Prices and factor demand in an endogenized input–output model

Abstract

This paper combines factor demand functions and price equations derived from a Generalized Leontief cost function with the traditional input-output price model. At the first level of aggregation Generalized Leontief cost functions for the factors intermediate input and labour are set up for the manufacturing industries of the Austrian economy. These functions determine factor demand for materials and labour as well as output prices for given input prices. At the second level of aggregation the intermediate demand input is split up according to the input-output structure. There the repercussion of domestic prices on input prices as described in the traditional input-output-price model is taken into account. Model simulations reveal the link between the technical coefficients and the econometric equations for domestic prices, input prices and factor demand.

Global Circular Economy Scenario in a Multiregional Input–Output Framework

“…Theoretical models for this exist, see e.g. 52,55,56 , but empirical implementation is challenging and is still lacking.…”

“…Rather than parametrizing the success of measures (as is done here), a next step for future research is endogenizing the potential, through the use of dynamic input-output methods. These consider induced effects in the economy by endogenizing technological change and required investment50,55,56,[65][66][67] . This will give additional insights into the temporal dynamics, the links between possible secondary production, the capital and investments required for the production, and the material stocks becoming available for re-use.…”

Usefulness of Non-Linear Input—Output Models for Economic Impact Analyses in Tourism and Recreation

“…The inclusion of substitution did not lead to fundamentally different results. Based on this we might conclude that the application of a NLIO model does not add much value compared to the application of a traditional IO model (Kratena, 2005). However, our result also shows that for individual industries differences between models are substantial.…”

“…Third, researchers have integrated non-linearity into IO models by replacing the Leontief production function with other production functions, such as generalized Leontief (Frenger, 1978;Bonnici, 1983;Morrison, 1988;Kratena, 2005), Cobb-Douglas (Zhao et al, 2006), CES (Okushima and Tamura, 2009) or nested functions (Tokutsu, 1994;Zhang, 2008;Cardenete and Sancho, 2012). The use of these production functions, combined with capacity constraints in factor markets, results in price-induced input substitution.…”

Implicit Elasticities and Price Effects: An Updated Procedure

“…In addition to the approaches taken by Hudson and Jorgenson (1974), Tokutsu (1994), Kratena (2005), and Tamura (2007, 2009) reviewed in Casler (2011), Roson (1991) uses a general equilibrium model based on a constant elasticity of substitution (CES) production structure that allows for differences in substitution elasticities among industries. De Boer and Harkema (1993) use Hanoch's (1975) homogeneous constant differences of elasticities of substitution production function and estimate a 10 sector system of factor demand equations for the Netherlands.…”