Leontief and Ghosh Models

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Leontief and Ghosh Models
Master Économie et Affaires Internationales

• Modèles de Simulation
• Université Paris IX Dauphine
• Prof. Rafael de Arce

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Statistics Input OutputDestination Tables
products and branches
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Statistics Input OutputOriginsTables
products and branches
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Classical Input-Output Structure
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Leontief Prices Model (I)

• Production Coefficients demand of sector i
  from sector j over total production in sector
  i. Cost structure of each sector
  (interdependence between sectors)

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Leontief Prices Model (II)

• The total demand of each sector could be
  computed subtracting from its production, the
  part delivered to the other sectors, that also,
  could be computed using the production
  coefficient that we have described before. The A
  Matrix is composed by all of these coefficients.

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Leontief Prices Model (III)

• From the previous equation, we can easily
  obtain the Leontief Inverse Matrix that will be
  a powerful tool to simulate the effect of changes
  in demand over the total production in a country

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I-O Model ImplementationProduction Efect
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I-O Model Implementation Demand Efect
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Value Added and Employment Generation from the
Leontief Model Static vs. Dynamic coefficients
of VA and Employment
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Ghosh VA Model (I)

• Distribution Coefficients sells of sector
  i to intermediate (other sectors) and final
  demand (consumption, investment, exports) over
  total production in sector i. Distribution
  structure of each sector (interdependence between
  sectors)

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I-O Ghosh Model ImplementationProduction Efect
NEW DIRECT VALUE ADDED
VA(I-D)-1 (TrMIVA)D(I-D)-1
? BRANCHES PRODUCTION (DIRECT INDIRECT)
Value added Coefficient.
? TOTAL VALUE ADDED (DIRECT INDIRECT)