The Input-Output Model

Lecture notes by the unit lecturer on the input-output model, the technique developed by Wassily Leontief and also called inter-industry analysis, used to map inter-industry relationships so as to understand the interdependence and complexity of an economy and the conditions for keeping supply and demand in equilibrium. Sets out its basic features: concern with production only, the question of how much of each input must be used up for a given output of a commodity under a given supply of productive factors and state of technology, and its character as an empirical investigation. Describes the four quadrants of the transactions table, with the rows of each industry showing sales to all others and the columns showing its purchases, the third quadrant of primary inputs and the fourth of final demand, and the key identity that each industry's row total equals its column total. Closes on the uses of the model, including analysis of import requirements and substitution possibilities from the split between domestic and imported materials, and the direct requirements of capital and labour.