Are Input-Output Coefficients Really Fixed?

Marc Jim M. Mariano, George Verikios and Kenneth Clements
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Marc Jim M. Mariano: CSIRO

No 23-06, Economics Discussion / Working Papers from The University of Western Australia, Department of Economics

Abstract: It is standard practice to treat input-output (I-O) coefficients as fixed. We show this is unwarranted and offer a simple way of allowing for variable coefficients. Using 25 years of IO tables for Australia, we present prime facie evidence that coefficients change substantially. We show how a CES approach can be used to predict future values of the coefficients. Coefficients are fixed when the CES parameter 𝜎, the elasticity of substitution, is zero, a restriction mostly not supported by the Australian tables. Finally, using various values of 𝜎 in CGE simulations establishes that taking coefficients as fixed has misleading economic implications.

Keywords: Input-output analysis; index numbers; elasticity of substitution; CGE modelling (search for similar items in EconPapers)
JEL-codes: C13 C32 D57 D58 (search for similar items in EconPapers)
Pages: 45
Date: 2023
Note: MD5 = ea1eaf98028dc48d01f60b52ee27c76b
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Journal Article: Are input-output coefficients really fixed? (2025)
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