the independent variables, The Penn-Jersey study and the RAND study, then, have in common an attention to units that can be thought of as selecting residential space and a dependence on rent as a determinant of residential site selection. Consideration of location rent is an attractive idea because rent is consistent with some of the theory of urban morphology and it places the choice of residential location clearly within a market framework.(lO) A question is that of the degree of reliance that is warranted. How important in the location process are variations in rent measured along gradients from downtown or measured using work-place reference points? There can be no doubt that there are considerable differences in location rents from place to place in cities. A major factor is that of zoning. Within residential areas, factors such as prestige and proximity to parks and schools affect the rent surface. As a consequence spatial patterns of rents are complex, Some data from Chicago indicate that rents for residential land actually increase the farther one is from the centre of the city, ~ - The notion of rent has played an important role in urban land economics . For examples of recent writing see Lowdon Wingo, Jr . , Transjortation and Urban Land (Resources for the Future, 1961) and William Alonso, " Theory of the Orban Market", Proceedings, Regional Science Association, 6 (1960), pp . 149-157 and Location and Land Use (Harvard University Press, 1964).

rm

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when a cross-section east and west is taken of the city.< 11) Data from other studies have indicated only small variations in location rents related to trave1.< 12l In the RAND study the rent proxy (distance from downtown) tended to be the most important independent variable. An explanation is that the locati on rent proxy might also be a proxy for many other factors, such as age of residential district and prestige. Both of these factors tend to change systematically with distance from the centre of the city. Size of lot is another factor that changes systematically with distance from the centre of the city. But it may also be suggested that these systematic variations are an outcome of the location rent factor. A brief discussion of the model used in the Baltimore area will reveal some other problems of empirical work.< 13> In the Baltimore study a series of regression equation was used to allocate changes in population and changes in employment to cells. Models were calibrated using census data from the last ten to fifteen years. An equation was fitted to within-city changes in population and a separate equation was fitted to the outside-of-city population changes. Equations were estimated for changes in employment in manufacturing, retail service, and government activities. Independent variables included measures of the accessibility of cells to other cells, land availability, income level, transportation service, and racial composition. Independent variables varied from equation to equation. Results of the regression equations were in that range ordinarily characterized as "good". Total correlation coefficients lay generally in the range between . 8 and . 95. It is not known how good the estimating equations have to be in order to provide acceptable forecasts. So evaluations of correlation or goodness of fit represent impressions rather than statements with respect to the solution of a forecasting problem. Another question is that of the errors introduced by aggregation. The equations referred to "cells" and there is ample information to indicate that relationships computed on between-cell data may be quite different from the relationships of actual micro units. Still another problem is that of the use of cross-section estimates. Are cells homogeneous with respect to the processes of change? The final question to be raised is with respect to the independence of the independent variables and the direction of the relationships postulated by the regression equations . One could suggest that changes in employment, population, income level, land availability, property value, and the like are generated simultaneously by growth mechanisms operating within the city. In other words, dependence is other than that shown in the equations.

--n.

See G. C. Olcott's annual Blue Book of Land Values for Chicago. 12. There is no doubt that the rent surface vanes withm cities and that it plays a role in the choice of sites. What is questioned here is the extent of variability related to simple distance-to-downtown measures or to other simple travel-accessibility measures . Cf. W. L. Garrison, Benefits of Rural Roads to Rural Po erty, Washington State Council for Highway Research, 1956 and the studies by . F. Marble reported in W. L. Ganison et al, Studies of Highway Development and Geosraphic (University of Washington Press, 1959). Cha . T . R. Lakshamanan and M. E. Fry, • An Approach to the Analysis of IntraUrban Location', paper presented at the meetings of the Southeast Section, Regional Science Association, 1963.

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ff

12 Another set of studies will be mentioned briefly in order to point up other questions in modelling and forecasting. Reference now is to the model developed at the Pittsburgh Economic Study< 14) and the model developed for use in the Boston study.0 5) Central to these models are equations containing computations of "potential". In the model developed at Pittsburgh, concern is with the distribution of households and with the size and distribution of firms which supply goods and services to those households as well as to firms located by exogenous considerations. There are nine relations in the model and certain constraints. Relations include consideration of such matters as size and number of firms and requirements that all households be located. The key distributional relations are in "potential" form.ints, which should be placed at the centre of gravity of the geographical distribution, but frequently are located at the centre of the area of the enumeration unit. The range and character of the statistical distribution is then analysed, and class intervals selected which will satisfy the needs of the geographer. Isopleths to represent the class limits are drawn between control points on the basis of linear arithmetic interpolation. The areas between successive isopleths may be coloured, or shaded in monochrome, according to some accepted scheme of gradation, in order to differentiate clearly between the classes. Alternatively the statistical surface£ 34 > indicated by the isopleths may be transformed into a planimetrically correct, but more "visual" impression, through the use of inclined plane traces and plastic shading. consistent with present-day usage. An isarithm is any trace of the intersection of a horizontal plane with a statistical surface . It is thus the generic term; it may also be called an isoline or isogram. lsarithms showing the distribution of actual or derived values that can occur at points (in which there is relatively little error) are called isometric lines. • •• often they are given instead individual names which indicate their functions, such as isotherm (equal temperature) or isobar ( equal pressure). Those isarithms displaying the undulations of statistical surfaces that are based upon values that cannot exist at points, and which are likely to be subject to a somewhat larger inherent error of position, are commonly called isopleths." 31. Monkhouse and Wilkinson, Maps and Dia,ams, p. 188. 32, J.R. Mackay, "Geographic canograpliy,Canadian Geographer, vol. 4, 1954, p. 12. 33, David I. Blumenstock, "The Reliability Factor in the Drawing of Isarithms," Annals of the Association of American Geographers, vol. 43 , 1953, pp. 289-304; George F. Jenks, "Generalization in Statistical Mapping, " Annals of the Association of American Geographers, vol. 53, 1963, pp. 15-26; .r:,r.Mackay, "some Problems and Techniques m Isopleth Mapping, " Economic Geography, vol. 27, 1951, pp. 1-9; idem, "The Alternative Choice m Isopleth Interpolation," Professional Geo~pher, vol. 5. 1953, pp. 2-4; idem. "An Analysis oflsopleth-aioroplethass Intervals," Economic Geof.tpny, vol. 31, 1955, pp. 71-81; Robinson, Elements of Canor,ar.hy, pp. 179- ; idem . "The Cartographic Representation of the Stausucal Surace," International Yearbook of Cartoivar,hy, vol. 1, 1961, pp. 53-61; C. F. Schmid and E.H. MacConneli, "Basic Prob ems, Techniques and Theory of Isopleth Mapping," Journal of the American Statistical Association, vol. 50, 1955, pp . 220-39. 34. The spatial distribution of a variable will vary with the intensity recorded at each sample point or within each enumeration area, relative to a selected datum plane. The statistical surface is formed by joining the points or areas of differing intensity with continuous slopes or steps . Whatever means is employed, the form of the statistical surface must be a conceptual construct, the counterpart of which exists in reality as undulations in the terrain .

42 The map serves as a means of communication, and makes possible an examination of statistical trends in their geographical, i, e. spatial, context. The statistical surface portrayed by the isopleth map can be conceived as having real volume, the variations in which will reflect the interactance between a number of physical and human factors. Precisely which factors, and the geographical extent of their influence, are questions relevant to the delimitation of the region. The common approach has been to postulate those variables likely to be significant, based on personal knowledge of the study area or secondary sources of information, and to map each variable if data is available. Then follows a process of visual correlation, the map of the variable to be explained being compared with maps of the supposed contributory variables. The comparison may take the form of two distributions being mapped together, the colour of the isopleths serving to distinguish between the variables. However there are technical and visual problems inherent in this method. More frequently the variables will be mapped separately, and either superimposed over a light table to facilitate direct comparison, or compared visually side by side. This technique has been much used in research investigations, to which the professional literature is a testimony. It is interesting to note that it was used to marshal evidence to be presented to a Royal Commission, the technique being known as "sieving out. 11( 3 5) That the method has been widely used does not reveal its effectiveness. A number of important statistical and technical problems in isopleth mapping have been demonstrated, which can, of course, be considered thoroughly during the planning and production of the individual isopleth map. Additionally there are visual problems which make the interpretation of such a device a subjective judgment on the part of the user, As with all visual compositions the subject may be communicated to each individual in a different way. There is no certainty that the patterns on the map, which represent the spatial variations of the feature, will communicate the same meaning to two observers. One might then consider whether this could be related to the training and experience of the observer. Similarly the degree of correlation between two variables may well have bearing upon the ease with which the patterns representing the spatial extent of these variables may be associated. This complex situation has been examined in a recent study,< 3 6) ---35. E.G. R. Taylor et al., "Discussions on the Geographical Distribution of Industry," Geogra*hical Journal, vol. 92, no. 1, 1938, pp. 22-39. Seven-

teen maps of Englan and Wales were presented to illustrate those factors relevant to a discussion of the geographical distribution of industry. The final map represents the "sieving out, " i.e., the rejection, of areas unsuitable for the location of industry. The submission prepared by a Committee of the Royal Geographical Society at the request of the Royal Commission is presented in "Memorandum on the Geographical Factors Relevant to the Location of Industry," Geographical Journal, vol. 92, no. 1, 1938, pp. 499-526. 36. Harold H. McCarty and Neil E. Salisbury, Visual Com~arison of Isogleth Maps as a Means of Determining Correlations Between Spana ly D1Str1buted henomena, Department of Geography, State University of Iowa, Monograph no. 3, 1961, pp. vii and 81. The comprehensive series of tests indicate that visual comparison of maps illustrating high positive correlation between selected variables is more successful than with lower orders of positive or negative correlation. There is also evidence of competence being related to the level of training in geography and cartography. Four- and five-interval class systems are more successfully compared than other systems. Gradient systems of colouring isopleth

43 This suggests that the isopleth map is not a successful device for the visual determination of the correlation between two or more spatially-distributed variables. However the isopleth does have value when used in the comparison of maps portraying spatiallydistributed phenomena, which may suggest additional variables to be incorporated in some form of statistical testing. This penetrating study has reached to the very core of a regional analysis which has utilized graphic aids. It does not suggest in any way that the isopleth map is a valueless tool. Rather it points to two most important functions which this type of map may perform the locating of the phenomena, and the indication of factors which might not be suggested by the tabulation of statistical data. It has come at a time when the application of statistical analysis to the region has found widespread acceptance amongst geographers. This, and other cartographic investigations concerning the value of long-used graphic techniques, can only result in an improved means of analysing and delimiting the region. Reference has been made to area symbols when discussing the patterns used to accentuate the classes of isopleth maps. Such symbols are also used to indicate different amounts in areas, and are often applied to census enumeration units to give the choropleth map. The quantitative area symbol may show directly observed quantities, or derived ratios, percentages, or densities. Consequently. much of the foregoing discussion of the isopleth technique is applicable to the choropleth. The portrayal of infor mation by census tracts, on the assumption that the variable in question is uniformly distributed throughout each tract, may not offer a satisfactory solution. The dasytnetric map gives weight to the likely areas where there will be rapid changes in the distribution of the variable from one area of relative uniformity to another. However it is considered that only the isarithmic map is able to portray the form of the statistical surface as a continuous series of gradients, and to give the clearest indication of trends on this surface. For this reason the choropleth and dasymetric techniques will not be discussed further. Most other cartographic aids to regional analysis use one or other of the quantitative symbols, e.g. the isopleths of population potential/3 7) though the choropleth area symbol is also favoured, e.g., to show market potential.(38) In certain studies there may be no apparent requirement for a three-dimensional statistical surface, for example in the study of trends in the centres of population,(39) and in this case the qualitative point and line symbols are suitable. The emphasis is here placed upon significant regional mean, median, and convergence points, a graphical comparison of which may be a useful tool in regional analysis!40) But these points may maps to accentuate the panern of isopleths are favoured o,er spectral systems. The complexity of pattern exhibited by the individual isopleth maps directly affects competence in the assessment of association. 37 . J. Q. Stewart, "Empirical Mathematical Rules Concerning the Distribution ailel Equilibrium of Population," Geograa,hical Review, vol. 37, 1947, pp. 461-85; W. Warntz, "A Methodological Cons1 eration of some Geographic Aspects of the Newfoundland Referendum on Confederation with Canada , 1948, " canadian Geographer, vol. 6, 1955, pp. 39-49. --38. Donald Ken and Jacob Spelt, "Industrial Location in Southern Ontario, " Canadian Geo~pher, vol. 15, 1960, pp. 12-25. 39 . E~. Sv1atlovsky and W. C. Eells, "The Centographical Method and Regional Analysis," Geographical Review , vol. 27, 1937, pp . 240-54 . 40. John Fraser Hart, "central Tendency in Areal Distribution." Economic Geography, vol. 30, 1954, pp . 48-59.

