A new approach for the input–output price model

This paper proposes a new approach to measure the impact of a sector's price shock on price indices. It works based on table adjustments to trace the effects of any initial price shock through an iteration process. It has the same accuracy and all the capabilities of the popular Standard Leontief Price (SLP) model. A distinct advantage of the new approach compared with the SLP model, however, is its ability to measure the impact of the initial price shock on all value-added components if and when it is required. This capability enables researchers to use interindustry price analysis to tackle problems of a more real-world nature. Other advantages of this approach are its simple computational implementation, especially relevant for larger size interindustry tables, the unified way to deal with all kind of different price issues, and the yielding of an adjusted interindustry table reflecting all endogenous price adjustments in response to the initial price shock.     

Simplifying the input–output analysis through the use of topological graphs

In this paper, we revise some ideas on Graph Theory and develop them to explain and determine three usual concepts of Input–Output Analysis: fundamental products, autonomous sets, and indecomposable matrices.Firstly, we define a digraph associated with the given economic system (i.e., with its technical coefficients matrix). Secondly, we consider topological properties of this graph to study the economical concepts previously mentioned. Thirdly, we describe different, original algorithms to make the calculations easier. Finally, we give an example from a real economy, Andalusia (a region in Spain).Along this paper, we also discuss the advantages of this new approach and present some ideas to ease its application in the future research.     

Estimating the economic costs of electricity deficit using input–output analysis: the case of Brazil

The objective of this article is to present a methodology to estimate the marginal cost of electric energy deficit in the long-term using input–output (I–O) analysis. We obtain a deficit marginal cost (DMC) curve that is not limited to a small number of levels, such as the curve used currently in Brazil, which is limited to four levels. The marginal cost of deficit is an important exogenous parameter used in the model’s chain to calculate the operation’s marginal cost and short-term market pricing. The electric energy deficit is a temporary lack of continuity in meeting demand, which is usually predictable and involves prior notice to the consumer. The cause of this deficit may be a lack of investment and/or low water inflows that impact the production of hydroelectric power plants. In this study, the marginal cost of the deficit is obtained from restrictions on the provision of electricity for productive sectors and by calculating the corresponding impact on the gross domestic product. The proposed methodology can be used with data from the I–O matrix of any country to estimate its marginal cost of electric energy deficit.     

Price–value deviations: further evidence from input–output data of Japan

This paper subjects to empirical testing the labour theory of value using input–output data from the economy of Japan for the years 1970, 1975, 1980, 1985 and 1990. The results of the analysis show that labour values and prices of production are extremely good approximations to market prices. In fact, the proximity of prices of production to market prices is closer than that of labour values, a result which suggests that prices of production constitute more concrete centres of gravitation for market prices. Furthermore, we find that prices of production change as a result of variations in income distribution more often than not in a monotonic way and that in fewer cases they display curvatures, which may even reverse the order between prices of production and values.     

Modeling input–output impacts with substitutions in the household sector: A numerical example

Although there have been many elaborations of the basic input–output approach, including multi-regional models, dynamic models, models with variable coefficients, supply-side models, etc., these approaches all have the same limitation. The fixed-coefficients production function assumptions ignore substitutions in response to price changes that can be expected to accompany most shocks— skipping over the heart and soul of market economics. This research note suggests a simple approach to estimating new technical coefficients matrices after a shock so that the consequences of short-term substitution effects can be studied. Given a reduction in income (as reflected in the value added row), households are likely to make substitutions, reducing their final demand by less than the application of base-year I–O coefficients would indicate. But if ex post changed income and consumption can be observed, the application of RAS procedures can generate an appropriately modified A matrix. The resulting set of interdependent substitutions that occurred can be identified. Due to some well known limits in applying the traditional RAS approach, we reformatted it and suggest a new economic model that can link coefficient adjustments to degrees of a priori substitutability and complementarity. Based on this resolution, we look forward to detailed studies of specific coefficients and how they evolve over the short term.     

