Abstract
Multipliers are routinely used for impact evaluation of private projects and public policies at the national and subnational levels. Oosterhaven and Stelder (J Reg Sci 42(3), 533–543, 2002) correctly pointed out the misuse of standard ‘gross’ multipliers and proposed the concept of ‘net’ multiplier as a solution to this bad practice. We prove their proposal is not well founded. We do so by showing that supporting theorems are faulty in enunciation and demonstration. The proofs are flawed due to an analytical error, but the theorems themselves cannot be salvaged as generic, non-curiosum counterexamples demonstrate. We also provide a general analytical framework for multipliers and, using it, we show that standard ‘gross’ multipliers are all that are needed within the interindustry model since they follow the causal logic of the economic model, are well-defined and independent of exogenous shocks, and are interpretable as predictors for change.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
We will focus on so-called type I multipliers. Similar considerations would apply to type II multipliers but we omit any references to them for the sake of brevity.
Since prices are independent of quantities in the model, aggregation entails using reference prices which are kept hidden because they play no explicit role and are set to unity using the standard normalisation.
If we could distinguish between value and actual physical data, the same conservation of value property would hold but in that case we would need to introduce non-unitary prices explicitly. With the implicit normalisation developments are simpler and clearer.
Pathological counterexamples can sometimes be avoided by strengthening the set of assumptions in the initial statement, giving rise, in these cases, to a stronger mathematical proposition. Non-pathological counterexamples, however, are harder to crack since they usually indicate a serious logical or reasoning flaw.
References
De Mesnard L (2002) Note about the concept of net multipliers. J Reg Sci 42(3):545–548
De Mesnard L (2007a) A critical comment on Oosterhaven-Stelder net multipliers. Ann Reg Sci 41:249–271
De Mesnard L (2007b) Reply to Oosterhaven: the net multiplier is a new key sector indicator. Ann Reg Sci 41:285–296
Dietzenbacher E (2005) More on multipliers. J Reg Sci 45(2):421–426
Gim HU, Kim K (1998) The general relation between two different notions of direct and indirect input requirements. J Macroecon 20(1):199–208
Leontief W (1936) Quantitative input-output relations in the economic system of the United States. Rev Econ Stat 18(3):105–125
Márquez MA (2011) Centralidad e integración de las redes económicas de los sectores de alta tecnología en América del Norte. UNAM working paper
Nikaido H (1972) Introduction to sets and mappings in modern economics. North-Holland, Amsterdam, the Netherlands
Oosterhaven J, Stelder D (2002) Net multipliers avoid exaggerating impacts: with a bi-regional illustration for the Dutch transportation sector. J Reg Sci 42(3):533–543
Oosterhaven J (2004). On the definition of key sectors and the stability of net versus gross multipliers. Research report 04C01, SOM Research School, Groningen University
Oosterhaven J (2007) The net multiplier is a new key sector indicator: reply to De Mesnard’s comment. Ann Reg Sci 41:273–283
Sancho F (2012) Straightening out the concept of direct and indirect input requirements. Econo Bull 32(1):502–509
Temurshoev U& Oosterhaven J (2010) On input-output linkage measures. Working papers in input-output economics, WPIOX 10–002
Acknowledgments
Support from research projects MICINN-ECO2009-11857 and SGR2009-578 is gratefully acknowledged. Clarifying comments by L. Alsedà and thorough discussions with A. Manresa are very much appreciated. Suggestions from the referees have improved the submittedt draft of this paper. The usual caveat applies.