Rose: Input-Output Economics and Compuatable General Equilibrium Models

Rose, A., 1995. Input-output economics and computable general equilibrium models. Structural Change and Economic Dynamics, 6(3), 295-304.

“My experience is that economists trained before the mid-1970s readily appreciate and acknowledge Leontief’s work, while many of those trained scine, including those standing on his broad shoulders, have distanced themselves from input-output analysis. I refer primarily to those working in the area of computable general equilibrium (CGE) models” (296).

I-O models are crucial for the development of CGE models. Also, I-O models offer a different kind of analysis of market interaction and dependencies and are not based on assumptions of equilibrium or certain kind of actor behavior.

Footnote 3: “Most CGE models are based on a social accounting matrix (SAM), a framework developed by Stone (1966). A SAM is a matrix of interactions in the spirit of the production relationships of I-O, with a much greater emphasis on institution accounts” (296).

“Several features of I-O analysis clearly distinguish it form its precursors and continue to be of lasting value to its direct descendants and to other models” (297).

It is rooted in technological development. It bridges the divide between economists and business people/factory people. The simplicity of the table is a strength. Help facilitate discussions between private and public sector interactions. I-O accounting is used globally and is not political. I-O analysis accounts for all input factors in production, something that many neoclassical accounts do not.

I-O Myths:

I-O has no role for prices.
I-O is static.
*plus more, but I was only interested in the above

“One of the major areas of the relative advantage of CGE is international and interregional competition…Other areas of advantage of CGE models include tax policy, where behavioral considerations are crucial” (301).