44 ultimately be related to the distributions of which they are descriptive indicators, and the two-dimensional maps to locate specific centres may be supplemented by distributions of selected phenomena, or perhaps may indicate present or past changes in distribution through the application of area symbols . Cartography, Regional Statistics, and Automation The introduction of automation into cartography has required a considerable revaluation of many aspects of this diverse field, some of which have relevance to the geographer in his work of mapping and analysing the pattern of areal differentiation. It is yet too early to permit firm statements as to the likely outcome of current experimentation, for research and development is taking place in all areas of the cartographic field where automation might conceivably be introduced to improve techniques and hasten output. Nevertheless it is pertinent to review the situation in broad terms in the light of the geographer I s needs. The principal developments may be discussed under three main heads: the manipulation of data by computer techniques; the production of maps from a data-manipulation system; and the derivation of quantitative data from nonquantitative source material. The manipulation of data by computer techniques. It is evident that the computer has enabled scholars of many disciplines to undertake extensive research projects utilizing quantitative data, previously considered impracticable due to the lack of a high-speed data manipulation system . The increasing use of statistical analyses by the geographer may be considered complementary to the availability of such aids. Statistics on all aspects of our existence have been gathered and published for many years, though in rapidly increasing quantities as the acquisition of fundamental data has expanded. Automation has facilitated rapid sorting of statistical information by various means, the manipulation of data in the computer guided by programs written for the specific task, and the presentation of numerical information in a form specified by the investigator. This should not be interpreted as implying that, had computer facilities not become available, then the application of statistical techniques by the geographer might not have taken place . Geographical writing demonstrates quite clearly the introduction of such tools some considerable time before computer facilities became available to professional geographers.(41> Is the output of data from the computer to be the final step in the process which began with the gathering of statistical data by persons known or unknown? An extract from a recent paper by Robinson et al. stresses the interest of the geographer in uniting the statistical and cartographic processes of geographic analysis: "The geographer's interest in modern descriptive and analytical statistical methods is growing, especially with respect to their potential usefulness in regional analysis. Correlation techniques, including --4-1. Jan Burton, "The Quantitative Revolution and Theoretical Geography," Canadian Geographer, vol. 7, 1963, pp. 151-9. In this most stimulating review of the impact of the statistical approach upon geography and geographers, Burton indicates early suggestions for the use of statistical techniques within the discipline .

45 multiple correlation and regression, are particularly suited to aiding the geographer in his traditional study of the areal variations of related phenomena, . since the variables always exist in complex interconnection. One may properly employ these statistical-cartographic techniques after he has established tentative descriptive hypotheses regarding the mutuality that may exist among the distributions of an area, inferred through the study of individual maps and other sorts of data. •~42) The statistical analysis employed, particularly the technique of correlation in its many forms, is able to help explain the areal association between a dependent variable and a number of independent variables. The geographer may apply the analysis of correlation and tests for significance to the smallest unit of enumeration, so that information on the areal extent to which association between variables exists may be maximized. The likelihood of meeting perfect correlation between the variables to be encountered in a complex geographical situation is remote, particularly when quantities are not available for certain features, e.g . soil fertility, in a study of the distribution of rural farm population. The amounts by which the regression values calculated for given points or areas differ from the llobserved" values for the same location will have spatial variation, a knowledge of which may be helpful to the geographer in a number of ways. Thomas has investigated this subject in considerable detail, and has concluded that residuals from regression may be mapped and used for "(A) formulating and modifying hypotheses concerning the existence of an areal association between a dependent variable and a set of independent variables; (B) the establishment or modification of regional boundaries; and (C) the judicious selection of areas for intensive field investigation . 11 (43) The procedural steps which might well be taken in a study of type (A) are outlined by McCarty.C44) The statistical map is used here at different levels. Firstly, it indicates the spatial variation in the basic data, in terms of the parameters describing the distribution of this data. Secondly, through visual comparison of the map described above with maps showing the distributions of other variables which are thought to be significant, a decision may be made as to which variables should be incorporated in the initial hypothesis for statistical testing. The statistical map is being used in this context only as a visual indication of correlation, a means and not an end . Thirdly, the statistical map shows the residuals from regression, the distribution and magnitude of which may suggest other variables not previouslyemployed for incorporation in a revised hypothesis for further statistical analysis. ---42. A.H. Robinson, J.B. Lindberg, and L. W. Brinkman, "A Correlation and

Regression Analysis Applied to Rural Farm Population Densities in the Great Plains, " Annals of the Association of American Geor{aehers, vol. 51, 1961, p. 210 . The strength of feeling on this question of the reauonship between the statistical method and cartographic techniques is expressed similarly by Preston James: "The real ·strength of this mating may lie in the bringing together of cartographic and statistical methods of analysis," Papers and Proceedings of the Regional Science Association, vol. 4, 1959 , p. 26. 43. Thomas, Maps of Residuals from Regressions, p. 5. Note, however. that it has been suggested that a factor or components analysis is an essential basic step prior to any multiple regression analysis, for this will show which variables need not be included in a regression equation. See Forrest R. Pitts , "Chorology revisited Computerwise." Professional Geoff ~er, vol . 14, no. 6, U6:2. pp . ;':-1:2. 44. H.H. McCarty, "Use ortain Statistical Procedures in Geographic Analyses" (Abstract), Annals of the Association of American Geouraphers, vol. -16. 1956, pp. 263.

46 The residuals from regression may be mapped in a number of ways, each with its advantages and limitations. The fir st is the residual Ye-Y. Ye represents the computed value of the dependent variable Y from a simple or multiple linear regression equation, and Y the observed value. These may be for enumeration unit areas, for other areas transformed from the enumeration units, or for points. The difference Ye -Y is in absolute positive or negative values. A second residual, Yc-Y)/Y, is expressed either as a ratio or as a percentage, and can be used to permit comparison of maps of residuals for different dependent variables. Thirdly, the ratio Ye/ Y may be employed; although literally not a residual, it does give an immediate impression of the goodness of fit of the regression equations. Finally, (Ye -Y)/ Sye, where Sye (the standard error of estimate for Ye) is selected as one of a number of residuals of the general form (Yc-Y)/K, K being a constant. Thomas rightly distinguishe·s between the unsuitability of the statistical map for the testing of hypotheses and the suitability of the same tool for the formulation of hypotheses. The first involves the visual comparison of maps with all of the inherent difficulties discussed earlier. However, Robinson has recently demonstrated the practicability of measuring the degree of association between sub-units of two maps portraying the spatial variations in two variables. From the computed values of the association an isarithmic map is constructed. To the question, "Could this be extended to a larger number of variables? 11 , Robinson gives this answer: "The coefficient of correlation here being used is based upon the two variables, but there is no theoretical reason why one could not obtain the correspondence among three or more maps by means of multiple correlation methods. There is, however, a good practical reason. Isarithmic maps, as yet, contain an unknown amount of error, and to compare only two without great care is risky; to attempt three or more would require uncommon faith. 11 Our discussion begins with a brief statement on some previous attempts to regionalize Canada, including a review of the WeeksSametz work. This is followed by first a verbal and then a mathematical outline of the analytic procedures we have used to group the 120 census counties of Ontario and Quebec into socio-economic regions of relative uniformity on the basis of simultaneous consideration of 88 variables. The importance of these procedures is that they are analytic. Decisions on the part of the investigator between preparation of a data matrix and construction of the regions are eliminated, for the entire process may be accomplished as a two or three phase run on a la,rge electronic computer without operator intervention (in this study the University of Chicago 1 s IBM 7094 was used). The reader will note that the analytic procedures are in fact general ones for performing all forms of classification, including the special case of regionalization. Indeed, it was because of its general applications to classification problems that D. B. S. was prepared to give so much advice and assistance in the selection of variables and compilation of data for this study. Outlined first are the results of several principal-axes factor analyses - first of cultural characteristics of the study area, then ~rateful acknowledgements are due to the staff of Dominion Bureau of Statistics, particularly J. Mann, economist, A. Larocque, programmer, and J. Lefebvre, cartographer, and to Robert A. Murdie of the Department of Geography, University of O!icago. 1. See also the recent book by P. Camu, E. P. Weeks and Z. W. Sametz, Economic Geography of Canada (Toronto, 1964).

75 Papers on Regional Statistical Studies Printed in Canada

76 demographic, followed by housing and by agriculture. Finally, an analysis which combines all of these variables is discussed. Emphasis is placed upon underlying dimensions of variation in every case, and particularly upon the major independent types of county-to-county variation found in each set of variables: FrenchEnglish differences; urban-rural differences; and differences between the settled lowland and the pioneering shield. Each of these major types of variation was quantified, and as a result it proved possible to develop a near-optimal allocation of counties to socio-economic regions that are as unifor~, as possible . Results of this allocation process in Eastern Ontario are presented in the final part of the paper, and contrasts of the resulting regions with those achieved by Weeks and Sametz in the same area are discussed. PREVIOUS REGIONALIZATIONS OF CANADA As the term "regionalization" is used in this study, it means dividing an area into sub-areas, which may be relatively homogeneous• or functional, and may be designed to aid research, planning, or administration. Many regionalizations are primarily adminis trative in character. The Unemployment Insurance Commission, for instance• has divided Canada into "local office areas" such that each area can be serviced from its "local office. 11 Similarly• each of the "enumeration areas" of the Canadian Census are no larger than can be canvassed on June 1 by a census enumerator. Some types of regionalization exist that delineate "economic" regions even though they were designed primarily for administration. Thus each of the Bank Clearing House Areas fall into the · class of areas which satisfy a particular set of administrative criteria: proximity of the clearing house to the main commercial centres. Where a clearing house established in any commercial centre is assigned a service area extending as far as the centre 1 s sphere of influence (terminating where the influence of an adjacent clearing house is stronger), the end result is a functional regionalization of the country into a network of commercial areas. Other subdivisions of the provinces of Canada have been made which have been designed, quite explicitly, to be economic or socioeconomic regionalizations. This means that each "region" created by the regionalization process falls into a class of areal units having a specified set of social or economic characteristics. One such system was set out in Canadian Regions by Putnam et al. ,< 2) although in this instance the authors did not pay attention to the problem of defining a uniform set of standards for a region. Of much greater importance from our viewpoint are the two D. D. P. monographs of a decade ago. The authors of these monographs attempted to develop an improved methodology for defining economic regions and their results have been adopted by branches of several provincial governments for purposes of data tabulation and planning. A four-level hierarchy of regions is defined, namely, Provinces, Economic Regions• Economic Zones, and Census Divisions .( 3) In some cases, - , : - D. Putnam, ed. , Canadian Re~ions: A Geo~a~hb of Canada (New York, 1952). 3. Throughout this paper we use t e modified ~JS . D.P. terminology.

