Economic Research and Perspectives

Economic Research and Perspectives

Semi-closed Input-output Model with Semi-endogenous Consumption:Case Study for Iran

Authors
zeinab yazdani charati 1
alireza pourfaraj 2
Nooraddin sharify 2
1 Ph.D. student in Economics, Mazandaran University, Babolsar,
2 Associate Professor,Faculty of Economics and Administrative Sciences,Mazandaran University, Babolsar
Abstract
Aim and Introduction

In the conventional Input-Output model, all final demand components including household consumption, government expenditures, capital accumulation and exports are considered as exogenous variables. The basic limitation of the open Input-Output model is ignorance the relationship between the production sector and the household. In this way, if there is an increase in demand for the products of some industries, such an event will directly lead to an increase in the production level of these industries in the first place. On the other hand, the increase in production in turn leads to an increase in the level of production in related industries through previous connections. The increase in income resulting from higher levels of household economic activities leads to an increase in household consumption and as a result stimulates more activities in the production sector. Based on this, the production sector and the households are related to each other through the income-consumption relationship.In order to estimate the income-consumption relationship, household consumption should be included as an endogenous variable in the Input-Output model, while in the conventional (open) Input-Output model, household consumption is considered as an exogenous variable. To solve this limitation, Miyazawa (1976) presented a new Input-Output model in which he considered household consumption as an endogenous variable. Miyazawa's model is known in the relevant literature as a semi-closed Input-Output model with endogenous consumption. Despite this, Miyazawa's model, similar to Keynes' consumption theory, considers household consumption solely as a function of current income, while according to other theories of consumption behavior, household consumption depends on other factors such as past consumption levels and income. It also depends on the expectation. Accordingly, in this research, the semi-closed Input-Output model with semi-endogenous consumption, introduced by Chen et al (2016), was used because this new model adapts the Input-Output model to other consumption theories and corrects the failure of the previous model. In this framework, household consumption is divided into two endogenous and exogenous parts, so that the endogenous component is influenced by current income and the exogenous component is influenced by other factors affecting consumption. In fact, it is only endogenous consumption that enters the mediation matrix.

Methodology

In this research, the results of the new semi-closed Input-Output model with semi-endogenous consumption (Chen et al (2016) model) and the semi-closed Input-Output model with completely endogenous consumption (Miyazawa (1976) model) were compared. In this regard, first, endogenous consumption coefficients for 12 product groups were estimated using the Kalman filter model, and then, the estimated endogenous consumption coefficient of each category of goods was compared to the endogenous consumption coefficient of the data sections by means of the interface matrix. The receipt was converted.

In order to compare the performance of the two models of Miyazawa (1976) and the model of Chen et al (2016), the effect of government capital formation on the value added of different sectors was evaluated using the two mentioned models.

Findings

Failure to consider other factors affecting consumption will lead to upward deviation in GDP estimation. In this way, it can be concluded that the semi-endogenous model solves the insufficiency of the completely endogenous model and its results are closer to reality.

Discussion and Conclusion



the gross domestic product was obtained based on fully endogenous and semi-endogenous models (9601201) and (9329172), respectively. These findings show that Miyazawa model considers all household consumption as a function of current income, and also due to the lack of consideration of other factors affecting consumption such as expected income, consumption level. Also, in Chen et al.'s model, the calculated added value is smaller compared to Miyazawa's model, because by analyzing and separating exogenous consumption from total consumption, only endogenous consumption entered the table of intermediary exchanges.
Keywords
Endogenoussemi-closed input-output model
Household consumption
Kalman filter

Subjects

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- بانوئی، علی‎اصغر و محمودی، مینا(1380 ). محاسبه توان اشتغال‎زایی بخش ها بر حسب تفکیک جغرافیایی مصرف(درآمد) خانوارها در قالب نظام شبه ماتریس حسابداری اجتماعی. فصلنامه پژوهش‎های اقتصادی ایران، شماره 8، بهار و تابستان 80:42-13.
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- مرکز آمار ایران : https://www.amar.org.ir
- بانک مرکزی جمهوری اسلامی ایران https://www.cbi.ir


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Economic Research and Perspectives
Volume 23, Issue 1
Spring 2023
Pages 145-164