Supply and demand biases in linear interindustry models
Manresa, Antonio 1954- (Universitat de Barcelona. Departament de Teoria Econòmica)
Sancho Pifarré, Ferran (Universitat Autònoma de Barcelona. Departament d'Economia i d'Història Econòmica)

Date:	2013
Abstract:	We explore the sectoral and aggregate implications of some endogeneization rules (i. e. on value-added and final demand) which have been common in the extended demand-driven Leontief model and have been recently proposed in the supply-driven Ghosh model. Extended linear models are refinements that aim at endowing the linear models with additional general equilibrium feedbacks. We detect that these rules may give rise in these models to some allegedly pathological and biased behavior. We find that in these models sectoral or aggregate output may not follow the logical and economically expected direct relationship with some underlying endogenous variables-namely, output and value-added in the supply-driven model and output and consumption in the demand-driven model. Because of their shared mathematical structure, whatever is or seems to be pathological in the Ghosh model also has a symmetric counterpart in the Leontief model. These would not be good news for the inner consistency of these linear models and raise doubts regarding the validity of their empirical applications. To avoid such possible inconsistencies, we propose new and simple endogeneization rules that have a sound economic interpretation.
Grants:	Ministerio de Ciencia e Innovación ECO2009-06953 Ministerio de Economía y Competitividad ECO2012-34046 Ministerio de Ciencia e Innovación ECO2009-11857 Agència de Gestió d'Ajuts Universitaris i de Recerca 2009/SGR-10 Agència de Gestió d'Ajuts Universitaris i de Recerca 2009/SGR-578
Rights:	Tots els drets reservats.
Language:	Anglès
Document:	Article ; recerca ; Versió sotmesa a revisió
Subject:	Extended linear models ; Demand-driven model ; Supply-driven model
Published in:	Economic modelling, Vol. 33 (2013) , p. 94-100, ISSN 0264-9993

DOI: 10.1016/j.econmod.2013.03.025

Preprint 17 p, 1.1 MB

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