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Leontief versus Ghosh: two faces of the same coin

  • Antonio Manresa

    ()

    (Departament de Teoria Econòmica, Universitat de Barcelona, Spain)

  • Ferran Sancho

    ()

    (Department of Economics, Universitat Autònoma de Barcelona, Spain)

In this paper we explore the sectoral and aggregate implications of some endogeneization rules (i.e. on value-added and final demand) which have been common in the Leontief model and have been recently proposed in the Ghosh model. We detect that these rules may give rise in both models to some allegedly pathological behavior in the sense that sectoral or aggregate output, very often, may not follow the logical and economically expected direct relationship with some underlying endogenous variables—namely, output and value-added in the Ghosh model and output and consumption in the Leontief model. Because of the common mathematical structure, whatever is or seems to be pathological in the Ghosh model also has a symmetric counterpart in the Leontief model. These would not be good news for the inner consistency of these linear models. To avoid such possible inconsistencies, we propose new and simple endogeneization rules that have a sound economic interpretation.

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File URL: http://www.pcb.ub.edu/xreap/aplicacio/fitxers/XREAP2012-18.pdf
File Function: First version, 2012
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File URL: http://www.pcb.ub.edu/xreap/aplicacio/fitxers/XREAP2012-18.pdf
File Function: Revised version, 2012
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Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number XREAP2012-18.

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Length: 34 pages
Date of creation: Oct 2012
Date of revision: Oct 2012
Handle: RePEc:xrp:wpaper:xreap2012-18
Contact details of provider: Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques i Empresarials, Universitat de Barcelona, c/ Tinent Coronel Valenzuela, 1-11, 08034 Barcelona
Phone: +34+934039653
Web page: http://www.pcb.ub.edu/xreap
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