On the fallacy of forward linkages: A note in the light of recent results
AbstractFollowing on from de Mesnard’s (2009) radical criticism of the Ghosh supply-driven model, this paper draws the dramatic consequences for the widespread use of forward linkages in input-output analysis applied to regional science: the practice must be abandoned. The arguments are based on three points: (i) it is impossible simultaneously to choose the Leontief model for the backward effects and the Ghosh model for the forward effects; (ii) it is impossible simultaneously to consider a production function of complementary inputs (Leontief) and a production function of perfectly substitutable inputs (Ghosh); and most importantly (iii) price effects and output effects remain inextricably mixed in the Ghosh model, so precluding its use for analyzing forward effects on quantities or prices.
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Bibliographic InfoPaper provided by LEG, Laboratoire d'Economie et de Gestion, CNRS, Université de Bourgogne in its series LEG - Document de travail - Economie with number 2009-05.
Length: 13 pages
Date of creation: 2009
Date of revision:
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Forward linkage; Backward linkage; Leontief; Ghosh; Supply-driven;
Find related papers by JEL classification:
- C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
- D46 - Microeconomics - - Market Structure and Pricing - - - Value Theory
- D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods
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- Ana-Isabel Guerra & Ferran Sancho, 2010.
"A Comparison Of Input-Output Models:Ghosh Reduces To Leontief (But 'Closing' Ghosh Makes It More Plausible),"
450, Barcelona Graduate School of Economics.
- Ana-Isabel Guerra & Ferran Sancho, 2010. "A Comparison Of Input-Output Models:Ghosh Reduces To Leontief (But 'Closing' Ghosh Makes It More Plausible)," UFAE and IAE Working Papers 823.10, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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