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A non-linear Leontief–type input-output model

Michaelides, Panayotis G. and Belegri-Roboli, Athena and Markaki, Maria (2012): A non-linear Leontief–type input-output model.

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Abstract

In this paper, we present an econometric model based on Leontief’s IInput–Output (IO) approach. In this context, the paper puts forward an econometric approach to estimating an IO Leontief – type coefficients matrix which has several advantages and constitutes an extension to the standard IO model. Analytically, the original model is a description of the situation when (i) linear relations express the production process of each sector, (ii) each sector experiences constant returns to scale, and (iii) the technical coefficients in the conventional IO table are fixed for several years and based on a-priori calculations using traditional survey methods made by practitioners, and not on econometric estimations using real–world data on economic aggregates. The proposed method’s main advantage is its simplicity, flexibility, and capability of including real-world information on economic aggregates that could also be used as a portion of a dynamic model. Measures such as Returns to Scale (RTS), Total Factor Productivity (TFP), and Technical Efficiency (TE) may be computed easily.

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