THE SENSITIVITY OF INPUT-OUTPUT MULTIPLIERS*

The present paper derives analytical expressions for the sensitivity of input-output multipliers to errors in the data. The effects on the simple output multipliers are investigated for additive errors, multiplicative errors in the columns, multiplicative errors in the rows, error rectangles, the error couple and the single error, and price changes. In contrast to earlier investigations, the results are not obtained from the Leontief inverse. The present approach focusses on the effects of errors on the eigenvector corresponding to the dominant eigenvalue. It is indicated how similar expressions may be derived for several other multipliers.     

A MIXED-FREQUENCY MODEL OF REGIONAL OUTPUT*

ABSTRACT. This paper proposes a new method for estimating a monthly regional production model. The technique involves treating the region's monthly industrial output as a latent variable, which is in turn a function of capital (prosed by energy usage) and labor inputs. Annual observations on regional value added correspond to the summation of the unobservable monthly series over the 12 months, while changes in the national Industrial Production index help infer the series' month-to-month fluctuations. The model is estimated using the Kalman filter and the method of maximum likelihood. The estimates are used to compute monthly indices of regional value added for 15 individual 2-digit industries, and for the aggregate manufacturing sector in the Seventh Federal Reserve District. In a comparison of out-of-sample forecasting accuracy, the mixed-frequency model outperforms both the traditional parametric Cobb-Douglas and nonparametric Atlanta methods over the 1988–89 forecasting horizon.     

A NOTE ON THE GENERAL MATHEMATICAL EQUIVALENCY OF ECONOMIC BASE AND AGGREGATE INPUT-OUTPUT MULTIPLIERS: FACT OR FICTION*

ABSTRACT A longstanding inconsistency in the definition of basic and nonbasic economic activity is resolved. When indirect exports are included in the basic, rather than the nonbasic sector, and the model is closed with respect to households, economic base and aggregate input-output mulitpliers constructed with the same data and definitions will be mathematically identical.     

ON THE PLAUSIBILITY OF THE SUPPLY-DRIVEN INPUT-OUTPUT MODEL: EMPIRICAL EVIDENCE ON JOINT STABILITY*

ABSTRACT. This paper addresses the issue of the plausibility of the supply-driven input-output model from an empirical standpoint. We suggest that requiring production coefficients to remain perfectly fixed during an application of the supply-driven input-output model is unnecessarily restrictive given the extensive use of approximation methods in mathematics, economics and regional science. Simulations with the supply-driven version of an input-output table for a representative region are shown to result in changes in the corresponding production coefficients well within conventional tolerance levels.     

ON THE PLAUSIBILITY OF THE SUPPLY—DRIVEN INPUT-OUTPUT MODEL: A THEORETICAL BASIS FOR INPUT-COEFFICIENT CHANGE*

ABSTRACT. Oosterhaven (1988) labels the supply-driven input-output model “theoretically implausible” and criticizes the straightforward use of the model for impact studies. This comment extends and corrects some of the issues addressed by Oosterhaven. We derive the characteristics which industry production relations must possess to be consistent with the implied changes in industry inputs and outputs when supply-side input-output models are employed for impact analysis. First, it is shown that an implicit assumption is the characteristic of perfect substitutability among all inputs in each industry production function. This is the polar opposite of the Leontief assumption of zero elasticity of factor substitution among all inputs, and is very unrealistic for large changes from the initially observed solution since it implies that all inputs are non-essential in the production process and that any input can be substituted for all others simultaneously. Second, it is shown that the model may still be reasonable for approximating the effect of small changes since the implied production relation may be interpreted as a cost minimizing choice for a standard constant-returns-to-scale production function linearized around the initial solution under the assumption that relative prices are unchanged. Under this alternative interpretation, the supply-side model may be expected to provide a reasonable approximation, useful for analyzing changes in the neighborhood of the initial solution, but would appear to be inappropriate for analyzing large changes.     

NONSURVEY INPUT-OUTPUT ESTIMATION TECHNIQUES: EVIDENCE ON THE STRUCTURE OF ERRORS

ABSTRACT This paper concerns the nature and extent of error introduced to regional input-output multipliers by errors associated with the estimation of regional purchase coefficients (rpc's). Using the Washington State input-output model and computer simulations, estimates of multiplier error are generated for two distinct sources of rpc error. The results indicate that multiplier error from both rpc sources may be significant and support the findings of previous studies which highlight the importance of error introduced to the household purchases column for multiplier accuracy.     

A DOUBLE-ENTRY METHOD FOR THE CONSTRUCTION OF BI-REGIONAL INPUT-OUTPUT TABLES*

ABSTRACT. In The Netherlands, a strong tradition in the construction and updating of (inter)regional input-output tables has been built up. The paper gives a brief overview of this Dutch experience and discusses the features of the by now more or less standardized double-entry bi-regional construction method (DEBRIOT). This method systematically adds sales and export coefficients to the usual construction procedures. Thus, it introduces consistency checks at the cell level of the input-output table. Moreover, it offers a non-survey technique to estimate a regional domestic sales table that is crucial to the double-entry character of the method.     

THE SUPPLY-DRIVEN INPUT-OUTPUT MODEL: A NEW INTERPRETATION BUT STILL IMPLAUSIBLE

ABSTRACT. In this reply, I argue that the production function proposed by Gruver provides a theoretical foundation for the supply model only in a most trivial case. He proposes a more general alternative which is, however, still very implausible. Furthermore, against Rose and Allison, I argue that small input-coefficient changes provide an insufficient excuse for using the supply model for impact studies, and I show that employment estimates may be quite different depending on the approach used.