Economic Structure and Maturity

Collected Papers in Input-output Modelling and Applications

Ranko Bon

• Publisher: Taylor & Francis
• Year: 2018
• Print ISBN: 9781138637269
• eBook ISBN: 9781351793520
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This title was first published in 2000: A collection of Ranko Bon's papers on input-output analysis and its applications. The underlying feature of the papers is a focus on the supply-side input-output model, which better predicts the behaviour of mature economic sectors, such as agriculture and mining, than the demand-sided model. The construction sector is especially relevant in the context of economic stability and maturity issues, as it offers an index of economic maturity for entire economies. This is the main theme that evolves through the papers collected in the book.

PART I
Some Theoretical Aspects of Economic Stability

1. Some Conditions of Macroeconomic Stability in Multiregional Models*

Introduction**

This investigation was a part of a comparative study of the three multiregional input-output (MRIO) models: column coefficient, row coefficient, and gravity coefficient.¹ The objectives of the research were twofold: (1) to examine the causes underlying negative values in the inverse generated by the row coefficient model, as well as negative projection generated by the model; and (2) to explain why the column coefficient model did not present any of these problems.

The first section provides a brief introduction to the two MRIO models. In the first part of the second section, several theorems concerning the required properties of the technical coefficient matrix that ensure the generation of non-negative Inverses and non-negative projections of Leontief s input-output model are employed and extended to MRIO models. Two new theorems concerning the properties of the regional trade coefficient matrix that ensure the generation of non-negative inverses and non-negative projection in MRIO models in general are provided. Next, the results concerning MRIO models in general, analysis of the which were derived in the first part, are applied in the analysis of the two MRIO models. The objective of these two parts is to determine whether the two models satisfy the conditions that ensure non-negative inverses and projections. An economic interpretation of the relationship between the column coefficient and row coefficient models is then presented.

The results of this research provide: (1) construction rules for the regional trade coefficient matrix which ensure that the projections generated by MRIO models will be non-negative; (2) on the basis of these rules, a test of regional technology and regional trade data that ensures non-negative projections for well constructed MRIO models; and (3) an explanation of the malfunction of the row coefficient model, which concentrates on the violation of the rules.

Finally, the policy implications of this investigation extend the conclusions of Hawkins and Simon [7] from the single-region economy to the multiregional economy: if the production system is internally consistent, it will be consistent with any schedule of consumption goods, the latter representing a set of policy variables.

Multiregional Input-Output Models

Multiregional input-output models are essentially, conventional input-output models modified to incorporate interregional trade.² These models are founded on one basic economic principle: the total output of an industry is equal to the sum of intermediate demands by various industries (including the industry itself) and demands by final users of the industry’s products.

Mathematically, this relationship call be expressed as a set of linear equations:

(1)xi=Σj=1maijxj+yi(all i)

where

aij	=	technical coefficient representing the amount of input of commodity i required by industry j to produce one unit output of commodity j
Xi	=	total supply of commodity i
Xj	=	total production of commodity j
yi	=	final demand of commodity i
i,j	=	1, …, m

Assuming no trade between regions, an input-output model for m industries and n regions can be represented by the following set of linear equations:

(2)xiog=Σj=1maijgxjgo+yig(all i)

where

aijg

=

technical coefficient representing the amount o...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Contributors
• List of Papers
• Introduction to the Reissue
• Introduction
• Part I Some Theoretical Aspects of Economic Stability
• Part II Empirical Investigations Into Economic Stability and the Emerging Problem of Economic Maturity
• Part III Empirical Studies of Construction Activity and Economic Maturity