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).

Pyatt and Round: Accounting and Fixed Price Multipliers in a SAM Framework

Pyatt, Graham and Jeffery I. Round. (1979). Accounting and Fixed Price Multipliers in a Social Accounting Matrix Framework (Vol. 89, 850-873): Blackwell Publishing for the Royal Economic Society.

“This paper is concerned with the relationships between output, factor demands and income, and the decomposition of these relationships into separate effects as suggested by the structure of a social accounting matrix representation of flows between them” (850). This SAM will be able to describe the behavior between three different matrices in one matrix.

“Factors of production receive income from domestic production…which in turn is distributed to households and companies…and as net factor income payments from abroad…Factor incomes received by households include wages, unincorporated business profits, and rent on dwellings…but households also receive distributed profits from the corporate sector…and transfers from government…before arriving at total household income. Similarly, corporate enterprises receive factor incomes in the form of gross profits…as well as current transfers from government…government income is derived from direct tax payments and other transfers by households…corporate enterprises…and from the rest of the world…as well as intra-government transfers…together with net indirect tax payments…shown as a receipt from a special indirect tax account. The expenditures on domestically produced commodities are shown in the row of account 4. They include outlays by household…government…investment…and the rest of the world…as well as intermediate transactions between production activities…Indirect taxes on all of these expenditures, and purchases of imported goods, are shown as separate outlays by the various spending units. …Finally, outlays on domestic investment…are matched by domestic and foreign savings…where the later…is the final balancing item in the rest of the world accounts” (854-4).

”To move from a SAM to a model structure requires that each account should be designated as endogenous or exogenous” (855).

Defourny and Thorbecke: Structural Path Analysis and Multiplier Decomposition within a SAM framework

Defourny, Jacques and Erik Thorbecke. (1984). Structural Path Analysis and Multiplier Decomposition within a Social Accounting Matrix Framework (Vol. 94, 111-136): Blackwell Publishing for the Royal Economic Society.

“The main purpose of this paper is to apply structural path analysis to a SAM framework” (111).

Figure 1 shows a matrix of interaction between three distinct types of economic activity: Productive activities, factors and institutions (113). This interaction is represented within a SAM. A SAM must also be able to take into account both endogenous and exogenous factors of modeling (114). Exhaustive SAMs are presented.

Structural path analysis involves the exploration of the methods by which one action eventually arrives at its conclusion. There are different poles involved in the structural path of an action and its outcome based on the structure in that it is embedded. This structural path method is applied to the earlier SAM example: South Korea.

Vos: Accounting for the World Economy

Vos, Rob. (1988). "Accounting for the World Economy". Review of Income and Wealth, 35(4).

This paper proposes a World Accounting Matrix (WAM) for exploring the inadequacies of current accounting methods. There should technically be a 0 balance for international trade, but this is clearly not the case. The WAM is here to help solve that problem. WAM, “…shows how internal savings and investment balances, trade and factor payments and external financial transactions can be presented in an integrated matrix system, registering all entries on a source-user basis and allowing for a consistent treatment of stock and flow variables within the same data system. It will be argued that such a system of accounts allows for the integration of different data systems and a permanent cross-checking on statistical inconsistent ices. This would lead to a substantial improvement in the reliability of the data on the world economy” (391).

The WAM structure is then outlined as well as an example given for 1980.