Title: THE ROLE OF SUPPLY CONSTRAINTS IN MULTIPLIER ANALYSIS
Authors: CARDENETE FLORES MANUEL ALEJANDROSANCHO Ferran
Citation: ECONOMIC SYSTEMS RESEARCH vol. 24 no. 1 p. 21-34
Publisher: TAYLOR & FRANCIS LTD.
Publication Year: 2012
JRC N°: JRC66349
ISSN: 0953-5314
URI: http://www.tandfonline.com/doi/full/10.1080/09535314.2011.615824
http://publications.jrc.ec.europa.eu/repository/handle/JRC66349
DOI: 10.1080/09535314.2011.615824
Type: Articles in Journals
Abstract: Multiplier analysis based upon the information contained in Leontief's inverse is undoubtedly part of the core of the input-output methodology and numerous applications and extensions have been developed that exploit its informational content, both at the national and regional levels. Nonetheless there are some implicit theoretical assumptions whose policy implications need to be assessed. This is the case for the 'excess capacity' assumption, which implies that resources are available as needed to adjust production to new equilibrium states. In an actual economy, however, new resources are often scarce and always costly. When supply constraints intervene, the assessment of the effects of government demand policies may be substantially different from that of the standard Leontief multiplier matrix. Using a closed general equilibrium model that incorporates supply constraints, we perform some simple numerical exercises and proceed to derive two 'constrained' multiplier matrices, based upon the implicit Jacobian matrix, that can be compared with the standard 'unconstrained' Leontief matrix.
JRC Institute:Institute for Prospective Technological Studies

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