77

subregions, which are larger than zones, are also recognized. The princi plP of the ouilding block is not, how ever, accepted. In particular, while the economic regions are composed of entire zones and th,· Confor,'llt', Jun,• 1:11;.1_ anJ rrintcd bclw .

126 ticated recognition of a type beyond the capacity of at least the present generation of computers. It appears to me as yet too difficult to program for the recognition of different founts involving minor variations in letter and digit characters, let alone for the recognition of the identity of shade variations on an aerial photograph, however standardized. How a computer would distinguish a house from a barn, granary, or chicken house, or even chimneys from airvents, to get a count of houses, I do not know. The immediate prospects of prac tical utilization of computers are challenging enough to geography that more attention should be concentrated on them. HODGE: DEVELOPING REGIONAL STATISTICS FOR POLICY PURPOSES The paper by Hodge is important in: (a) stressing the new practical requirements for the development of regional statistics for policy purposes, such as local government reorganization and the location of public investment, and (b) emphasizing the trade centre and hence trading area approach, and the system of trade centres. The following specific comm•ents may be made: 1. What kind of statistical data was available and utilized on the 306 unincorporated centres? An appendix on the data sources would have been useful to others. Presumably population and some other administrative data was available, but one is most curious about the nature of the data on spatial relationships which would be essential to a trading area approach. 2. Pressures of population in underdeveloped countries do not lead to depopulation, but to pressures for migration to keep the total level constant or rising not as quickly. It is difficult to conceive of rural depopulation in Saskatchewan by such analogies. 3. Average farm size has gone up 58. 9% in 1941-61 (Table 1). 4. It is difficult to reconcile the definition of trade centre with the social effects suggested. In fact, decline of small trade centres suitable for the horse-and-buggy days need not increase difficulties in organizing effective local government; on the contrary it may spur organization of more rational units. It may also cut down on cost of rural roads which are becoming an uneconomic use of land. 5. While I greatly admire the diligent work involved in the factor analysis, I am wondering about the basic premise, that the viability of a centre as measured by the indices used can be the basis of administrative planning of the location of service centres. There are many industrial developments and administrative decisions, such as with respect to new municipal service units, that will in effect change the viability status of trading centres. Perhaps the spacing of hospitals and consolidated schools should follow their own logics and determine viability instead of being determined by the hidden hand of obsolete marketing structures which should not be rescued from their natural fate. Just because, in the horse-and-wagon days, grain elevators and the trading centres which grew up around them were spaced 8-10 miles apart, is no reason to sustain that locational pattern. 6. There was a system of regional centres implicit in the setting up of the factor analysis (Variable 23 - Distance to nearest regional centre), and another system of regional and subregional central places

127 suggested as a result of the analysis. We would have liked to see these stated explicitly and mapped. 7. Some of the clusters of variables which produced the 6 reliable dimensions are difficult to conceptualize. The urban syndrome (1) is understandable. It is more difficult to understand dimension 2 which combines high positive loadings on rural population growth and high negative loadings on farm population density. Dimension 5 is difficult to distinguish from Dimension 3 because of the isolation component in Dimension 3, and Dimension 5 might be better understood as the d!:!population syndrome. 8. I was not surprised by the strong relationship between degree of urbanism and its performance as a commercial centre - one even expects a sort of necessary relationship. 9. We are indebted to the author for presenting the detailed analytical picture of widespread trade centre decline (I prefer the term "rationalization") which some of us had sensed from the census and other data. As a former resident of Saskatchewan, even a number of decades ago my experiences suggested to me that rationalization, of the type undertaken in Alberta, had to proceed. I shall leave aside, however, the judgment as to whether the disappearance of certain centres should not be allowed, or should not have been allowed to occur in piecemeal fashion. And further, whether the concept should be one of subsidization to prevent undue ill effects or of positive development to create necessary effects. I shall merely say that perhaps this work by Hodge, if made available in more explicit form, for at least the principal centres of say 5 00 or over, may assist in the development of what we are interested in at this conference, namely better data units for the Province of Saskatchewan. RAY AND BERRY: MULTIVARIATE SOCIO-ECONOMIC REGIONALIZATION With respect to this paper, I am more on the spot than are the authors, although I hope I might have the support of the provincial statisticians from Ontario and Quebec. My problem is that I have too many comments. Many of the comments I have made earlier are applicable here. 1. To start off, however, I shall set up a direct confrontation between the Thoman paper and this one. "Statistical geographers as yet have discovered no full solution to this problem of complexity, but a method has been devised by which data may be agglomerated into successively larger formal or uniform regions. The author has noted, however, that (a) the technique is limited to the context of the data used in the initial mix and to the problem which determined what the variable should be, (b) there are difficulties of comparability when certain subdivisions have no 'inherent reality, ' (c) some areas may not be joined, but left isolated with each step towards generalization, and (d) the high cost of computer time may restrict the amount of work that can be done." (I might add here also the high costs of programming the computer and the time involved). Further, "Quantifying methods, with proper allow ance for assumptions and for built-in qualitative judgments in gathering materials and assi~ning values ••• offer refinements for

128 qualitatb:e assessment of truth. In my own thinking, the final judgment concerning veracity must be qualitative. 11 2. I must admit that I may not be doing full justice to this paper, in so far as it required a considerable retracin~ of the data. For example, the figures which located counties by alphabetically determined codes were hard to decipher. In fact, it is precisely because of the difficulty oi handling DBS and other data presented by long meaningless alphabetical sequences that I haYc been pressing for grouping by some analytically meaningful order. Similarly, in Figures 12 and 14, it would have helped me to haYe assigned and placed a specific county code within the seven regions proposed. I ior one an1 curious about the deviants that splay out within the Bc..'rry regions on the din1ensions used: the El F (English-French) axis is easy enough, but not factor 2 agricultural intensity. 3. I must say also, generally, that the Sa1netz model was explicitly described as an economic-administrative model, and not a socio-economic model. As a sociologist, I could not ignore sociological factors altogether, but they were given only a token weighting, more as a corroborath·e device. As correctly predicted by Berry with respect to his next stages, "it may be better to suppress certain factors ••• where contiguity is required, .. . such as the rural-urban factor. 11 The present computer regionalization is so overpowered by the ethnic and rural-urban factors that it becomes in effect a \·ery fascinating socio-geographic model, and that in fact constitutes its greatest interest to me personally. I cannot, however, accept that it represents an adequate analysis or replacement of the economic-geographic system which it considers to be its target. 4. Proceeding to more detailed comments, there is a possible ambiguity in the introduction. We never did claim that the regions were "as nearly uniform as possible" in the sense that it would be possible to make them; we merely stated that we tried to make these constructs as nearly uniform as it was possible for us to create them, under the constraints under which we were operating. For example, we did not start from the county base : we really started from a zonal base - the activity nodes and their functional hinterlands. This is the real data unit in which we were interested, not the county or arbitrary Census District base. But \Ve had to make a series of progressive adjustments to the data base and aggregate these into as suitable combinations as we could. Another self-imposed constraint was to not end up with an analytically unmanageable number of regions, as Thoman has rightly complained of the over 400 State Economic Areas used in the U.S. A. E .:ternal constraints were that it had to make sense to the provinces and to the people who were setting up regional associations. It also had to make some sense to the geographers who had studied genetic regions. We had to pay attention to the problem of defining a uniform set of standards, yet recognizing the variable application of variables. When the Berry model is applied across the whole county, it will be found that the E/ F (English-French) variable loses its distinguishing characteristics. I notice that factors switched their relative importance even between the combined Ontario-Quebec study and the separate analysis for Ontario.

129 5. On the subject of homogeneity and subregions, I recognize that certain groupings were made of what could have been separate regions. Ray and Berry were probably not aware that the first model worked out in 1946-47 with the Province of Ontario had nineteen regions - they were more homogeneous, but the model was too clumsy and unacceptable. Further linkages were made; for example, the Bluewater and Highlands regions were reduced to subregions, but the identity of the combined Georgian Bay region still consisted in a measure of relative homogeneity as contrasted with the industrial regions to the south and the mining regions to the north. Homogeneity is a relative matter, in relation to excluded as well as included items. 6. Though the paper starts off very critically, that it may be "unrealistic to expect to develop regions which are both homogeneous and functional," I am happy to see that by the end of the paper, Berry will try to become as "unrealistic" as I was, in his regionalization of Canada as a whole; "This should be both homogeneous and functional, if data permit. 11 7. With the weights given to the E/ F variable, it is no wonder that the computer model divides Eastern Ontario into E-W instead of N-S subregions. This, we knew. The incorporation of functional factors would however swing the economic model back to the present subregions. I cannot· see a functional grouping that assigns Russell County to the Cornwall subregion instead of to Ottawa. Incidentally, I must point out that the Eastern Ontario region was redefined in 1954 by general agreement to include Frontenac County, and this has been used by the Ontario government since, because that marginal county defined itself as part of Eastern Ontario, not of region 51. I hope this does not pose greater problems for the Eastern Ontario linkage tree constrained to contiguity. 8. I agree with the conclusions: {a) that there should be a re-examination of data gathered, to avoid redundancies, and to permit new valuable series. More attention is paid to counting both chickens and eggs than to key human variables. {b) that more intercensal series be projected on the basis of key annual series. {c) that more emphasis be put on movements, and regional inputoutput studies. {d) that functional regionalizations are more useful than the homogeneous regionalizations {as attempted in this paper). However, I have not gone so far as to say that the homogeneity approach should be subordinated by geographers to the functional approach, for we have attempted to balance both approaches. {e) I was not surprised that the three principal components {E/ F, U / R, and Agricultural Intensity) reduced the model to an elementary 7 region grouping for which much use could not be envisaged. {f) that it will be possible to compromise S/ F factors when the U/R factor is suppressed as being "not pertinent." However, this is operationally irrelevant because of the significance of U/ R linkages as opposed to indeterminacy in using U/ R structures. {g) that there are few sharp discontinuities. In fact, I would classify Dufferin county not as well-defined, but as another marginal case due to functional ties to the south.

130

(h) there are optional allocations of counties to a given number of regioris. We have chosen a ten-region maximum allocation per province for ready coding and as a restraint. (i) I agree that our work was laborious and slow, but one must not create a new mythology around the computer, that it takes only a quarter hour for these computations. I am prepared to give considerable credit to the long preparatory work in compiling the data and in programming the computer. (j) I agree that the human mind cannot compare with the computer in performing arithmetic, but I have had enough experience in installing an "iron pig" and in cybernetics to know (a) that the human mind can have inspiration, and (b) that it can consider a wide array of informal data based on personal observation and the judgment of fellow workers. (k) I agree that there is still much to learn about computer regionization. I can only hope that DBS and other people are as excited by this prospect as I am. In conclusion, I can only say that these three papers, and this conference, mark a new phase of development of geography in Canada. There are many theoretical issues upon which I have not touched, but there are bound to be other occasions in which the new emerging dialogue between the new hypothetico-deductive approaches and the new empirical-inductive approaches will be continued.

PROBLEMS OF REGIONAL AND OCCUPATIONAL MOBILITY IN RELA rION TO DISARMAMENT G. Rosenbluth This paper deals with statistical aspects of certain problems investigated as part of a research project on the economic consequences of disarmament. If we consider the implication of one or another of the schemes for general and complete disarmament now under discussion in Geneva, it is reasonable to expect significant economic consequences for Canada. Our defence expenditures now account for abour 4 per cent of our GNP, and we may make the rough guess that something of the order of a further 2 per cent of GNP is represented by exports attributable to defence expenditures in the United States and overseas.< 2) If a substantial portion of these expenditures is eliminated by disarmament, serious unemployment will result unless compensating public or private expenditures are expanded to take up the slack. Even if government policy provides adequate offsets to the shrinkage of defence demand in the aggregate, unemployment may arise because of imperfect mobility of labour and real capital. People do not move readily between employers, industries , occupations, and regions. This paper is concerned with the problem of measuring the likelihood and seriousness of mobility problems that may arise. INDUSTRIAL COMPOSITION OF DEFENCE EXPENDITURES Defence expenditures have been at a level of about $1. 6 billion in recent years. Table 1 shows that about half is devoted to military and civilian wages, salaries, and supplementary labour income, while the other half goes mainly to business firms. In terms of industries, the largest expenditures would appear to go (apart from "defence" itself) to aircraft, shipbuilding, electronics, construction, petroleum and coal products, and transportation. The figures suggest that these industries get about a third of direct defence expenditures. Recently announced changes in policy indicate that the proportion devoted to wages and salaries may decline and the proportion going to "hardware" may increase.

