Difference between revisions of "Leontief Model"
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where | where | ||
| − | * x is the vector of output of endogenous accounts | + | * x is the column vector of output of endogenous accounts |
| − | * y the vector of | + | * y the column vector of [[Final Demand]] and |
| − | * A the so-called [[Technical Coefficient Matrix]], whose elements are the elements of the | + | * A, the so-called [[Technical Coefficient Matrix]], whose elements are the elements of the [[Transactions Matrix]] divided by the total of their corresponding column, |
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</math> | </math> | ||
| − | with <math>\mathrm{I}</math> defined as the identity matrix with the size of A. | + | with <math>\mathrm{I}</math> defined as the identity matrix (Kronecker delta) with the size of A. |
== Interpretation == | == Interpretation == | ||
| − | |||
In the demand-driven, upstream or Leontief model, a matrix of direct requirements <math>A</math> is defined as the inter-industrial flows <math>a_{ij}</math> from an industry i to an industry j per gross output of sector j. | In the demand-driven, upstream or Leontief model, a matrix of direct requirements <math>A</math> is defined as the inter-industrial flows <math>a_{ij}</math> from an industry i to an industry j per gross output of sector j. | ||
Revision as of 14:11, 18 September 2023
Definition
A Leontief Model is an economic model following the proposals of economist Wassily Leontief who developed a system of economic analysis (Input-Output Model) in the 1930s and 1940s. It is based on a linear economy assumption and demand-style economic modeling[1]
Formula
Starting with the market balance or Total Output equation
where
- x is the column vector of output of endogenous accounts
- y the column vector of Final Demand and
- A, the so-called Technical Coefficient Matrix, whose elements are the elements of the Transactions Matrix divided by the total of their corresponding column,
the Leontief inverse matrix 
is obtained, satisfying the condition 
.
with 
defined as the identity matrix (Kronecker delta) with the size of A.
Interpretation
In the demand-driven, upstream or Leontief model, a matrix of direct requirements 
is defined as the inter-industrial flows 
from an industry i to an industry j per gross output of sector j.
An element 
of the total requirements matrix, or Leontief inverse, L represents the amount of gross output from sector i that was produced to satisfy a unit of final demand y from sector j.
Usage
An important goal of IO analysis is to examine the interdependencies between production and consumption within an economy. Such analysis includes the flow of goods of services between the economy and the rest of the world and can be expressed in monetary or other measurement units.
