Regional input-output (I-O) analysis is traditionally motivated by a short-run, extreme Keynesian vision of markets. In this paper we argue that an appropriately formulated, investment-endogenous, I-O system replicates the long-run equilibria of a wide range of regional models, many of which do not operate as I-O systems in the short run. In particular, we use a computable general equilibrium (CGE) framework to illustrate the impact of an aggregate demand disturbance on an I-O and standard neoclassical model. When run forward over a number of periods, the results from the capacity-constrained neoclassical model asymptotically approach the I-O outcome. We use sensitivity analysis to examine the speed of adjustment of the neo-classical system and investigate barriers to the attainment of the I-O result.
|Number of pages||21|
|Journal||Journal of Regional Science|
|Publication status||Published - Aug 1996|
- regional input-output analysis