--1-.

This project is financed by the Canadian Peace Research Institute. Robert Rand, Janet Smith and Al Prentice assisted me with the computations, and some of the work was done at the University of British Columbia Computing Centre. 2. A discussion of this estimate is available on request from the author.

131

Paper on Regional Statistical Studies Printed in Canada

132 Table 1 Budgetary Defence Expenditures, Canada by Main Categories and Major Items Fiscal Year 1962/63 ($ million)

Department of National Defence Military pay and allowances Civilian pay and allowances Major procurement of equipment Aircraft and engines Ships Electronic and communication equipment Bombs and ammunition Materials and supplies Gasoline, fuel oil, lubricants for M.E. Food Fuel for heating, cooking, power Professional and special services, transport, and communications, office supplies, publication, etc. Travel and removal expenses Construction, repair and upkeep of buildin~ and land Repair and upkeep of equipment Contract repair Ships Electronic equipment Aircraft

128 39 28 16 33 25 16 40

66 18 19 15

545 195 234

115

111 109 131

Pensions and other benefits

68

Municipal and public utility services

21

Mutual aid and NATO contributions

25

Development

11

Other expenditures

~ 1589

Department of Defence Production Administration and general Capital assistance programme Technological capability programme

19

2 8

29 Total Source:

1618 Public Accounts (Only selected major items are listed under some of the main categories.)

The extent to which particular industries are dependent on defence business is appropriately measured by the proportion of the industry 1 s total sales that is attributable to defence expenditures. Sales attributable to defence include, of course, not only prime defence contracts, but also subcontracts, sales to subcontractors, and so on. All sales directly and indirectly dependent on defence should be included. An estimate of this total for a given industry requires input-output analysis.(3) The statistical - ~ For a description of input-output analysis and the Canadian input-output taqles see DBS Reference Pat'.er No. 72, ( 1956), and Supplement to Reference Paper No. 72 ( at. No. 13-513, 1959) .

133 material now available is not suitable for this task since it is out of date (the Canadian input-output tables are for the year 1949) and the classification into industries is not sufficiently detailed (for example both aircraft and shipbuilding are included in "transportation equipment" together with motor vehicles and railway rolling stock). Further work on the problem is being done in the course of this project. Estimates of the relative importance of expenditure on direct defence contracts and subcontracts in leading defence industries (ignoring further inter-industry effects) have been made by Dr. James and Mr. Naemark in the Department of National Defence and are given in Table 2. Table 2

Industry

Defence expenditures as percentage of industry shipments, 1960 --·--· ___ _

Aircraft and parts

89

Shipbuilding and repair

21

Electronics

41

Instruments

19

Ammunitions and explosives

25

·-- -

---- - - -- - -- - - - - - -

In the other industries mentioned above the volume of defence expenditures, while large in relation to the total defence program, is small in relation to the industry's output. If defence expenditures are replaced by other expenditures from public or private sources, both businessmen and labour will face problems of mobility. Business firms will have to find new markets for their output or to change their products. Some firms may have to change their location and some may be forced out of business. Members of the armed forces, some civil servants, and some employees of private firms will have to find a new employer in a different "industry." In many cases they will have to change the type of work they do and to learn new skills. In many cases they may have to change their location. One may thus distinguish problems of industrial, occupational, and regional mobility. It should presumably be an object of government policy to ensure that such changes as are necessary take place with a minimum of friction and a minimum of loss to the persons concerned. One of the most difficult problems of policy is the extent to which compensating expenditures should be "tailored" to minimize the need for mobility. A government seriously concerned with the possibility of disarmament would endeavour to obtain, well in advance, as good an impression as possible of the location and scope of the mobility problems that are likely to arise. This task requires inforn1ation and facilities not readily accessible to the private investigator.

134 The character and scope of the problems that will be met depend not only on the industrial and geographical distribution of the defence effort but also on the nature of the compensating measures that are envisaged. A very rough indication of the industries, occupations, and areas likely to experience problems of mobility may be obtained by looking for the industries, occupations, and areas in which defence demand accounts for a very high percentage of output or employment. As has been pointed out, an adequate attack on this problem will require input-output analysis. In the present paper we shall be restricted to a rough analysis of the direct impact of the defence effort, and shall ignore the indirect impact through the chain of suppliers who receive a portion of each defence dollar. TOWNS AND CITIES DEPENDENT ON DEFENCE Some information on the regional distribution of the defence effort is now available to the writer from four sources: (a) A distribution of employees of the Department of National Defence, by census division, kindly made available by the department. (b) A distribution of expenditure against major defence contracts in the main defence industries by broad regions, which the Department of Defence Production has been good enough to supply. (c) Our own tabulations of expenditure against defence contracts listed in the Public Accounts. (d) Details of the regional distribution of the labour force, by industry, available from the 196 l Census. The Census is the only source that permits the pooling of information on the distribution of armed forces, civilian defence department employees, and industrial employees, without a great deal of estimation. It is also the best source of industrial detail for towns and cities. The disadvantages of the Census are first, that it does not permit the segrega,t ion of industrial defence from non-defence employment and, secondly, that the city boundaries which govern the grouping of Census returns are not in every case the boundaries of the relevant economic area. Table 3 shows all incorporated centres of 10,000 inhabitants or more in which there are at least 200 employees in one of the five "defence- sensitive industries, 11 and in which these industries together account for 5 per cent or more of the labour force. These are the centres which may be said to have the greatest likelihood of experiencing problems of regional mobility in the event of disarmament. Table 4 contains the same information for those cities where defence-sensitive employment is high in an absolute sense, with a figure of 1500 employees as the cut-off point. The cities where the problem of regional mobility is both likely to occur and to be serious in its extent are those that appear in the upper part of both tables. Halifax and Victoria stand out by their high ranking on both lists. Ottawa presents a less extreme case. The garrison town of Oromocto, as well as Trenton, Belleville, and St. Jean·are high on the first list and low on the second. In Montreal and Quebec, on the other hand, the percentage is low

135 but the absolute numbers involved are high. Kingston, Calgary, London, Ont., and Saint John, N. B., have a lower standing on both lists. ~ Towns and Cities with a High Concentration of Defence-Sensitive Employment, 1961

Area

Labour force Total in defence-sensitive industries (1) (2) ·- ---- -- -

(000) Oromocto, N. B. Trenton, Ont. Halifax, N.s.(1) Victoria, B.c.(l) St. Jean, Que . Belleville, Ont. Portage-la-Prairie, Man. Barrie, Ont. Sorel, Que. Georgetown, Ont. Ottawa, Ont.( 1) Cobourg, Ont. Pembroke, Ont. Fredericton, N.B. Brockville, Ont. Kingston, Ont.(2) Brampton, Onh Quebec, Que . ) Saint John, N(B.Cl) London, Ont. 1) North Bay, Ont. Red Deer, Alta. Montreal, Que .Cl) Granby, Que. Moose Jaw, Sask. Calgary, Alta .Cl)

4.3 4.8 73.0 55 . 4 10.1 11.6 4.1 8.2 5.5 3.6 167. 7 3.7 6. 3 8.1 7. 2 24.4 7.5 126. 4 33.4 73 . 8 8. 6 7.1 807 . 0 11.2 12. 1 109.3

3.8 1.5 20.0 11.0 1.7 1.7 0.6 1.1 0. 8 0.5 20.0 0.5 0.7 0.7 0.6 1.8 0.5 7.2 1.8 4. 0 0. 4 0.4 39 . 5 0.5 0.6 5.0

(2) as percentage of (1) (3)

Main Defence Industry ( 4)

"lo 89 32 27 20 17 15 15 14 14 13 12 12 11 9 9 7 7 6 5 5 5 5 5 5 5 5

D. D. D.S.A. D.S. D. C.D. D. D. s. A. C. D. D. D. D. c. D. A. D. S.£. S.D. D.C. D. D. A.C.D.S . l. C. D. D.A.

Source: DBS., 1961 Census, Bulletins 3 . 2 - 2, 3, 4. D ~ Defence departments; A - Aircraft and parU; S - Shipbuilding and repair: C - Communications equipment; E - Explosives; I - Scientific instrumenu. 1. Metropolitan area. 2. Major urban area.

The analysis so far suggests that there are only a few localities where the problem of regional mobility arising from disarmament is likely to be serious. We have, however, only a minimum list of such localities since a city may be highly dependent on armed forces bases or defence plants located outside its boundaries and therefore not included on the census tabulation. The introduction into the Census of the concepts of "Metropolitan Area" and "Major Urban Area" was designed to deal with problems of this kind, but it has not, of course, been possible to design suitable areas for all cases, and unfortunately, for most of the "Major Urban Areas" that have been defined, a detailed industrial distriof the labour force has not been tabulated.

136 Table 4 Towns and Cities with at least 1500 members of the Labour Force in Defence-Sensitive Industries, 1961

Area

Labour force Total in defence-sensitive industries

(1)

(2)

( 2) as percentage of (1)

807.0 788.7 73.0

167. 7

55.4

126.4

194,3

294,8 131.6

109,3 73.8 4.3 24.4

33.4

10, 1

11.6 4.8

( 4)

~o/o

(000) ~lontreal, Que.( 1) Toronto, Ont.Ol Halifax, N. S .( 1) Ottawa, Ont.< 1) Victoria, B. c.(l) Quebec, Que.(1) Winnipeg, lllanJl) Vancouver, B.c.(1) Edmonton, Alta,( 1) Calgary, Alta.Cl) London, Ont,( 1) Oromocto, N. B. Kingston, Ont. (2) Saint John, N. B .( 1) Saint Jean, Que. Belleville, Ont. Trenton, Ont.

(3)

Main Defence Industry

39.5 21.7 20,0 20,0 11.0 7.2 7.0 5.7 5.2 5.0 4.0 3.8 1.8 1.8 1. 7 1.7 1.5

5

3

27

12

20

6 4 2 4

5 5

89 7 5

17

15 32

A,C,D,S,I, A,I.C.D. D.S,A.

D.

D.S. D,S,E. D,A,

o.s.c. D,A, D.A. D.C.

D. D. S.D. D.A. C.D. D.

Notes and Sources: see Table 3,

:rhe City of North Bay, for example, had only about 400 persons or 5 per cent of its labour force in defence-sensitive industries according to our tabulation. A research group organized by the Combined Universities Campaign for Nuclear Disarmament found, however, that nearby bases had a combined strength of 1750 persons, including civilians, who make an estimated 75 per cent of their purchases in North Bay.( 4) In order to find all cases of this type it would be necessary to examine the economic geography of all areas in which there are defence bases. In the absence of time and fil,cilities for such a study, some indication of the probable occurrence of problem areas can be obtained by examining the distribution of defence personnel by counties and census divisions.(5) Table 5 shows all those counties or census divisions in which defence personnel exceeded 1000 in 1963 and in which a substantial proportion of them were not included in the census tabulations for cities and metropolitan areas. The extent to which the census figures understate the local importance of defence personnel is indicated roughly by the difference between columns (1) and (3) of the table. It is evident that in the cases of Quebec, St. Jean, Kingston, Belleville, Trenton, North Bay, Pembroke, and Barrie, the local dependence on defence is much greater thanTable 3 suggests. The remaining areas shown in Table 5, most of which contain no substantial cities, also appear to be highly dependent on defence, with the exception of Chicoutimi. ---4-. North Bay '64 - Preliminary Report (mimeographed, September, 1964). ~

Snnnl1c,.rihu hci.n~r1'mon1' nf l\l~t-,n.n,,.1 nofn,,.....-.o

J,...,,,,..,n

101'2A

137 Table 5 Areas with High Defence Employment outside Cities

Counties or Census Dvns.

