From Basic IO and SU Models to Demo-economic Models

What is it about?

A Social Accounting Matrix (SAM) is shown to represent the ideal data set to endogenize household consumption, as it contains a full description of the generation, redistribution and spending of income. The Type II multipliers and Type II spillovers of an interregional SAM model are both larger than those of the standard, Type I model, whereas exogenous final demand is smaller. They are shown to represent an upper limit for the true multipliers. Type III multipliers are smaller, as income growth of existing jobs needs to be multiplied with smaller marginal instead of average consumption/output ratios. Type IV multipliers are even smaller, as they include the feedback of employment growth on unemployment benefits. Endogenizing remaining final demand leads to ever larger, less plausible multipliers.

Featured Image