Alternative approaches to the estimation of economic impacts resulting from supply constraints

Abstract

The standard Leontief input-output approach to estimating the impacts resulting from changes in final demands is inappropriate to apply to cases in which the gross outputs of particular sectors of the economy are constrained because of conditions such as strikes or natural disasters. In this paper two alternative approaches are presented for estimating the impacts on production resulting from supply-constraints. The first is based on standard interindustry purchase coefficients, the second on sales coefficients. Each model is applied in turn to estimate the impact on the Kern County, California economy of a hypothetical curtailment of State-supplied water to the County's agricultural activities. The empirical results, as well as the underlying assumptions, of each approach are compared and discussed.