Cities Labour Force 1961

l:

ca .....

"0 .,

a ~-8 3

;i

.g G,)

or

Province

P.E.I. N.S. Quebec

Prince Kin~ Chicoutimi

Quebec Quebec Ontario

Ontario

Quebec St. Jean Frontenac Hastin~

Ontario Ontario Ontario Ontario

Nipissing Huron Renfrew Simcoe

Manitoba Alberta

7 12

.,

sa~ c Some of its relevant findings will be summarized here, but readers are refer.: red to the original, now available in printed form, for details. The analysis is based on a sample of annual unemployment insurance book renewals, and measures mobility by the percentage of renewals that record a change in industry, area, or occupation from the preceding year. Mobility is measured only for those with a job at successive renewal dates, and is thus a fairly good index of voluntary mobility. Table 12 summarizes some of the results relevant to the present discussion. Mobility rates appear to be '-,ery high. The very important point that voluntary mobility is inversely related to the general level of unemployment is confirmed by the trend shown in the first column. The high mobility rates involving a change in industry suggest that, if turnover in defence-sensitive industries is not abnormally low, substantial annual cut-backs in their output could take place without layoffs in excess of normal voluntary turnover, by halting the flow of new entrants into these industries. Of course, in the absence of detailed studies no firm conclusion on this matter is possible. Table 12 Mobility Rates (1) ( in percentages)

Change in Year

Total

industry( 2)

1956-.57 1957-58 1958-59

54 50 41

28 23 18

Change in Industry and occupation< 2)

Change in Industry and local office area(2)

16 13

6.4 5.4 4.1

10

Source: Computed from Greenway and Wheatley, "Regional Aspects of Labour l\lobility in Canada", p.5 . 1. Job changes as a perc~ntage of those with jobs at successive Unemployment Insurance Book renewal dates. 2. Includes change in all three attributes. ~ H.F. Greenway and G. W. Wheatley, "Regional Aspects of Labour l\lobility in Canada," in C.P.S . A. Conf.;rence on Statistics, 1961, Papers (Toronto, 1~164) .

146 Occupational mobility was considerably higher than regional mobility. The relatively low level of regional mobility suggests that on the aver age people are more easily induced to change their occupation than their place of residence. This finding tends to support a policy of providing job opportunities and retraining at the local level, but it cannot take the place of a more concrete weighing of benefits and costs. For the armed forces, rates of entry and exit have also been very high, as shown in Table 13 . Hence a fairly rapid reduction in strength can be achieved without creating any special problem of mobility, by cutting down on recruitment. Table 13 Turnover Rates, Armed Forcell)

12 months ending ~larch 31, 1952 1956 1957 1958 1959 1960 1961 1962 12 months ending Nov. 30, 1963

Enrolment rate (o/o)

Release rate (o/o)

40 . 7

12.5

14.2 14.8 15. 6 12.0 10.4 10.9 14.1

15.4 14.4 14.0 10.8 11.0 10.5 9. 2

9.5

11.4

Source: 1952-62: Computed from data in Report of the Royal Commission on Government Operations. Calculated on the basis of totals at end of period. 1963: Department of National Defence . Calculated on basis of average strength during period. 1. Excluding reserves.

CONCLUSION The problems of measurement that arise in connection with disarmament are not different in principle from those relating to the impact of other policy decisions affecting the economy. The main benefit that might be derived from a paper like the pre sent is to direct attention to the type of statistical information that is required and hence to weaknesses and gaps in the present statistical system. Perhaps the most serious and most conspicuous problem is the inadequate information on inter-industry relations which makes it virtually impossible to discuss the indirect impacts of government (and other) expenditures in terms of realistic figures. A closely related problem is the lack of integration between the information on government expenditure available from various

147 sources and the industrial statistics published by the Dominion Bureau of Statistics. It would not be difficult, for example, to classify expenditure against government contracts - not only defence contracts - by industry, region, and commodity on a basis consistent with that of other statistical series. Similar considerations apply to other categories of final demand. For example the lack of integration between D . B. S. foreign trade statistics and their industrial statistics is a perennial source of difficulty. A second major "underdeveloped area" to which our paper draws attention is the field of regional and local statistics. Presumably this field will also receive attention at other meetings of this conference. A third neglected area relates to the mobility and migration of labour, not only regionally, but also ·w ith respect to industry and occupation. There has been important pioneering work in this field by individuals in the D . B. S. , but the surface has barely been scratched and the full potential of, for example, the unemployment insurance records, has not been exploited. The conceptual problems relating to inter-industry statistics have been fairly thoroughly explored, but with respect to regional and mobility statistics a great deal of theoretical discussion is still required,

148 Chart I Labour Force in "Basic" and "Local" Industries Cities, Towns and Metropolitan Areas of 10,000 or more 1961

Local (000)

soo

200

100

so

20

IC

IC

10

...

•

•

.. . ....

s

.-:·:

..... .. ... . ·.• ... ·.... ......

2

l

l

2

Basic (000)

s

"

•

10

20

so

100

200

(logarithmic Scales) Cities of 30,000 to 100,000. Source : D.B.S. 1961 Census. (for definitions see text)

x:

soo

149 Chart II Labour Force in "Basic" and "Local" Industries 39 Cities, Towns and Metropolitan Areas of 10,000 or more 1951

Local. ( 000)

'.

soo

e•

200

100

• o e 0

0

• 20

, .. •

10

s

2

l

., 2

10

.::o

50

I

,.

100

I

00

Basic (000)

(Logarithmic Scales) Source: D. B. S. 1951 Census. (for definitions see text)

500

..

INTER-INDUSTRY STUDY OF THE ECONOMY OF THE ATLANTIC PROVINCES Kari Levitt This paper is to be regarded as a progress report on a project which was started in June, 1962 and which consists of the construction of four inter-industry flow tables, one for each of the Atlantic provinces, as well as an aggregated table for the region as a whole. _ Separate tables are necessary because the province is an important political decision-making unit. The aggregated table, however, also has a function: for some purposes the entire region should be regarded as one economic unit. The tables are constructed for the year 1960 because we were too impatient to wait for 1961 data at the time we started. We now feel considerable regret that we did not use 1961 as our base year because very much more information is available for 1961, and because both the Dominion Bureau of Statistics and the Quebec Bureau of Statistics are constructing tables for 1961. The study was undertaken as a result of a growing conviction that economic development policies for the Atlantic Region cannot be properly evaluated without knowledge of the interdependence of economic avitivity within each of the provinces and the region as a whole. It was anticipated at that time that sooner or later the federal government would have to increase capital expenditures and review both existing and new forms of assistance to the region. It remains the hope of those engaged in this study that an analysis of the structural interdependence of the flow of goods and services and of related money transfer flows will prove to be a useful tool in the formulation of economic policy for the Atlantic provinces. • the srudy was initially supported by summer grants from the Social Science Research Council and by considerable additional grants from the Atlantic Provinces Research Board. These latter funds enabled us to engage research assistants during the summers of 1962 and 1963. Since May 1964 the Atlantic Development Board has come to the rescue, financially speaking. A contractual arrangement was negotiated with the Atlantic Provinces Economic Council to aid completion of the srudy and within these arrangements, the design of the model and the methods of statistical estimation . used to construct the tables are my refil)onsibility . _ It must be stated at this point that this project could not have been undertaken without the wholehearted co-operation of the Dominion Bureau of Statistics which permitted us to gain access to the detailed data necessary and whose staff have been most co-operative and patient with our research group and its revolving personnel. It is impossible for me to proceed without expressing my sincerest thanks to the two individuals without whose continuing support of this project - from its problematical initial stages to its present and still very much unfinished state - we could not have proceeded. Mr. A. C. Parks of the Atlantic Provinces Research Board and the Atlantic Provinces Economic Council and Dr. S. A. Goldberg of the Dominion Bureau of Statistics were willing to gamble on

151 Papers on Regional Statistical Studies Printed in Canada

152

I.

A POLICY-ORIENTED MODEL

An inter-industry flow table is essentially a double-entry accounting system which records the flow of goods and services between various economic units. Reading along the rows, we obtain sales of locally produced plus imported products according to purchasing sector, both intermediate and final. Reading down the columns we can see the cost strucure of every produc ing sector as reflected in its purchases of intermediate goods and services and primary inputs. Final demand can be presented in as many components as we wish, and primary inputs can be separated into several elements, data permitting. We have made a number of modifications to the conventional square table. These modifications - and the reasons for them - form the main topic of this paper. On the assumption that the cost structure of the producing sectors is stable over some specified period of time, it is possible to trace the effects of changes in final demand on the gross level of output of the sectors, and on incomes, employment, tax yields, and so forth. The advantage of input-output over partial analysis lies in its ability to take into account secondary, or induced, increases of demand arising from an initial demand for a certain commodity. The influence of the Keynesian economics is such that everybody knows about the "consumption multiplier" - we all know that incomes generated by an increase in economic activity will create secondary incomes in va-rious consumer goods industries. This expresses itself in rules of thumb such as "every job created in manufacturing creates another job in the services. 11 It is often not realized that there is also a "production multiplier" - i.e. , an increase in the demand for the output of a product generates demand for intermediate goods and primary inputs necessary to produce this output. The production of these intermediate goods may generate a derived secondary demand for intermediate goods and for primary inputs. And so on. It is a fact that the proportion of industrial output classified as intermediate increases with the degree of economic development of an economy. In other words the growth rate of intermediate goods is higher than that of final goods. Another way of saying the success of the project, While the latter is not yet assured - many problems remain to be solved - we believe that we have made sufficient progress to establish the fact that statistically reliable input-output tables can be made on a provincial basis in Canada. This fact was by no means eviaent when we started. It remains to acknowledge another source of invaluable help. I refer to the preparation by the Province of Quebec of a provincial input-output table. This provided us, in the first place, with more encouragement; it showed that others also considered such tables to be both useful and statistically feasible. Furthermore, the help which we have received in the form of exchange of ideas concerning concepts and methods of compilation can best be appreciated by comparing our model with that described in the Aide Memoire prepared in October 1963 by Professors T. I. Matuszewski and M. Dagenais of the University of Montreal and M. M. Boucher of the Ministry of Industry and Commerce of the Province of Quebec, Finally, I would like to express my thanks at this time to Mr. John Iton, Mr. Nugent Miller, Miss Geraldine Fulton, Mr. Clarence Bayne, Miss Wilma Augustin, and Miss Noel Lewis, all graduates of McGill University, who worked on the project for varying periods of time. Since the paper was prepared, Miss Adlith Brown, Mr. Anthony Bossiere and Mr. Hugh O'Neale, have joined the staff of the project.

