The Role Of Supply Constraints In Multiplier Analysis
AbstractMultiplier analysis based upon the information contained in Leontief's inverse is undoubtedly part of the core of the input--output methodology and numerous applications and extensions have been developed that exploit its informational content, both at the national and regional levels. Nonetheless there are some implicit theoretical assumptions whose policy implications need to be assessed. This is the case for the ‘excess capacity’ assumption, which implies that resources are available as needed to adjust production to new equilibrium states. In an actual economy, however, new resources are often scarce and always costly. When supply constraints intervene, the assessment of the effects of government demand policies may be substantially different from that of the standard Leontief multiplier matrix. Using a closed general equilibrium model that incorporates supply constraints, we perform some simple numerical exercises and proceed to derive two ‘constrained’ multiplier matrices, based upon the implicit Jacobian matrix, that can be compared with the standard ‘unconstrained’ Leontief matrix.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Economic Systems Research.
Volume (Year): 24 (2012)
Issue (Month): 1 (June)
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Other versions of this item:
- M. Alejandro Cardenete & Ferran Sancho, 2010. "The Role of Supply Constraints in Multiplier Analysis," UFAE and IAE Working Papers 805.10, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- M. Alejandro Cardenete and Ferran Sancho, 2010. "The Role of Supply Constraints in Multiplier Analysis," Working Papers 432, Barcelona Graduate School of Economics.
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
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