Butok Ekaterina
Abstract
Introduction
Input-output analysis is a basic method of quantitative economics that portrays macroeconomic activity as a system of interrelated goods and services. In particular, the technique observes various economic sectors as a series of inputs of source materials (or services) and outputs of finished or semi-finished goods (or services). The field is most identified with the work of Wassily Leontief (1906-1999), who was awarded the 1973 Nobel Prize in Economics for his pioneering work in the area. Leontief once explained input-output analysis as follows: "When you make bread, you need eggs, flour, and milk. And if you want more bread, you must use more eggs. There are cooking recipes for all the industries in the economy." And hence, one industry's output is another's input, and the chain continues.
The goal of the investigation
The aim of this work lies in the rationale and implementation of methods for developing input-output table based on the use of economic-mathematical model of the multiplier, as well as construction and improvement of the method "IO" (Input-Output), macroeconomic interdependence, allowing to define and improve the efficiency of the economy as a whole and its individual components.
To achieve these goals requires the following tasks:
- Investigate and classify economic models;
- formulate the opportunity and conditions of use of the multiplier theory for practical calculations;
- Learn the basic concepts of the method of "IO".
Actuality of the graduation work theme
Deterministic input-output analysis has been applied to solving a variety of economic problems. Nevertheless, uncertainty plays an important role in decision-making and should be properly addressed in future input-output analysis.[1].
Expected practical value of the research
Obtain the dynamic trajectories of investments with varying parameters of the multiplier, as well as the formation of recommendations for the allocation, diversification of capital.
Survey of research and developments
Wassily Leontief brought up several generations of brilliant researchers. The future Nobel winners Paul A. Samuelson and Robert M. Solow were among his students at the Harvard University. The well-known experts, as Walter Izard, Hollis B. Chenery, Paul G. Clark, James S. Dusenberry, Leon N. Moses, Carolyn Allmon, Anne P. Carter, Karen R. Polenske, Peter Petri and many other researchers have passed through Leontief’s school at the Harvard laboratory. [4].
The International Input-Output Association's (IIOA) objective is the advancement of knowledge in the field of input-output analysis, including improvements in basic data, theoretical insights and modelling, and applications, both traditional and novel, of input-output techniques analysis. The Association fosters the exchange of ideas by arranging meetings and conferences, sponsoring a journal, providing a directory of members, encouraging the formation of, and communication among, regional and specialized input-output associations, cooperating with scholars in other fields and establishing contacts with enterprises, governments and international organizations interested in the use of multi-sectoral, multi-regional and multi-national modelling. [4].
Theoretical and methodological foundations of the research form of the theory and practice of achieving cross-sectoral analysis and modeling which reflected in the following studies of domestic and foreign economists and mathematicians: W. Leonyief, E. Baranov, W. Belkin, R. Beloysov, G. Klejner, B. Klimenko, F. Klotsvog, U. Yaremenko, С. Almon, P. de Boer, J. O'Brien, D. Jorgenson, M. Hatanaka, W. Krelle, M. Morishima, R. Preston, J. Sawyer, J. Schumann [5].
Brief description of own results
Ever wonder how the government can predict a deeper recession when the airline industry shrinks or why certain antiquated industries are subsidized by the government? Input-output analysis can be applied to any size economy from a business district to the entire world. It is most often used for city planning and analysis of our national economy. The Leontief Open Production Model provides us with a powerful economic analysis tool in the form of input-output analysis. Input-Output analysis the modern name for the process of manipulating a Leontief open production model [6].
Input-output analysis is a method of calculating income and employment multipliers which takes account of differences in technology between industries and of the linkages between industries. The data required is the input-output accounts for the region often referred to as the transactions matrix [7].
A standard input-output table contains an equal number of rows and columns, as depicted in Table 1, which is based on an early input-output table produced by Leontief in 1951. Following the construction of an annual input-output table, it is possible to derive a second table of input or technical coefficients. The term "technical coefficients" refers to the quantity of inputs required from each industry to produce one dollar's worth of a given industry's output. The coefficients can be denominated in either monetary or physical units. The basic formula for determining coefficients is
where aij= the input coefficient of industry i into industry j,
Xij= the amount of industryi 's output used by industry j, and
xj = the total output from industryj [8]
Yij = the final demand.
Final demand represents the total level of demand for products (of industries) by households, business and governments. This includes both consumer and capital goods and services. Also goods and services produced for consumption overseas, exports, are included here [9].
Using this formula, the coefficient aij can be obtained for all the industries in an input-output table.
Conclusions
Input-output analysis remains an active branch of economics, and one with numerous offshoots. Some of its most popular applications are those that Leontief helped pioneer, including national accounts and trade, environmental studies, and technological change forecasts. In addition to the many input-output studies published from time to time in general economics journals, there are a number of academic journals devoted specifically to input-output analysis. For economists who specialize in input-output work, there are also several professional associations worldwide, the most prominent being the International Input-Output Association (IIOA), based in Vienna, Austria. As of the late 1990s, the IIOA had some 300 individual members and 20 institutional members representing 49 nations.
Input-output analysis has sustained such interest in the professional community because of its versatility and its strong grounding in empirical evidence. While it is most associated with grand macroeconomic studies like those of Leontief, input-output analysis can be equally valuable to research on a single firm. And unlike some areas of economics, input-output analysis does not come with a great deal of theoretical baggage that is hard to prove in real life. Of course, it is susceptible to distortions from measurement error or inaccurate modeling, but its underlying strength lies in being driven by real data.
References
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- http://matekonomika.narod.ru/data/3.htm — Б.С. Малышев. Математическая экономия: Учебное пособие — Амурский государственный университет, 2003.
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- http://online.redwoods.cc.ca.us/instruct/darnold/laproj/fall2001/iris/lapaper.pdf — Iris Jensen. The Leontief Open Production Model or Input-Output Analysis
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- http://www.referenceforbusiness.com/encyclopedia/Inc-Int/Input-Output-Analysis.html — Reference for Business. Encyclopedia of Business
- http://www.nieir.com.au/yourPlace_IO/using_input_output_tables_in_analysis.htm — National Economics — National Institute of Economic and Industry Research
- Экономико-математические методы и модели: Учеб. пособие / Н. И. Холод, А. В. Кузнецов, Я. Н. Жихар и др.; Под общ. ред. А. В. Кузнецова. — Мн.: БГЭУ, 1999. — 413 с.
The abstract of the Master's work is not complete yet . The final completion in 1st December 2010. Full text of the work and materials on the topic can be obtained from the author or his head after that date.