Cointegration tests under multiple regime shifts: An application to the stock price–dividend relationship

We examine the properties of several residual-based cointegration tests when long-run parameters are subject to multiple shifts driven by an unobservable Markov process. Unlike earlier study, which considered one-off deterministic breaks, our approach has the advantage of allowing for an unspecified number of stochastic breaks. We illustrate this issue by exploring the possibility of Markov switching cointegration in the stock price-dividend relationship and showing that this case is empirically relevant. Our subsequent Monte Carlo analysis reveals that standard cointegration tests are generally reliable, their performance often being robust for a number of plausible regime shift parameterizations.     

Does the microsimulation approach used in macro–micro modelling matter? An application to the distributional effects of capital outflows during Argentina's Currency Board regime

We provide a novel comparison between the behavioural and the non-parametric microsimulation approach. Coupled with a CGE model, we consider the distributional effects of the significant capital outflows faced by the Argentinean economy at the end of its Currency Board, in a context with significant macroeconomic similarities to the present crisis in Greece. Both the relatively straightforward ‘non-parametric’ approach and the more complex behavioural approach lead to distributional results that are consistent with the data, suggesting that both are viable alternatives. Looking forward, it would be desirable for researchers to look for additional evidence regarding the distributional effects that these microsimulation models can illuminate for given macroeconomic shocks.     

A new approach to determining sectoral priorities in an economy: input–Output elasticities

This paper uses input–Output elasticities to identify important economic sectors. Elasticities of output employment and income are used to identify key sectors of the Greek economy. A comparison of the rankings of economic sectors based on input–output elasticities with those based on net backward linkages indicates significant divergence in sectoral rankings obtained from the two approaches. The elasticity approach yields more consistent estimates of sectoral output employment and income potentials than the net backward linkage approach. Measured in terms of the potential to generate output employment and income agriculture services and textiles are found to be the key sectors for the Greek economy.     

Why is it so difficult to outperform the random walk? An application of the Meese–Rogoff puzzle to stock prices

Some economists suggest that the Meese–Rogoff puzzle is equally applicable to the stock market, in the sense that no model of stock prices can outperform the random walk in out-of-sample forecasting. We argue that this is not a puzzle and that we should expect nothing, but this result if forecasting accuracy is measured by the root mean square error (RMSE) and similar metrics that take into account the magnitude of the forecasting error only. We demonstrate by using two models for dividend-paying and nondividend-paying stocks that as price volatility rises, the RMSE of the random walk rises, but the RMSE of the model rises even more rapidly, making it unlikely for the model to outperform the random walk.     

Applying physical input–output analysis to estimate land appropriation (ecological footprints) of international trade activities

In the last few years some studies have been presented, which link land use accounting and input–output analysis (based on monetary input–output tables (MIOTs)) for the calculation of direct and indirect land appropriation of production and consumption activities. The compilation of the first comprehensive physical input–output tables (PIOTs) for some western European countries in the 1990s opened new possibilities for linking physical accounting and input–output analysis. Using a physical multiplier for this kind of calculation is more appropriate, as the most land intensive sectors are also the sectors with the highest amounts of material flows. Physical input–output analysis illustrates land appropriation in relation to material flows of each of the sectors, which is more appropriate from the point of view of environmental pressures than land appropriation in relation to monetary flows of a MIOT. Physical input–output analysis has so far not been applied for any land-related studies. Based on a physical input–output model of the EU-15, physical input–output analysis is applied in this paper, in order to calculate direct and indirect land requirements for the production of exports from EU-15 to the rest of the world.     