153 the same thing is to observe that there is an increase in structural interdependence in the economy. It is obvious that local production of intermediate goods which were previously imported will increase local output by more than this direct increment in so far as the product in question is produced from local materials. The source of supply of any given increase in final demand for some product and the source of supply of the principal inputs into the producing sectors involved, will determine how great is the impact of a given expenditure on the local economy. As in the Keynesian system, imports are leakages; we do not however work with one aggregated "propensity to import." In fact the leakage associated with a given value of money expenditure depends on the commodity composition of the goods and services being purchased as well as many other factors. We have tried to produce a policy-oriented table, within the constraints of what is statistically feasible. We assume that development policy in the region is concerned with finding ways and means to raise incomes and employment in the area. We further assume that federal and provincial government spending is the main policy instrument available. Other policy tools might be the encouragement of the location of certain industries in the area or special steps to increase productivity in problem sectors. For many reasons it might be important to know the balance between federal revenue arising from economic activity in the region and federal spending on transfer payTnents and on the purchase of goods and services in the region. Our tables are set up so as to provide information on all these questions and many others. To illustrate the uses of input-output tables for development planning in the Atlantic provinces, let us take another look at the well-worn debate as to whether a dollar spent on investment in a capital-intensive project like a paper mill, will create more income and employTnent than a dollar spent on investment in a labour-intensive operation such as radio assembly or automobile assembly. Let us see what input-output has to offer by way of information. It can show the indirect, as well as the direct, incomes and employTnent generated by each of these two alternatives. It can show government revenues yielded by the estimated total increase in activity in both cases. If there are elements of subsidy or assistance in either of these policies, this will be of relevance to the policy-maker. Further, we have allowed sufficient freedom in our tables that both alternatives can be explored on the basis of various assumptions concerning changes in the structure of production such as the introduction of the manufacture of componenents for the hypothetical assembly plants. In general, we can ask two kinds of questions of an inputoutput system: questions of fact and questions of fancy. By questions of fact we mean such questions as: how many jobs and how much income depends on the export of fish, or of paper products in the year 1960? The system will take into account indirect as well as direct effects. We may, for instance, ask: how many jobs really depend on the continued operation of the Nova Scotia coal mining industry? We may further try to balance the various federal subsidies to the coal mining industry with fed-

15-!

eral revenues derived from coal mining and from activity dependend on the indirect demands associated with this industry. This might be quite helpful in devising alternate ways of spending these federal subsidies - for these might yield both more income and more employment than the continued subsidizations of the coal mining industry. Then again we may ask: how many jobs and how much income depends on federal spending in a given province, both directly and indirectly? We might be particularly interested in what would be the consequences of a curtailment of defence spending in the region. Another question of interest concerns the leakage out of a province from some given amount of federal government spending. If these "import leakages" are not taken into account, \Ve get an inflated picture of the cost to central Canada of government payments, either by transfer or by purchase of goods and services, to the Atlantic region. In fact, a considerable portion of government spending in the Atlantic area finds its \\·ay back to central Canada via import leakages. The second set of questions which input-output analysis should be able to answer are hypothetical questions of the following type: what would be the total effect on Nova Scotia of a fully developed automobile manufacturing industry, complete with local parts suppliers? In so far as development policies consist of efforts to change the structure of the economy we cannot make use of tables in which the chosen set of industries, the commodity distribution within the industrial sectors, or the import structure are frozen into a unique matrix of co-efficients. We need a more flexible framework which will both record more information and will draw on more information at the programming stage. If, at the programming stage, we do not have this additional information we can always direct the system to apportion amounts as per base year. If, however, we do have additional data we are not forced into the straitjacket of strict proportionality. Before presenting the accounting framework which we have chosen we shall examine a number of problems we had to face. 1.

Absence of Data on Imports and Exports The basic difficulty in constructing provincial tables is the absence of data on imports into the province. We do not know the supply available to meet the demand. We have no alternative but to build autonomous estimates of all final demand categories. Imports into the province appear as the residual shortfall between demand and local supply. This procedure rests on the assumption that there is no re-export of commodities.< 1> Through-movements or trans-shipments will not appear in the table. Thus, winter grain shipments through maritime ports will appear neither as an import nor as an export. The transportation storage and distribution services, however, associated with the handling of goods passing through the region for export out of maritime ports, as well as similar services associated with the handling of imported goods destined for other provinces through Maritime ports, will be included in our tables as an "export" of transportation and distribution services.

--_-_-1-.

In fact, we do show both in- and out-movements of some commodities. This 1s so where we were able to obtain direct information on a provincial export of a commodity whose total provincial demand exceeds provincial production.

155 To reduce the underestimate of imports by "netting out, 11 we worked with the most disaggregated commodity detail which our data would permit. As broader commodity groups are built up, by aggregation, they show an increasing number of cases of simultaneous export and import, This phase of the study will yield the fir st set of estimates of imports into the Atlantic p•rovinces and also the first set of carefully constructed estimates of exports out of the area. hnports into the region is the sum of the inflow of nonAtlantic products into each of the four provinces. In order to estimate these inflows, both for the individual provinces and, by summation, for the region as a whole, we had to devise a method of dealing with interprovincial flows between the four Atlantic provinces. We decided to conduct a survey of all manufacturing establishments included in the 1960 Census of Manufactures. In thus survey each establishment was asked to dispose the commodities produced in the Census year with respect to five geographic destinations: each of the other three Atlantic provinces, foreign markets, and shipments to the rest of Canada. The commodities listed for this disposition were those produced by three-digit SIC group to which the establishment concerned belonged. Having thus obtained estimates of the outflow of commodity X from province A to provinces B, C and D, from province B to provinces A, C, and D,from province C to provinces A, B, and D, and from provinces D to provinces A, B, and C, we entered the reverse inflows of comm,odity X produced in one or more of the three other provinces into provinces A, B, C and D. By adding these inflows of products of Atlantic origin to local provincial production we obtained II Atlantic supply. 11 The difference between this II Atlantic supply" and all demands, including movements to other Atlantic provinces, yields an estimated of inflows from sources external to the region. These inflows, which we call "imports, 11 cannot be classified into goods from other Canadian provinces and goods from foreign sources. For purposes of the economic development of a province or a region this distinction is, in any case, of little interest as "import substitution" on a regional basis need not take into account of the source of the goods, any more than a private entrepreneur planning to expand his sales takes account of the present origin of the competition business he plans to capture. From a national point of view, however, it makes more sense to assist Atlantic production of a commodity currently imported from abroad than to assist in the transfer of an activity from central Canada to the Atlantic provinces. Further information on the source of the "imports II into the Atlantic provinces will, however, have to await surveys of the geographic destination of sales initiated by the other provinces or by a federal agency. The schedule used in our survey is to be found in Appendix I. The above discussion, incidentally, relates only to "competitive imports. 11 Estimates of the import of non-competitive goods for intermediate use present fewer problems.

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2,

Criteria for Choosing Industrial Sectors

Because the tables must serve the dual purpose of describing the economy as it really is - or rather as it was in the base year and as it might become in the process of the implementation of development plans, we are faced with selecting industrial sectors which fulfil the following requirements : (a) isolate the key resource activities upon whose fortunes the region is so heavily dependent; (b) make sectors which are sufficiently detailed to describe the rather scanty inter-industry structure and are yet sufficiently important to warrant the additional work both in compilation and manipulation of a larger matrix in programming; (c) keep in mind the basic assumption of input-output systems, i. e,, proportionality between output of product and inputs to the produc ing sectors; (d) provide for the inclusion of industries not in existence in the base year and for the expansion of some industries to produce a far fuller range of products - which implies a change in input structure. On our worksheets we are carrying every three digit SIC manufacturing industry found in the Atlantic provinces in 1960. These manufacturing industries will be aggregated into a smaller set. The attached list of industrial sectors represents a provisional plan of aggregation with respect to the manufacturing industries designed to strike a compromise between the requirements listed under (a), (b), and (c) and available resources in terms of data and time atour disposal. This provisional list gives us 60 industrial sectors, yielding an input-output table with 60 columns of producing industries (see Appendix II). As regards (d), we propose to include in the table some industries not in existence in the base year. The coefficients will be taken from the input structure of similar industries in central Canada. The output assigned will be nominal - say $1000, In balancing rows and columns, these entries will disappear in the rounding of figures. They will, however, be included in the matrix of coefficients. The set of industries to be treated in this manner include industries established since 1960 as well as industries whose establishment appears to be feasible, Obvious examples are petroleum refining in Newfoundland, automobile assembly in Nova Scotia, explosives manufacturing in the Atlantic provinces. 3.

Competitive and Non-Competitive Imports The problem here is well known. The smaller the economy we deal with, the more "non-competitive" imports there will be,· if we define this term to refer to commodities not produced within the economy. Further, the finer the commodity detail we have, the more non-competitive imports there will be, (If we go to the ultimate length of defining a commodity by brand name, almost all imports become non-competitive.) As stated above it is desirable to work with fine commodity detail, as long as data permit, because this leads to less netting out of residual imports. On the other hand, we do not want to force too many commodities into the non-competitive group - even if the data would permit us to do so - because this amounts to constraining the import content of all purchasing activities, both productive and final, to bear a strictly proportional re-

157

lationship to output. This neither represents the real world because the proportion of imported purchases tends to rise in years of exceptionally high economic activity - nor suits us in terms of building a policy-oriented model which will permit us to explore the implications of "import-substitution," to borrow from the language of development literature. In our tables competitive imports are channelled through the delivering (row) sector and the input coefficients of the purchasing sectors are less influenced by trading patterns, and more closely approximate purely "technical" coefficients in the sense that we show a purchase of input regardless of the geographical source of supply. This is the case, of course, for competitive imports only. We proceeded as follows. Initially we defined as noncompetitive any commodity not produced in the Atlantic region in 1960. If a commodity was produced in any one of the four provinces, in however small a quantity, its import into the region was initially defined as competitive. Our experience was that in allocating materials used in manufacturing it was not difficult to identify intermediate material purchases which originate outside the region, because the census of manufactures provides very detailed data on materials used. In cases of doubt a comparison of unit value of purchased material with _unit value of the compj!-rable locally produced material enabled us to decide whether these materials were in fact the same commodity. If all data on purchases were as good as data on intermediate goods purchased by manufacturers, the problem deciding which commodities should be treated as non-competitive imports could be settled with reference only to conceptual considerations. With reference to conceptual considerations alone, we are faced with a choice: a more embracing classification of "noncompetitive" imports facilitates estimation of the direct and indirect import - requirements of a given program of final purchases - on the assumption of constant structures. A classification which puts a larger part of marginal commodities into the "competitive" group, yields more flexibility regarding changing sources of supply of imports, more accuracy regarding constancy of the coefficients, but implies a sacrifice of knowledge and necessitates independent estimates of imports of the commodity in question for the year for which the projectors are made. We may illustrate the point with primary steel products. We know the range of primary steel products which were produced in the region in 1960. They are specialized steel commodities, mainly for export out of the area. We have data on the exports of these commodities out of the region. Further, we know the type of primary steel commodities being purchased by manufacturing industries and we know that many of these are not produced in the area in any significant quantities or not produced at all (for instance, steel plate, structural steel, etc.). We now have a choice: (a) we can make two commodity groups, one composed of products of a type being made locally and exported and the other classified as a non-competitive export, or (b) we can show the wider commodity "steel products" in such a way that we have simultaneous exports and imports for this commodity. If we

158

choose the latter solution we may do it because we wish to show "steel products" as a competitive import in order to explore "import substitution." There is yet a third possibility : we can sho\v a dummy column of the type referred to above representing the cost structure of an industry which produces these steel products which are in fact being imported. We can then explore the implications of increasing the local output of this (non-existent) industry. This is in fact the best solution, but the data do not exist. We have chosen to treat these steel products which are definitely~ locally made as non-competitive imports. To a large degree, however, the classification of imports between competitive and non-competitive is determined by the inadequacy of the data regarding purchases by non-manufacturing producing sectors and by final demand sectors. To cite another example : we can estimate final demand purchases of fruit (exclusive of Atalntic provinces products such as apples and blueberries). We know that the bulk of fresh fruit is essentially non-competitive for climatic reasons. As we cannot, however, divide final expenditure on fruit between fruit of a type which is, or might be locally produced, all import of fruit becomes "competitive." The same holds true for "fresh vegetables" where local production is very small and cannot be expanded significantly. In some cases, like wheat or corn, we have classified the commodity as a noncompetitive import and transferred the local product to some other commodity group such as "miscellaneous agricultural output." 4.

