The economic model is a component of the TELMoS land-use model. It forecasts the growth (or decline) for the various sectors of the economy at regional level. Whilst its inputs include independent forecasts of growth for the Scottish economy, its main concern is with the distribution of economic activity within Scotland. The linkages which affect this distribution include: generalised costs of transport; consumers’ demands for goods and services; and property costs of employment location (rents).

Two distinct processes are represented within the model: trade and investment.

Trade deals with where goods and services are produced within Scotland, and hence the location of production related employment, where they are consumed; and the resulting trades in goods and services between different parts of Scotland, and to the rest of the world. These variables respond quickly to changes in the transport system and are modelled using a spatial Input-Output model calibrated using data from UK and Scottish sources (Scottish Economic Statistics, 2003).

The investment process uses the resulting production costs and relevant accessibilities to generate the pattern of investment across the sub-regions of Scotland, using an incremental logit model.

The key outputs of the economic model are changes in employment by sector and sub-region.