Effects of changes in outputs and in prices on the economic system: an input–output analysis using the spectral theory of nonnegative matrices

The (physical) output adjustment model and the price adjustment model are presented. By the two models we quantitatively analyze the influences of alterations of one sectoral (physical) gross output and of one sectoral price on another sectoral (physical) gross output and on another sectoral price, respectively. Hence, a basic nature of the Ghosh inverse and a fundamental character of the monetary Leontief inverse are obtained. The proposition that a matrix of intermediate output (input) coefficients alters if the vector of output (price) adjustment coefficients is nontrivial holds, if and only if this matrix is C-irreducible. It is impossible that (i) the adaptation of output system causes all sectoral final output rates (or input multipliers) either to rise or to fall collectively, or (ii) an adjustment of price system causes all sectoral value-added rates (or output multipliers) either to increase or to decrease jointly. However, maybe (i) a change of output system enables some sectoral final output rates (or input multipliers) to rise (fall) and all others to be constant, and (ii) an alteration of price system enables some sectoral value-added rates (or output multipliers) to increase (decrease) and all others to be fixed, whose necessary and sufficient condition is that the matrix of intermediate output (or input) coefficients has at least one non-final (or non-initial) class. The proposition that the vector of final output rates (or input multipliers) changes if the vector of output adjustment coefficients is nontrivial is true, if and only if the matrix of intermediate output coefficients has only one final class. The proposition that the vector of value-added rates (or output multipliers) alters if the vector of price adjustment coefficients is nontrivial holds, if and only if the matrix of intermediate input coefficients has only one initial class. The necessary and sufficient conditions and the matching economic explanations for possibility and uniqueness of the economic adjustment that enables (i) all sectors to have a uniform final output rate (or input multiplier), and (ii) all sectors to have the same value-added rate (or output multiplier) are respectively given. I would like to thank an anonymous referee for helpful comments and suggestions.     

Unit root testing against an ST–MTAR alternative: finite-sample properties and an application to the UK housing market

A class of smooth transition momentum-threshold autoregressive (ST–MTAR) tests is proposed to allow testing of the unit root hypothesis against an alternative of asymmetric adjustment about a smooth nonlinear trend. Monte-Carlo simulation is employed to derive finite-sample critical values for the proposed test and illustrate its attractive power properties against a range of stationary alternatives. The empirical relevance of the ST–MTAR test is highlighted via an application to aggregate house price data for the UK. Interestingly, house prices are found to exhibit structural change characterized a fitted logistic smooth transition process, with the newly proposed ST–MTAR test providing the most significant results of the alternative smooth transition unit root tests available.     

The decomposition of disturbances to national output of China–the evidence of sectoral and regional shocks

Diversities and similarities in international consumption patterns are highlighted. A large body of data is used to identify cross-country consumption differences and to understand these in terms of the familiar utility-maximizing framework, in which observed differences in prices and incomes play the key role. Taken as a whole, the results reveal a surprising degree of similarity in international consumption patterns and support the idea that tastes are constant, at least with respect to broad commodity groups.     

A new approach to estimation of the R&D–innovation–productivity relationship

ABSTRACT

We apply a generalized structural equation model approach to the estimation of the relationship between R&D, innovation and productivity that focuses on the potentially crucial heterogeneity across sectors. The model accounts for selectivity and handles the endogeneity of this relationship in a recursive framework which allows for feedback effects from productivity to future R&D investment. Our approach enables the estimation of the different equations as one system, allowing the coefficients to differ across sectors, and also permits us to take cross-equation correlation of the errors into account. Employing a panel of Swedish manufacturing and service firms observed in three consecutive Community Innovation Surveys in the period 2008–2012, our full-information maximum likelihood estimates show that many key channels of influence among the model's components vary meaningfully in their statistical significance and magnitude across six different sectors based on the OECD classification on technological and knowledge intensity. These results cast doubt on earlier research which does not allow for sectoral heterogeneity.     

