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On the fallacy of forward linkages: A note in the light of recent results

  • Louis de Mesnard

    ()

    (LEG - CNRS UMR 5118 - Université de Bourgogne)

Following 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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Paper 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.

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Length: 13 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:lat:legeco:e2009-05
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