Fixed investment,factor substitution and the elasticity of demand

The results of comparative stability analysis of demand- and supply-side input–output models using the UK data are presented, as well as the results of the comparison between the UK and US comparative stability analyses of the two models. The results of comparative stability analysis of the two models using the US data were reported elsewhere (Bon, 1986). The forecasts of sectoral and total output of the two models are generated with known final demand and value added figures from subsequent tables, and are compared with known output figures for benchmark years. The results of the UK and US studies are very similar. The demand-side model performs somewhat better in terms of total output forecasts, but the supply-side model performs some-what better for a larger number of sectors. In particular, the supply-side model offers better forecasts for the mature economic sectors such as agriculture, mining, and construction. Both models should be used to determine the extent to which an extent to which an economy or a sector are demand- or supply-driven.