# Leontief Input-Output Model In The Real World

Leontief Input-Output Model in the Real World

Introduction

Wassily Leontief 's name is associated with a particular type of quantitative economics : input-output analysis (The New School , Pro of Wassily Leontief . The application of the dynamic input-output analysis serves as a guide in reviewing Leontief s contributions in two of the most important aspects of economic development and structural change : the raising of standards of living and the effects of the mechanization of production processes on labor . The purpose of this work is to familiarize the reader with the theoretical framework

construction and use of regional input-output models in the real world The of the analytical framework of an input-output model includes a discussion of the components of the model , an analytic measures derived from the model , and the assumptions of the model . The work presents the phases of model planning , construction and use including some of the inherent limitations and problems . Finally , some suggestions for effective use of the model will be provided

Leontief went to Harvard in 1937 , where , with the help of a few graduate student assistants , he completed the construction of the first input /output model for the 1939 U .S . economy , which , despite its primitive nature , proved to be an important planning tool during World War II . For example , it showed that President Roosevelt 's rash promise to deliver 50 ,000 planes to the Allied forces was unrealistic , and the model indicated the bottleneck obstacles that must be first overcome

The Leontief input-output systems takes the form 3 .1-1 (I - A ) X F where F is the vector of final demand by sector , I is an identity matrix , A is the matrix of technical coefficients , and X is the vector of gross output by sector . The main purpose of the input-output model is to explain the magnitudes of the interindustry flows in terms of the levels of production in each sector . The Leontief input-output model also makes several special assumptions which are not necessarily made in other interindustry models . The most important of these are (1 ) that a given product is only supplied by one sector (2 ) that there are no joint products and (3 ) that the quantity of each input used in production by any sector is determined entirely by the level of output of that sector (Leontief Input Output Model 2000

The integration of the input-output model based on equation 3 .1-1 with the final demand model based on national income accounting poses three problems immediately . First , the input-output accounting involves gross output concepts , while the national account data published for most developing countries deals with value added concepts . The second problem in the transformation , is the lack of time series data on final demand deliveries by each sector unless input-output tables exist for all years . Third , it is not to be expected that such a simple system will prove useful for all kinds of problems . A given aggregation into sectors may be valid for one purpose but not for another

The dynamic...

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