Leontief versus Ghosh: two faces of the same coin

Antonio Manresa and Ferran Sancho

No XREAP2012-18, Working Papers from Xarxa de Referència en Economia Aplicada (XREAP)

Abstract: In this paper we explore the sectoral and aggregate implications of some endogeneization rules (i.e. on value-added and final demand) which have been common in the Leontief model and have been recently proposed in the Ghosh model. We detect that these rules may give rise in both models to some allegedly pathological behavior in the sense that sectoral or aggregate output, very often, may not follow the logical and economically expected direct relationship with some underlying endogenous variables—namely, output and value-added in the Ghosh model and output and consumption in the Leontief model. Because of the common mathematical structure, whatever is or seems to be pathological in the Ghosh model also has a symmetric counterpart in the Leontief model. These would not be good news for the inner consistency of these linear models. To avoid such possible inconsistencies, we propose new and simple endogeneization rules that have a sound economic interpretation.

Keywords: demand-driven model; supply driven model; extended linear models. (search for similar items in EconPapers)
Pages: 34 pages
Date: 2012-10, Revised 2012-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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http://www.xreap.cat/RePEc/xrp/pdf/XREAP2012-18.pdf First version, 2012 (application/pdf)
http://www.xreap.cat/RePEc/xrp/pdf/XREAP2012-18.pdf Revised version, 2012 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:xrp:wpaper:xreap2012-18

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