An economic impact study by interfacing an integrated industry model to a national input-output model



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This dissertation develops a procedure for the linkup of a microeconomic model (The Integrated Industry Model) to a macro-economic model (The National Input-Output Model). The purpose of developing such a linkup is to have the capability of evaluating the economic effects of different direct policy specifications on structural changes in the inter-industry transactions of the petroleum refining, electric power, basic chemicals, and fossil energy (crude oil, natural gas, coal) mining industries. This structural evaluation capability is a necessary part of the needed methodology to evaluate the economic effects of different policies on both industry and the economy. There are basically two points to be made about the differences between this study and past studies in the same general area. First, the direct policy evaluation capability gives the equilibrium price/quantity consequences of regulating or not regulating prices, quantities, and technologies. Thus the resulting inter-industry transactions measure the hidden as well as the exposed costs of different government regulations. Secondly, the equilibrium price/quantity data are estimated simultaneously for all the conversion industries in the model to ensure consistency in the estimates of inter-industry transactions. The capability to maintain consistency is extremely important because of the high degree of interdependency among the industries included in the model. This feature seems necessary to visualize identification of the underlying supply and demand functions. Two sets of cases are analyzed, the first being environmental policy cases, and the second relating to energy policies. Among the findings of the study, striking structural differences are evident between the 1967 Department of Commerce Input-Output table and the input-output tables of the modeling cases. Several errors in accounting procedures of the U.S. Department of Commerce stand out in the analysis.