Embedding New Technologies and Extending Time Horizons in Input-Output Analysis

Embedding New Technologies and Extending Time Horizons in Input-Output Analysis

Randall W. Jackson, Christa D. Court
Copyright: © 2014 |Pages: 13
DOI: 10.4018/978-1-4666-4329-1.ch012
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Abstract

Input-output analysts are often confronted with requests for impacts assessments for economic shocks that stretch uncomfortably the assumptions of standard input-output modeling. This chapter presents an approach to confronting a subset of these challenges straightforwardly in a way that ameliorates some of the more restrictive input-output assumptions, maintains the inter-industry detail of the input-output model, and enhances the representation of certain economic behaviors without the additional complexities of moving to more complex computable general equilibrium or conjoined econometric input-output models. The authors conclude with the observation that direct changes to the input-output framework most often necessitate further modifications requiring additional behavioral assumptions and decisions on the part of the modeler.
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2. Input-Output Framework

The IO framework is likely the most commonly used framework for economic impact assessments. Its popularity is due to its ease of implementation, transparency, and mathematical simplicity, often making it the most accessible and cost-effective option for clients, especially those with time-sensitive requests.

The commodity by industry input-output framework described in Jackson (1998) is used as the basis for the methods introduced in this chapter. This approach is proposed as an accounting framework that is clearly interpreted and provides results that are especially informative for national and regional-level policy purposes. The treatment of imports within this approach focuses the analysis on the impacts of final demand changes to the domestic economy.

Currently, the model specifications are open with respect to households although there are expected to be few, if any, differences in terms of methodology for a model that is closed with respect to households. Equations (1) to (3) describe the basic identities underlying this framework in an economy with n industries and k commodities1:

978-1-4666-4329-1.ch012.m01
(1)
978-1-4666-4329-1.ch012.m02
(2)

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