Commodity Classification, Levels of Aggregation and "Margins" We have arrived at our commodity groups (shown as rows in the table) by a process of successive aggregation from very fine commodity detail, each step in aggregation being forced by nonavailability of detail on the purchasing side. Step 1. We commenced by recording the output of commodities in all the detail in which it could be obtained; in the case of manufactured goods, we recorded output in the detail in which value of shipments is reported to the census of manufactures. In the initial stages of the study, we thus recorded the output - in each of the four Atlantic provinces - of some 302 manufactured commodities. Step 2. The first aggregation was largely dictated by our survey of geographic-disposition of commodities. Where replies were incomplete or did not refer to individual commodities but to the total output of the establishment, we aggregated. Where our commodities were recorded in such detail that production of a number of individual items was very small and estimates .of the geographic destination of shipments were not likely to be statistic ally reliable, we again aggregated . The original manufactured commodities were thus reduced to 260 commodities. Much of the posting (allocations) of recorded purchases against recorded local output was done at the step 1 level of detail. After we aggregated in the manner described in step 2, we made new record sheets of outputs and transferred recorded intermediate purchases to the new sheets. The remainder of the posting (allocations) was done at the step 2 level of aggregation. Step 3 . In order to reduce our records to manageable proportions and to allocate some of the purchases of the non-manu-

159 facturing sectors, we went yet another step towards further aggregation. I would like to emphasize that this third step of aggregation was not dictated so much by lack of data as by lack of resources, in time and funds, to effect the required number of necessary commodity balancing of supply and demands by manual clerical techniques for four provinces. I believe it will also result in somewhat more reliable coefficients, although computerization of the work could have given us alternatives of aggregation at step 2 level and at step 3 level. A preliminary list of commodities at step 3 level of detail is included in Appendix II. Margins. All margins for intermediate purchases by manufactures were calculated at step 1 and step 2 level of commodity detail. Each transaction was revalued to producer price. The sum of margins for each industry (column sums of margins) represents payments made by the industry for transportation and storage services, wholesale and retail services, and indirect taxes paid on the purchase of materials. The sum of margins accruing to each commodity (raw sums) represents transportation and distribution services added to the commodity at producer value on its way to the purchasers. We thus derive a matrix of margins in dollar values which will be converted to a matrix of percentage margins on purchaser value of intermediate goods bought. We plan to use this information to estimate margins on purchase of non-competitive imports by selecting appropriate margins on a basis of comparable goods yet to be devised. 5.

Commodities and Industries: More Rows than Columns All industries produce more than one commodity. Some commodities are produced by more than one industry. This troublesome fact constitutes one of the many difficulties which face anybody engaged in constructing or using input-output tables. There is no ideal solution. Obviously, it is advantageous to set up the accounts in such a way that we preserve the maximum amount of information. For this reason among others we propose to use a rectangular matrix which has more rows than columns. Let us consider a number of cases. Industries producing more than one commodity. This is itself would not be too troublesome. Suppose that an industry produces three commodities but that none of these three are produced by any other industry. For input-output analysis this means that we must assume a common cost structure for each of the three commodities - a common set of inputs. There is no way to escape this, However, we shall still wish to preserve three rows for the three commodities if there are competitive imports - or for that matter if there a:r;e non-competitive imports which we might at some time wish to transfer to the competitive group. We need the three rows because the origin of supply with respect to local and imported source is likely to be different for each of the three commodities, and because we wish to obtain estimates of competitive imports. Although we would show the three rows, we would not depart from the one-for -one correspondence between groups of products and industrial sectors. We would have essentially a square table in which additional information concerning the disposition of the products is recorded.

160 Commodities produced by more than one industry, This is the troublesome situation. It becomes more troublesome the higher the degree of aggregation of commodity groups. It can sometimes be alleviated by aggregating industry groups. Such aggregation, however, increases the number of commodities for which ,ve assume the cost structure to be common, This then is not always a satisfactory solution. We can identify three types of cases in which a commodity or service is produced by more than one industry: secondary products, by-products, and own-account transportation and construction, We can classify these cases with respect to conditions of demand and supply, By independent demand we mean that the demand for the commodity is independent of the demand for other commodities produced in the industry, By independence of supply we mean that the output of the commodity by the producing industry is independent of the output of other commodities produced in the industry, In the case of own-account transportation demand for transportation services are linked with the output of the associated commodity, but supply is not necessarily linked. We can summarize the three cases as follows: Demand ~ Secondary products independent independent By-products independent dependent Own-account transportation dependent can be treated either way Secondary products, A commodity is produced by more than one industry. It is defined as primary to one industry and and secondary to one or several other industries. The demand for the commodity is independent of the demand for other commodities produced in the industry which produces it, Examples are production of pulpwood in agriculture (wood-farming) as well as in the logging industry; production of frozen fruit in the fish processing industry as well as in the fruit and vegetable processing industry, Here we proceed by recording the commodity as an output to more than one industry, We can them program all the increase in demand for this commodity to be produced by the industry for which it is a major product, This is likely to yield the best results because the materials involved in producing this commodity more closely approximate the cost structure of the industry to which it is primary than that to which it is secondary, But we are not forced to do this. We can program the increase in demand to be produced by both the industries, and in any proportion we wish, including that in which they were produced in the base year, This latter is the solution wich we would get from the conventional square table, Thus, by adopting the rectangular form, we gain more flexibility, Obviously we can do all that the conventional table can do - and more, Our system requires additional information, which gives it more flexibility, By-products. This requires a different approach, We asswne that this product is produced in two industries : in one industry it is a by-product, in the other it is produced as an independent activity. If no such other industry exists, we postu-

161 late an import of the commodity. We program demand for this product against the two sources of supply in such a way that the industry to which it is a by-product does not produce more of its primary product than the program demands. The balance is produced in the other industry, or is imported. Thus, for instance we would not allow a demand for sulphuric acid to yield a surplus of supply of primary steel. Rather, we would program so that we use the supply of sulphuric acid associated with a given demand and supply for primary steel products. In case of insufficiency, the rest would be produced in another industry, or imported. Own-account transportation. Let us now turn to the matter of own-account work where the secondary activity - own-account work - is directly related to the output of the primary activity of the industry. In this case the primary and secondary activities are complementary outputs of a special type. By this we mean that the demand for the primary activity induces a related demand for the secondary activity. For example, ore is mined and hauled to tide water, or beer is delivered to retail outlets by fleets of trucks belonging to the manufacturer. Here we may treat the matter in one of two ways: we can integrate the transportation activity with the producing activity and integrate the costs of both activities, or we can transfer the secondary activity and any involved costs to the sector to which it is primary, in this case the transportation sector. In no case should we permit the producing industry to produce transportation services as a distinct secondary activity. In the first case the own-account transportation disappears from view. Its costs are integrated with the producing industry, and the value of output is raised to the delivered cost. In the second case, we suggest a similar solution - i.e., that the producing sector should buy the transportation services associated with delivery of its product and pass the transportation charge on to the purchaser in the form of a higher price. The buyer thus buys the product plus transportation margin. This margin is generally charged to the buying sector. We suggest there are cases where it is more convenient to charge it to the selling sector. Thus, in the case of gasoline we have decided to value gasoline at the price which the service station operator pays for the gasoline, i.e., refinery price plus transportation and storage charges to the pumps. This treatment seems suitable wherever we have the situation that no buyer in fact has access to a commodity before certain additional delivery services have been added to it. This treatment permits us to deal also with industries which produce some but not all of their related transportation. Where have industries which produce some but not all their related transportation, we can proceed in one of two ways. We can remove ownaccount transportation from these industries and transfer it to the transportation sector and then make the purchaser of the product buy the whole transportation margin. Alternately, we can take the mixed situation as it is and have the purchasing sector buy the difference between the product at purchaser's price and the apparent producer price, remembering that the

162 apparent producer price includes a certain amount of transportation. Thirdly, we can do as suggested above, and make the producer buythe whole transportation margin and pass on the cost in the form of a higher "producer price. 11 Own-account construction. The above discussion has been conducted in terms of transportation. The situation with ownaccount construction is somewhat different. The balance of evidence is against the integration of own-account construction with the productive activity . Construction, even repair construction, is not as proportional to output as are the transportation examples cited above . We have decided to remove construction from productive industry and remove all the costs associated with it . This amounts to a transfer of the construction activity to the construction industry and a purchase by the productive industry of repair construction activity as a current input. In this case we could not permit construction to appear as the output of any industry other than the construction industry, defined to include own-account work. Alternatively, one could permit these industries to undertake construction work, in which case one must make sure that their costs include all the construction materials and overheads associated with the construction activity. The trouble here is that any increase in this own account construction would generate secondary demands for the material inputs of the major productive activity in which this industry is engaged . These are generally quite unrelated to inputs associated with construction. Because construction activity is so important and is intimately related to all the factors which affect private and public investment, including policy factors, we want to be careful to choose construction sectors which will yield the greatest attainable accuracy in the use of the tables . Construction costs, both new and repair, differ widely according to the type of construction activity. Thus we plan to make a separate column for residential construction and a delivery row which sells this output to housing (investment) and to the dwelling services industry (current maintenance and repair) of housing. We may, in fact, separate the cost structure of new residential building from the cost structure of dwelling repairs as the materials used in new and repai r activity are quite different - or more exactly, they are used in different proportions. This implies two residential construction activities, one for new and one for repair construction. In estimating the cost structure of non-residential building we collected data on labour costs, materials used, and overheads for different types of non-residential building construction . We found that non-residential building falls into two fairly distinct categories: those which are internally partitioned, and those which are not. Thus we have constructed one column for offices, hotels, hospitals, and schools, and another for factories, warehouses, garages, and churches . Each of these two non-residential building sectors is made up by weighting the cost structure of components according to the value of new construction by type of building in 1960. Engineering construction will be shown as a separate sector. We are also considering whether we should make railway and utility

16 3 construction and government construction into separate sectors . The latter has a large own-account component which is more labour-intensive and, of course, contains no profit element. 6.

Commodity Rows, Industry Columns, and Balance Our tables, in their most aggregated form will have approximately 200 rows and 60 industry columns. A provisional list of commodities and industries is contain in Appendix II. In general, commodities may be produced by more than one industry. There are certain exceptions to this. Thus, transportation services may be produced only in the transportation industries. (We may decide to show three transportation industries: rail, water, and road/ air, which would permit us to change the propor tions in which transportation services are provided by these alternate means . ) Gross distribution margins are produced only in wholesale and retail trade. On our worksheets we shall keep gross wholesale margins separate from gross retail margins, as we believe this will assist us in balancing estimated margins against the output of the distribution sector. In the final table this will be only one row, but possibly two distribution columns . We have constructed a row and a column for dwelling services. The row disposes output of gross rents (cash and imputed) to personal expenditure; the column records costs of dwelling services such as repair construction, insurances, taxes, interest payments, and net rents. We have also constructed a row and a column for automotive repair and services which includes car repairs and parts and the distribution service on gasoline sales. The attached diagram (Figure I) helps to explain . The supply and demand for each commodity and service produced, valued at producer price, will be balanced . This will give us estimates of competitive imports (by residual in cases where local supply exists). At this stage we shall also balance the estimated distribution and transportation margin with the established output of these services. A copy of the commodity balance sheet is shown as Figure 2. 7.

