Lessons from the debate on Cole's model closure

Jan Oosterhaven

Papers in Regional Science, 2000, vol. 79, issue 2, 233-242

Abstract: Cole (1989, 1997, 1999) advocates the introduction of expenditure lags and the fullest possible closure of single-region input-output models. Jackson et al. (1997, 1999) claim that closing also with regard to the Rest-of-the-World leads to inconsistencies and zero exogenous demand, which makes impact studies impossible. Using somewhat different arguments I agree with them: endogenous interregional feedbacks are conceptually impossible outside a full interregional model. Two hardly discussed points, however, remain for further research. First, closing with regard to all other regional demand is precarious too, as it empirically and theoretically amplifies the one-sidedness of the demand-driven input-output model. Realistic impact studies ask for models including supply-side aspects. Second, adding expenditure lags is an improvement, but the way in which this can be done and should be done requires further theoretical development.

Keywords: Input-output analysis; social accounting; model closure; expenditure lags; supply effects (search for similar items in EconPapers)
JEL-codes: C67 D57 E17 R15 (search for similar items in EconPapers)
Date: 2000-05-18
Note: Received: December 1999
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Citations: View citations in EconPapers (6)

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