Supply‐Driven Input‐Output Multipliers

Abstract

The paper raises and discusses issues related to the derivation, behaviour and characteristics of input‐output multipliers where the exogenous changes are not assumed in elements of final demand but in total outputs of sectors and commodities. These multipliers are more appropriate for use in impact analysis of policies which influence farm outputs, than the traditional final demand multipliers. The paper estimates also such “supply‐driven” multipliers for 16 farm commodities of US agriculture. The empirical analysis shows that despite the variability in the multipliers' values, two rather solid groups of commodities which feel the strongest impacts of different crop and livestock output changes respectively, can be found. Several commodities are common to both groups, verifying also the significance of some indirect linkages between farm and non‐farm commodities. However, the final demand sectors absorb the largest part of the initial exogenous change itself.

Interconnectedness and interdependencies of critical infrastructures in the US economy: Implications for resilience

“…Based on this previous work, Johnson and Kulshreshtha proposed a detailed methodology to exogenize a given set of outputs [74,75]. Mixed-models have been used previously for various purposes.…”

International Trade and Real Transmission Channels of Financial Shocks in Globalized Production Networks

“…As previously mentioned, the resulting negative demand-driven secondary shocks can be modelled individually using traditional Leontief model (final demand impulses), or by capturing the backward (demand) sectoral effects of supply-driven multipliers (Papadas and Dahl, 1999). Annex 2 explores the relationship between the initial supply impulse and the secondary demand shocks.…”

“…In order to avoid this loop effect, Papadas and Dahl (1999) have suggested splitting the I-O matrix into exogenous and endogenous sectors, and have captured the backward sectoral impacts of supply-driven multipliers only on the non-exogenized sectors. When the production of sector n is altered exogenously, the backward effects are felt by the sectoral outputs (different from n) which are used as inputs by n 27 .…”

Economic impacts of TAC regulation: A supply-driven SAM approach

“…She then proposes that forward impacts be estimated from the value-added driven Ghosh (1958) model. Papadas and Dahl (1999) in a study on US agriculture discussed the effects of exogenous changes in sectoral total outputs rather than final demands within an IO framework, differentiating explicitly between activities and commodities (Stone, 1962). The paper by Leung and Pooley (2002) again raises the point of supply-driven vs. final-demand-driven multipliers in a study on the economic importance of longline fisheries in Hawaii and also compares backward and forward linkages.…”

“…The use of this terminology in the present context is quite obvious(Papadas and Dahl, 1999;Leung and Pooley, 2002). However, it should not be confused with Ghoshian value-added multipliers(Ghosh, 1958) sometimes also referred as "supply-driven" in the literature.…”