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Input Output

University Mathematics is 100% positioned to meet the demands of undergraduate, postgraduate and professional exams. The book is capable and remarkable, giving students a good grounding in real-world mathematical applications. Inside you will find: • Simplified explanations step by step. • Solved examples of varying difficulties. • Plenty of workouts, fill-in-the-blanks and multiple-choice questions. Every student and every classroom will vastly benefit from University Mathematics.

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33 views3 pages

Input Output

University Mathematics is 100% positioned to meet the demands of undergraduate, postgraduate and professional exams. The book is capable and remarkable, giving students a good grounding in real-world mathematical applications. Inside you will find: • Simplified explanations step by step. • Solved examples of varying difficulties. • Plenty of workouts, fill-in-the-blanks and multiple-choice questions. Every student and every classroom will vastly benefit from University Mathematics.

Uploaded by

Olaniyi Evans
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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14

INPUT-OUTPUT
ANALYSIS

CONTENTS
Input-Output Table 182
Basic Derivation 182
Practiced Examples 184

Input-output analysis is a macroeconomic analysis based on the


interdependencies between economic sectors or industries. It was developed by
Wassily Leontief, who won the Nobel Prize in Economics for his work in this area.
It is used in economic projections of demand, employment, investment and
output for the individual sectors of the economy; study of technological change
and its effects; analysis of the effects of changes in wage, profit, and tax on prices;
and study of economic relationships, use of natural resources, and development
planning.

I N PU T -O U T PU T T A B LE
An input-output table describes the flow of goods and services between the
sectors of an economy over a period of time. Table 14.1 shows an input-output
table describing an economy. Sectoral inputs are recorded column-wise and
outputs, row-wise. The nine entries (𝐴𝑖𝑗 ) in the main body of the table are the
intersectoral flows. Of the total output of sector 1, A11 is used up in the sector 1
itself, A12 is absorbed, as one of its inputs, by sector 2, A13 is taken by sector 3 and
F1 is absorbed by final consumers (households). The second and the third rows
similarly describe the allocation of the outputs of the two other sectors. Primary
inputs comprise capital and labour.

B A S IC D E R I V A T IO N
Table 14.1 depicts inter-industry relationships within the economy, showing how
output from one sector may become an input to another sector. In the inter-
sectoral matrix, each sector uses a particular proportion of output to meet its
input needs as also those of other sectors. It uses the rest to satisfy the final
demand. The input coefficient of sector i into sector j is the quantity of the output
of sector i absorbed by sector j per unit of j’s total output. The input coefficient
may be expressed as
Chapter 14| Input-Output Analysis 183

𝑨𝒊𝒋
𝒂𝒊𝒋 =
𝑿𝒋

Where, 𝑎𝑖𝑗 is the input coefficient, 𝐴𝑖𝑗 refers to the inputs of the jth sector from
the ith sector and, 𝑋𝑗 , the total output of the jth sector.

Table 14.1 Input-Output Table

Final Total
1 2 3
Demand Output

1 A11 A12 A13 F1 X1

2 A21 A22 A23 F2 X2

3 A31 A32 A33 F3 X3


Primary Inputs x1 x2 x3
Total Inputs X1 X2 X3

We can have a matrix of coefficients (or technology matrix or input-output


matrix),
𝑎11 𝑎12 𝑎13
𝐴 = [𝑎21 𝑎22 𝑎23 ]
𝑎31 𝑎32 𝑎33

Generally, in any economy, the output of the sectors is given by

𝑿 = (𝑰 − 𝑨)−𝟏 𝑭

𝑋1
Where the outputs, 𝑋 = [𝑋2 ];
𝑋3

The Leontief matrix is


1 0 0 𝑎11 𝑎12 𝑎13
(𝐼 − 𝐴) = [0 1 0] − [𝑎21 𝑎22 𝑎23 ]
0 0 1 𝑎31 𝑎32 𝑎33
𝐹1
The final demand, 𝐹 = [𝐹2 ].
𝐹3
184 Olaniyi Evans | University Mathematics

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