Government School and Hospital Spending Presented in Detail Because we intend to use the input-output tables as an instrument in the formulation of economic policy, we are particularly inte:..csted in the impact of spending by ali levels of government, both on transfer payments to persons, other governments and industries (subsidies), and on the purchase of goods and services. Federal and provincial government spending in each of the four provinces is shown separated into spending on current account and on capital account. Spending on capital account is divided between new construction and equipment . The capital accounts purchase only from production sectors (government own account construction work for new capital formation is a production sector) . The current accounts also purchase the services of primary factors, i.e., wages and salaries and supplementary labour incomes. Although Canadian national accounting conventions do not charge depreciation costs to the operation of governments , we

164 believe that publicly owned assets should be depreciated, and we are considering raising the estimated value of government expenditure by an imputed depreciation charge. The "public administration" industry has been eliminated. The current accounts of the government are treated as final demand sectors which buy directly all the commodities, services, and primary inputs which previously were treated as inputs to the public administration sector, We are particularly interested in the amount and composition of federal government expenditures in the Atlantic provinces, and in the impact of this spending on the local economy. We must point out that we are not here concerned with the total benefits accruing to Atlantic provinces from the operations of the federal government. We are concerned with flows of purchasing power and flows of goods and services, not with welfare considerations. Our analysis of federal expenditure on goods and services was made in two distinct ways. One was derived from Public Accounts of Canada and is based on the SIC coding of supplying establishments with Atlantic locations, the other was derived from data made available by the federal Treasury and is based on considerable commodity detail deriving from the "object code" records of federal purhcases made on behalf of these Atlantic provinces agencies. Federal government purchases of goods and services were compiled for the ten most important federal government departments. Of these, the department of national defence is by far the most important and accounts for well over half the current goods and service expenditure of the federal government in the Atlantic provinces. In the province of Nova Scotia defence spending accounts for some 80 per cent of current federal expenditure on goods and services. Other federal departments shown as separate columns include the departments of Transport, Public Works, Fisheries, etc. Our justification for showing detail of spending patterns by federal government departments lies in the idea that it might be justifiable to assume constancy of spending patterns (input structures) within a federal department, where it is clearly not justifiable to make such assumptions with regard to total federal spending on goods and services. If further investigation proves reasonable constancy within federal departments we plan to build projections of federal expenditures from aggregates of estimated federal expenditures by spending department. Provincial government expenditure was similarly analysed by major spending department. Direct provincial expenditures on vocational education and on provincial hospitals were removed from the provincial government sector and transferred to the education and hospital sectors, respectively. Associated revenues, such as federal grants earmarked for vocational education or hospital construction, were similarly removed from the revenue account of the provincial government and transferred to the revenue account of the appropriate sector. Municipal government expenditure was treated in a similar manner, using available records of select municipalities to establish commodity content of the expenditure.

165 The education sector was built by constructing a revenue and expenditure account for the following components: public elementary and secondary education (school boards); provincial expenditure on vocational education; colleges and universities; and miscellaneous (quantitatively insignificant) private schools and colleges. The education sector was "financed" from municipal and provincial governments and personal expenditure (fees). Only universities and colleges were permitted to "borrow" in the sense that there is a shortfall of revenue in relation to total (current plus capita) expenditure, met by borrowing from the "savingsexternal" account. Thus borrowing· on behalf of public education will show as borrowing by municipal or provincial governments rather than the educational sector. The hospital sector was built by constructing a revenue and expenditure account for the following compoents : public general and special hospitals; provincial and municipal hospitals; federal veteran's hospitals, The hospital sector is financed from personal expenditure, governmental transfers, and "borrowing" from the savings-external account. Hospital insurance schemes will give some trouble as they are not uniform for the four provinces. 8.

Government Transfer Payments and Revenues Government to government and government to persons transfer payments are recorded in Figure 3, These are available from public accounts, and they do not represent any great problem. Indirect taxes accruing to the federal government show as the sum of indirect taxes paid by all purchasing sectors on their purchases. This sum must check with some global figure for yield of indirect taxes arising from activity in the Atlantic region. Indirect taxes accruing to the provincial government are shown in a similar manner. This total of indirect taxes is also shown in a non-additive entry by industrial activity which gives rise to it. For instance, the table shows excise tax on cigarettes as an indirect tax paid by the consumer who purchases the cigarettes. Here this tax is shown summed with all indirect taxes paid by the consumer. The non additive entry would show this tax as an indirect tax arising from the sale of tobacco products (in our case a non-competitive import). Thus sales taxes paid on all commodities of a type produced locally would be shown under the relevant producing industry. (Sales taxes on non-competitive imports would not be dis-aggregated, of course,) Other non-additive estimates concerning tax yields refer to income taxes, both personal and corporate, arising from incomes earned in the productive sectors. It should be noted, in passing, that estimates of the commodity composition of final demand sectors do not need to be as accurate as our figures on the purchases of intermediate sectors for accuracy of our input-output matrix. These latter are totally integrated into the matrix. The former are integrated only through margins. The sum of all margins paid must equal the provincial output of transportation and distribution. The non-additive estimates of tax yields also do not have to be perfect. They can be revised and should be revised - as better data become available and as changes in fiscal structure occur.

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9.

Fixed Business Investment One problem here concerns the commodity composition of equipment purchases. Once again, the method used in the compilation of a national table is not feasible for an open region because we do not know the imports of equipment into the region. Here it is necessary to draw on other sources of information and probably necessary to make some direct enquiries of the purchasing enterprises. Again, it is not so important to obtain an exact account of equipment purchases in the year 1960. Rather, we are interested in a typical set of purchases of new equipment by an industry or a group of industries. When we establish the commodity-content of equipment purchases our preliminary list of non-competitive imports as compiled in Appendix II will obviously have to be expanded. Obviously the bulk of machinery and equipment purchased in capital account is not locally produced. We plan to show capital formation, both construction and equipment by buying sector. The listing of column headings in Appendix II relating to our accounting framework shows a pre-· liminary choice of sectors for which we would separate sectors of capital purchases. II.

ACCOUNTING FRAMEWORK FOR THE TABLES

The tables can best be understood if we begin with a set of final demand expenditures directed towards a set of commodities. These expenditures generate secondary or derived demands for the inputs required to produce them and these in turn generate tertiary demands of a similar kind. The result of this is the generation of primary factor incomes - wages, salaries, profits - and the depreciation item which represents the use of capital equipment. These factor incomes are distributed to the spending sectors in the model: corporation taxes to government, wages to households, etc. Indirect taxes, which arise from the production process, go to the appropriate government sectors. A further transfer of money incomes then takes place. Different levels of governments transfer purchasing power to each other and to households, Households transfer income to goverrunents in the form of income taxes and to the savings account in the form of personal saving. Property incomes and gross business savings-distributed and retained profit and depreciation present a major problem because we have no means of knowing whether they accrue to the residents of the area or not. We can, however, make some estimate of income taxes yielded by these incomes, on a global basis. These go to the federal government. The rest, we assume, accrues to the savings account which is aggregated with the account of the external world, i.e., depreciation, retained earnings and some part of distributed profit net of tax paid. From this scheme, which is represented in our tables and also in the diagram of financial and transfer flows, we can obtain a rough balance of payments for federal government revenue and expenditure in the area. This balance is the difference between revenues collected on activity generated within the boundaries of

167 the province and payments made in the province, whether as transfers to households and provincial and municipal governments or as expenditures on the purchase of goods and services. A similar balance for the provincial government is less interesting. It is simply the difference between provincial revenues and expenditures on transfers and on the purchase of goods and services. The scheme of the tables is explained in simplified form in the model which follows and in the related charts in Appendix III. A more complete version of the table is also contained in Appendix III. As we can see, the regional economy is open both with regard to commodity trade and capital movements. At the present time we find it almost impossible to know how much of the income generated within the province flows out in the form of remitted profit or retained earnings transferred to head office. Thus the balancing item at the end of the transfer row of the external and savings account is not too meaingful. The final conversion from a GDP to a GNP concept of income for a province awaits further study of income transfers artd capital flows, and raises major difficulties, both conceptual and practical. For each of the four provinces we plan to reconcile the receipts and expenditures of the following sectors: federal, provincial, and municipal government; education; hospital; business and persons. The significance of these matrices of money flows will become clearer when we have explained the total accounting framework. Such studies are very important if we wish to "close" the model by directing incomes generated by a given set of final demands toward the regional economy. The investment in the preparation of the input-output tables will yield richer returns if a complementary investment were to be made in study of the relationship between incomes generated in the regional industries (GDP concept) and personal expenditure and private investment expenditure in the region (GNP concept), Suggested Further Lines of Research In this paper we have confined ourselves to the relatively simple, although statistically very demanding, problems of constructing multisectoral accounts of the flows of purchasing power and of goods and services in one base year. Such accounts and associated sets of coefficients for the base year open up a challenging and complicated set of questions relating to methods of constructing programming models which enable one to estimate the likely impact of changes in final deamnds, in the structure of producing industries and in the technical coefficients themselves on employment, incomes, government revenue, and imports in a region. The type of accounting framework we have constructed suggests experiment along lines of iterative and mathematically incomplete solutions, of a _type which has been made feasible by modern computer techniques. One would here be concerned with the medium run, meaning a time period of perhaps three to five years. In such a perspective, investment is no longer autonomous, but will bear a relationship to projected changes in external and personal expenditure; invest-

168 ment will also generate technical progress, which must be reflected in some manner in the technical coefficients of the industries, The input-output system is essentially a static global equilibrium system, with no time dimension and with a complete solution. For purposes of exploring the application of input-output analysis to rational development planning one must go beyond the limitations of static general equilibrium systems; one must search in the direction of moving solutions, with a time dimension, in which parameters and coefficients are changed along the way and which more closely approximate the real world in which, as is well known to all economists, general equilibrium is never reached. This suggests that the techniques we must explore are those known as simulation techniques. Development after all consists in constantly upsetting equilibrium, in technical progress which is uneven in its industrial incidence, in time lags between investment expenditures and related future outputs, which may vary from periods of months to periods of years. These are some of the lines of theoretical research which I feel are worth exploring. III.

SIMPLE MODEL OF EXTENDED INPUT-OUTPUT ACCOUNTS OF A PROVINCIAL ECONOMY WITH TWO INDUSTRIES, NO LOCAL GOVERNMENT

A.

Production Sector and Primary Inputs (Columns 1-6, Rows 1-12, of Appendix III Table) X 1 is the output of Industry 1 (row 1). x 2 is the output of Industry 2 (row 2). X11 and X1 2 are inputs of Industry 1 into industries 1 and 2 (row 1). x 21 and X2 2 are inputs of Industry 2 into industries 1 and 2 (row 2). NM 1 and NMz are non-competitive imported inputs into industries 1 and 2 (row 3). J 1 and J 2 are employment in industries 1 and 2 (row 4). Tl l F and T 1 are federal indirect taxes (less subsidies) paid by (or received by) industries 1 and 2 on purchased inputs Jrow 5). T 11 and T l2p are provincial indirect taxes similarly defined (row 6). W 1 and W 2 are Wages, Salaries and Supplementary Labour Incomes in industries 1 and 2 (before tax) (row 7). P 1 and P2 are property incomes in industries 1 and 2 (row 8). D 1 and Dz are depreciation (capital consumption allowances) in industries 1 and 2 (row 9). T and TCz are non-additive estimates of federal (and provincial) corporation tax payments by industries 1 and 2 (row 10). Tf 1 and Tf 2 are non-additive estimates of federal (and provincial) personal income tax yield on distributed incomes generated in industries 1 and 2 (row 11) . Row 12 is provided for provincial corporation and personal income taxes, if any, Column 5 is a (non-additive) summation of columns 1 to 4 for rows 3 to 12, For rows 1 and 2 it is a summation of Xij 1 s only. Column 6 is a summation of Xis.

f

cf

169 B. External Trade Sector (Columns 7-12; Rows 1-3) MAI and M.Az are competitive imports from other Atlantic provinces (rows 1 and 2). Ml and Mi are competitive imports from all other sources (i.e. rest of Canada and foreign). EAI and EA2 are exports to Atlantic provinces of output of industries 1 and 2 (rows 1 and 2). Eel and EF1·are exports to rest