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The Demand Driven and the Supply-Sided Input-Output Models. Notes for the debate

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  • AROCHE REYES, FIDEL
  • MARQUEZ MENDOZA, MARCO ANTONIO

Abstract

The demand-driven version of the open Input-Output model determines production as a function of final demand, given the production technology. On the contrary, in the supply-sided version, value added determines output and producers must induce sales in order to achieve a desired level of income. This latter version of the model has been criticised and even rejected on the bases of its implausibility, its difficult interpretation and its bizarre implications. This paper argues however that the logic of the supply-side model is not mathematically at odds with Leontief’s arguments. Rejection of the model is a matter of theoretical interpretation.

Suggested Citation

  • Aroche Reyes, Fidel & Marquez Mendoza, Marco Antonio, 2013. "The Demand Driven and the Supply-Sided Input-Output Models. Notes for the debate," MPRA Paper 61132, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:61132
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    References listed on IDEAS

    as
    1. Miller,Ronald E. & Blair,Peter D., 2009. "Input-Output Analysis," Cambridge Books, Cambridge University Press, number 9780521517133.
    2. Miller,Ronald E. & Blair,Peter D., 2009. "Input-Output Analysis," Cambridge Books, Cambridge University Press, number 9780521739023.
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    6. Louis De Mesnard, 2009. "Is The Ghosh Model Interesting?," Journal of Regional Science, Wiley Blackwell, vol. 49(2), pages 361-372, May.
    7. Bon, Ranko, 1986. "Comparative stability analysis of demand-side and supply-side input-output models," International Journal of Forecasting, Elsevier, vol. 2(2), pages 231-235.
    8. Leroy P. Jones, 1976. "The Measurement of Hirschmanian Linkages," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(2), pages 323-333.
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    Cited by:

    1. Kim, Dongseok, 2021. "Measuring the Impact of a Trade Dispute with a Supply-side Shock Using a Supply-driven Input-Output Analysis: Korea-Japan Dispute Case," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 43(1), pages 29-52.
    2. Juhyun Oh & Dong Hee Suh, 2019. "The Industrial Linkages and Supply Effects of the U.S. R&D Sector: Comparison with OECD Countries," Social Sciences, MDPI, vol. 8(3), pages 1-10, March.
    3. Pablo Aníbal Beltrán Romero & Santiago Estuardo Pozo Rodríguez & Patricio Cárdenas Jaramillo, 2017. "Effectiveness Of State-Driven Productive Reconversion: A Case Study Of The Shift On Production Matrix In Ecuador," Journal of Smart Economic Growth, , vol. 2(2), pages 83-103, September.
    4. Jungseok Choi & Woohyoung Kim & Seokkyu Choi, 2021. "The Economic Effects of China’s Distribution Industry: An Input-Output Analysis," Sustainability, MDPI, vol. 13(6), pages 1-13, March.

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    More about this item

    Keywords

    Input-Output model; demand-driven model; supply-driven model; Leontief; Ghosh; balanced growth;
    All these keywords.

    JEL classification:

    • B29 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Other
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models

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