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On the fallacy of forward linkages: A note in the light of recent results

Louis de Mesnard ()

No 2009-05, LEG - Document de travail - Economie from LEG, Laboratoire d'Economie et de Gestion, CNRS, Université de Bourgogne

Abstract: Following on from de Mesnard’s (2009) radical criticism of the Ghosh supply-driven model, this paper draws the dramatic consequences for the widespread use of forward linkages in input-output analysis applied to regional science: the practice must be abandoned. The arguments are based on three points: (i) it is impossible simultaneously to choose the Leontief model for the backward effects and the Ghosh model for the forward effects; (ii) it is impossible simultaneously to consider a production function of complementary inputs (Leontief) and a production function of perfectly substitutable inputs (Ghosh); and most importantly (iii) price effects and output effects remain inextricably mixed in the Ghosh model, so precluding its use for analyzing forward effects on quantities or prices.

Keywords: Forward linkage; Backward linkage; Leontief; Ghosh; Supply-driven (search for similar items in EconPapers)
JEL-codes: C67 D46 D57 R12 R15 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2009
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