coping strategy. Admittedly, part of the stability is due to the small sectoral gross output decreases in reaction to the 50-pereent embargo, and the fact that the direct and indirect shortfall is spread across thirty-four Sectors. 13 However, that is the beauty of the supply model -- it indicates how a supply shock can be cushioned by maintaining stability in distribution patterns. 14
This chapter has provided a theoretical understanding and empirical test of the joint stability of production and allocation versions of the I-O model. An empirical example showed a remarkable stability for the case of a sizeable supply disruption. The evidence supports a conclusion that use of the supply-driven, or allocation, version of the I-O model will not necessarily violate the basic production conditions of its conventional counterpart.
Note also that the smaller the variance of the allocation multipliers, the more stable we expect production coefficients to be. However, it is more difficult to tie this condition to the structure of the economy, as we did in the case of the multiplier size. A balanced economic structure is not, for example, a sufficient condition for a low variance.
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Publication information: Book title: Advances in Input-Output Analysis:Technology, Planning, and Development. Contributors: William Peterson - Editor. Publisher: Oxford US. Place of publication: New York. Publication year: 1991. Page number: 33.
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