On The Use and Misuse of Input-Output Based Impact Analysis in Evaluation
AbstractEstimates of economic activity generated and jobs created that are derived using input-output analysis are often presented in program evaluations and confused with the benefits resultin g from die program. Two such cases are presented as examples. We argue that for two main reasons this type of analysis con stitutes a misuse of input-output analysis. First, input-output estimates generated using the Keynesian closed versions of input-output models are biased upwards because they ignore the price and financial feedbacks that tend to reduce multipliers in macro-economic models. Second, and more important, it is inappropria te to consider induced effects resulting from a particular program in isolation, because such effects can only be properly considered in the aggr egate at th e level of overall stabilization policy. In this paper we contend that cost-benefit analysis, with its assumption of full employment, is the most appropriate tool for analyzing the benefits resulting from particular programs. Input-output analysis should be confin ed to providing estimates of die industr ial or regional breakdown of the direct impact of a program or of the employment impacts of program spending. It should not be used to generate Keynesian multipliers.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 22063.
Date of creation: 12 May 1986
Date of revision:
Publication status: Published in The Canadian Journal of Program Evaluation 2.3(1988): pp. 49-61
input-output analysis; Keynesian multiplier; evaluation;
Find related papers by JEL classification:
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
- C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
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- Chun-Yan Kuo, 1997. "Evaluating the Social Cost of Job Creation," Development Discussion Papers 1991-12, JDI Executive Programs.
- Rebecca Bess & Zoë O. Ambargis, 2011. "Input-Output Models for Impact Analysis:Suggestions for Practitioners Using RIMS II Multipliers," BEA Working Papers 0081, Bureau of Economic Analysis.
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