Prague Economic Papers 2018, 27(4):494-502 | DOI: 10.18267/j.pep.657

A Nonlinear Supply-Driven Input-Output Model

Nooraddin Sharify
Department of Economics, University of Mazandaran, Babolsar, Iran (nsharify@umz.ac.ir)

One of the major limitations of the supply-driven input-output (I-O) Ghosh model concerns its linear production function. Using the I-O table, this paper replaces the linear production function with the Cobb-Douglas (CD) production function within the supply-driven model. The two models are compared both theoretically and empirically. Nonlinear production function, relative substitutability of primary factors, and variability of the proportion of intermediate inputs over product levels are the characteristics of the proposed model. The consideration of sectors' Solow residual as Total Factor Productivity (TFP) of sectors is yet another characteristics of the proposed model. The model is also plausible in value added and supply shock computations.

Keywords: nonlinear input-output model, Cobb-Douglas production function, Ghosh model, plausible supply-driven input-output model
JEL classification: C63, C67, E27

Published: August 1, 2018  Show citation

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Sharify, N. (2018). A Nonlinear Supply-Driven Input-Output Model. Prague Economic Papers, 27(4), 494-502. doi: 10.18267/j.pep.657
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