An extension of the hypothetical extraction method to determine key regions: backward and forward dependencies

Abstract The study of the linkages between regions to identify key economic regions generally uses the hypothetical extraction method proposed by Dietzenbacher et al. (Econ Syst Res 5(2):185–206, 1993). This approach assumes a partial hypothetical extraction (PHEM), as it excludes only intermediate input flows. We use an extension of the hypothetical extraction method (Tormo et al. in Econ Syst Res 36(2):292–318, 2024. 10.1080/09535314.2022.2157249), referred to as full extraction (FHEM), as the extraction of a region also affects final demand and value-added flows. In this study, the FHEM is compared with the PHEM, both from a theoretical point of view, based on the decomposition proposed by Rose and Casler (Econ Syst Res 8(1):33–62, 1996), and from an empirical point of view, applying it to Spanish regions. The results show that, in equilibrium, full backward and full forward dependencies are similar and the PHEM does not adequately quantify the relevance of regions since it varies depending on whether they are analysed from the demand or supply side.