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Input-Output Exercise

Geography 350 / 2002

(http://faculty.washington.edu/krumme/350/exercises/io.html)

Please do NOT yet connect your input-output (exercise) page to your 350-Homepage. Please print it out, submit the assignment on paper (neat + "professional", only drawings can be done by (sharp) pencil & ruler. All other components, including verbal explanations and interpretations, need to be typed!) Also, please add the URL of your (not-connected) assignment.

Due:

The following questions are based on the hypothetical I-O tables for the Holukuluku economy distributed in class:

Select question #1 or #2 for a detailed answer (1 page). Questions "a" and "b" call for an explicit numerical answer.
Answer the remaining question (1 or 2) in general terms only (1/2 page).

1. You are the chief of planning research in the province of Holukuluku and are under orders from your governor to identify those industries which contribute significantly to import "leakages", and which might become prime targets of an import substitution drive to please the local unions or some "buy at home: support your local industries" movement.
   1. Which industry has the highest (direct) import coefficient?

   2. Is there any reason to believe that the industry you identified as the (directly) most import-intensive industry would lose this status after indirect effects are taken into account? In other words, could it be that another industry (which?) has larger direct and indirect import requirements per $ of output than the industry you selected? Be sure you describe the steps taken in answering this question.

   3. Policy Arguments: Pro & Con
      1. What would be the governor's justification for such a policy?
      2. In your report to the governor, would you have any reasons to warn him/her about the possible inappropriateness of a narrowly conceived import-substitution policy based on your identification procedure?

   4. What effects would an inclusion of the "induced effects" (in your calculations) have on your results and recommendations to the Governor?

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2. Reformulate the above question(s) by focusing on household wages and salaries. Now your governor is interested in promoting those industries which contribute to a high local "value added" / labor content.

   1. Which industry has the highest (direct) local value added / wage-salary coefficient?

   2. Is the production output of this industry still the most local-value-added-intensive or labor-intensive output after you have considered indirect effects? In other words, could it be that another industry has a larger direct and indirect impact on local household incomes per $ of output than the industry you identified under (b)? Be sure you describe explicitly the steps taken in answering this question.

   3. Policy Arguments: Pro & Con
      1. What would be the governor's justification for such a policy?
      2. Briefly discuss the appropriateness of a policy based on your identification procedure.

   4. What effects would an inclusion of the "induced effects" (in your calculations) have on your results and recommendations to the Governor?