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2022 | OriginalPaper | Buchkapitel

6. Cost-Push IO Price Models and Interaction with Quantities

verfasst von : Jan Oosterhaven

Erschienen in: Rethinking Input-Output Analysis

Verlag: Springer International Publishing

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Abstract

In the Type I single-region, cost-push IO price model, under full competition, exogenous primary input price changes are fully passed on to all intermediate users that fully pass them on further, resulting in endogenous total and final output price changes. In the Type II interregional price model, additionally, consumption price changes are fully passed on in wage rates, while domestic export price changes are fully passed on to importing regions. Finally, it is shown how the IO price model may be combined with the IO quantity model by adding demand and supply price elasticities and how supply and demand shifts are passed on from market to market, resulting in lower, more realistic price and quantity multipliers.

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Fußnoten
1
To see that, consider that all remaining primary input quantity multipliers of exogenous final demand are equal to one, i.e. \({\mathbf{i^{\prime}}}\,{\mathbf{C}}^{rem} \left( {{\mathbf{I}} - {\mathbf{A}} - {\mathbf{Q}}^{a} } \right)^{ - 1} = {\mathbf{i^{\prime}}}\), because \({\mathbf{i^{\prime}C}}^{rem} + {\mathbf{i^{\prime}A}} + {\mathbf{i^{\prime}Q}}^{a} = {\mathbf{i^{\prime}}}\). The same “equal to one” property holds for the identical remaining final demand price multipliers of remaining primary input prices. This implies that convergence is solely determined by the size of the elasticities. A sufficient condition for convergence is that all elasticities are smaller than unity. Consequently, the necessary condition for convergence will be that some weighted average of the demand elasticities as well as some weighted average of the supply elasticities is smaller than one. In an email of 24 April 2021 Bjarne Madsen reports that he never had a problem with convergence in the many versions and the many applications of LINE, which uses the same modelling approach.
 
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Metadaten
Titel
Cost-Push IO Price Models and Interaction with Quantities
verfasst von
Jan Oosterhaven
Copyright-Jahr
2022
DOI
https://doi.org/10.1007/978-3-031-05087-9_6