2. Elements of Input-Output Analysis

Abstract

Input-output analysis is a branch of econometrics, and the technical literature in the field draws heavily on the arcana of mathematics. For the beginning student of economics, and perhaps even for some professional economists, the mathematical nature of the literature has been a barrier. The present book covers the essentials of input-output analysis entirely in nonmathematical terms, although a certain amount of arithmetic is used to illustrate various steps in the analysis. For those who are interested, the last chapter includes a description of the model in elementary mathematical terms and the rudiments of matrix algebra needed to understand the description. The final chapter is largely independent of the remainder of the book - it can be read first or last, or it can be ignored entirely if one is content to accept some of the conclusions reached in earlier chapters without a mathematical demonstration. It should be emphasized that this volume deals with input-output analysis rather than with the statistical problems involved in the construction of an input-output table. It is designed to give the reader an understanding of how the input-output system works; it is not a guide to the construction of an interindustry transactions table.

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