The intergenerational transmission of historical conflicts: An application to China’s trade

We study the legacy effect and transmission mechanisms of historical conflicts on contemporary trade. Using new data on the regional dispersion of civilian deaths due to massacres in the Sino-Japanese war (1931–1945), we find that local conflict intensity predicts international trade patterns of Chinese corporations three generations later. We further explore the transmission mechanism of collective war memory. Conflict intensity correlates with measures of anti-Japanese sentiments inferred from survey data and it appears to be transmitted both through war dramas in the mass media as well as official commemorations. We also find evidence that the trade-inhibiting effect increases with the time exposed to collective war memory.     

Public–private partnerships for the provision of public goods: Theory and an application to NGOs

When will a public good or service be provided by the government, when will it be provided by a NGO, and when will we see a private–public partnership? This paper provides a model where a typical public good requires different inputs which raises the possibility of partnerships to exploit comparative advantages of different parties. But hold-up problems due to contractual incompleteness in specifying tasks discourage separation of ownership and management. The fact that public goods have the property of non-rivalry and non-excludability and that NGOs tend to be non-profits drives our key results. We apply the framework to NGOs in developing countries which, in the last few decades, have been increasingly involved in various capacities in the provision of a wide range of public goods and services.     

Quasi-Monte Carlo methods in stochastic simulations: An application to policy simulations using a disequilibrium model of the West German economy 1960–1994

Different stochastic simulation methods are used in order to check the robustness of the outcome of policy simulations. The application of a macroeconometric disequilibrium model of the West German economy to a fiscal policy simulation is taken as an example. Due to nonlinearities arising from regime specific reactions inside the model, confidence intervals for the simulation results have to be obtained by means of stochastic simulations. The robustness of the results is assessed using different methodologies. In particular, different methods for the generation of uniform error terms and their conversion to normal variates are applied. These methods include standard approaches as well as quasi-Monte Carlo methods. First version received: May 1998/final version accepted: August 1999     

Original Research A modified method for estimating volume–outcome relationships: application to percutaneous coronary intervention

Objective: The objective of the current study was to propose an alternative method for measuring individual operator and peer volumes to use as predictors for adverse outcomes.

Study design: A retrospective analysis was performed to assess the volume–outcome relationship for percutaneous coronary intervention (PCI) performed in New York State between 1996 and 1999. This relationship was calculated using a modified method whereby physician volume was calculated using the previous year's volume, and hospital volume was calculated after subtracting the operator of interest's annual volume from the total. The primary outcome of interest was in-hospital mortality.

Results: Using the modified method, the odds ratio (OR) of in-hospital mortality was 0.74 (95% confidence interval (CI) 0.55–0.99; p=0.04) for cardiologists who performed 75–174 procedures annually and 0.80 (95% CI 0.61–1.04; p=0.1) for cardiologists who performed ≥175 procedures annually compared with the lowest-volume operators. With the conventional approach to volume measurement, no relationship between cardiologist volume and mortality was found. Patients who underwent PCI in hospitals where their physician's peers had an annual volume of 600–999 or ≥1,000 cases had a significantly reduced odds of mortality (OR = 0.73; 95% CI 0.57–0.92; p=0.01; and OR = 0.77; 95% CI 0.62–0.95; p=0.01) compared with patients treated by physicians with an annual peer volume of <600 cases. The conventional method did not detect any significant correlation between hospital volume and in-hospital mortality.

Conclusion: The alternative approach to measuring cardiologist and peer volumes proposed in this study leads to more precise estimates of volume–outcome relationships than the conventional approach.     

A scenario analysis of China's land use and land cover change: incorporating biophysical information into input–output modeling

This paper assesses how the widely perceived changes in the economy and society of China will affect future land use at the regional level. It also shows the consequences of these changes on future inter-regional and international trade flows of land-based products. In order to conduct an integrated and consistent assessment, we develop a mixed input–output model characterized by strong biophysical linkages and the incorporation of supply-constraints to the major land-consuming sectors. The spatial aspect of the assessment is provided by a number of fairly large and detailed geographical databases implemented in a geographical information system, including biophysical attributes of land and demographic distribution.