Leontief Input-Output Model in the Real World

IntroductionWassily Leontiefs name is associated with a particular type of numeric economics excitant-output compend (The New School, Profile of Wassily Leontief). The application of the dynamic input-output epitome serves as a guide in reviewing Leontief s contributions in devil of the most important aspects of economic ripening and structural change the breeding of standards of living and the effects of the mechanization of production processes on labor. The purpose of this relieve oneself is to familiarize the reader with the theoretical framework, verbalism and use of regional input-output models in the real world.The description of the analytical framework of an input-output model includes a word of honor 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 most of the inherent limitations and problems. Finally, some suggestions for effective use of the model will be proposed.Leontief went to Harvard in 1937, where, with the aid 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, based to be an important planning putz during World War II. For example, it showed that electric chair Roosevelts rash promise to deliver 50,000 planes to the Allied forces was unrea magnetic dipic, 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 sender of last use up by vault of heaven, I is an identity intercellular substance, 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 ar not necessarily make in other interindustry models. The most important of these be (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 laid entirely by the level of output of that sector (Leontief Input yield mannequin 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 triplet problems immediately. First, the input-output accounting involves gross output concepts, while the national account information 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 prob lems. A given aggregation into sectors may be valid for one purpose but not for another.The dynamic input-output analysis allows economists to develop a general equilibrium system that, moving from the know economic conditions of the base year, traces different realizable development paths of the economy, depending on the assumptions made on the proportions in which the national product is divided into consumption and investment, and on the investment coefficients in each sector. In his Nobel speech communication, Leontief asserted The subject of this lecture is the elucidation of a particular input-output view of the world economy.This formulation should run a framework for assembling and organizing the mass of factual data infallible to describe the world economy. Such a system is essential for a concrete understanding of the world economy as well as for a systematic mapping of the alternative paths along which it could move in the future (Leontief1973). Leontief s analysis fo cused on the consistency mingled with the targets and the distribution of resources around the world. Among the most important conclusions and policy implications of the analysis are the necessity to increase the target rates of growth of gross products in the less developed countries, if the objective of increasingly closing the gap amongst North and South has to be fulfilled the identification of political, social and institutional, more(prenominal) than physical, limits to sustained growth for the developing world and the important indication that the be of contamination abatement do not necessarily represent a threat for economic development.Input-output analysis is a useful and productive tool for regional analysis. It can provide important and timely information on the interrelationships in a regional economy and the impacts of changes on that economy. Thus, it can provide pertinent information about the impacts of economic growth and/or eliminate and the relative benefi ts and costs of alternative development strategies. Recently, the combination of a riches of economic development issues to which input-output analysis can be applied and increase availability of computerized input-output models have led to an increased interest in this technique. The study contribution that input-output concepts and data have made to the analysis of economic development was reflected both in the large number of Conference participants from developing countries and in the generous sponsorship provided by UNIDO. Jacob Kol considers the probable effects on employment in the European Community and a group of (relatively industrialized) developing countries of a equilibrate increase in trade in manufactures (McKinley 2000).ConclusionLeontief is one of the first economists who was deep concerned about the impact of unabated economic activities on the world(prenominal) environment. In his Nobel lecture, he outlined a simple input-output model where pollution was trea ted explicitly as a separate sector. His input-output analysis has buzz off a classic technique of economic behavior, and some go as far as comparing him with John Maynard Keynes. One would never deficiency to conclude a review of the contributions that Leontief offered to economic science, any possible list would always fall short of the overall substance to the reader, a cognitive content of search, even more than research, for some pattern, some code hidden tail end the surface of social and economic appearances, able to explain what happened and why, and what to expect, a message that springs from the synthesis of an immense and reasoned background which melts history, anthropology, philosophy, and certainly all the possible economic knowledge at the service of the humanity.Works CitedLeontief Input Output Model 17 January 2006. 19 September 2000 http//media.pearsoncmg.com/aw/aw_lay_linearalg_3/cs_apps/leontief.pdfLeontief Input-Output Model 18 January 2006 http//math.carle ton.ca/vdabbagh/leontief.pdfMcKinley, Turi. Wassily Leontief. 17 January 2006. tremendous 21-25, 2000 http//www.iioa.org/leontief/links.htmlThe New School, Profile of Wassily Leontief. 18 January 2006 http//cepa.newschool.edu/het/profiles/leontief.htmWassily Leontief Structure of the World providence Outline of the Simple Input-Output Formulation.17 January 2006. 11 December 1973 http//nobelprize.org/economics/laureates/1973/leontief-lecture.pdf