Faculty of Science

Food Design and Sustainability course: Input-Output Models - 5 ECTS - 2023-24
Provider: Faculty of Science

Activity no.: 5332-23-04-31
	Enrollment deadline: 02/06/2025

Date and time

08.09.2023, at: 00:00 - 31.12.2023, at: 16:00

[antalgange]

Regular seats

Course fee

0.00 kr.

ECTS credits

5.00

Contact person

rkf241 rkf241 E-mail address: mth@food.ku.dk

Enrolment Handling/Course Organiser

rkf241 rkf241 E-mail address: mth@food.ku.dk

Written language

English

Teaching language

English

Semester/Block

Autumn Spring

Exam form

Active participation during the campus course

Grading scale

Passed / Not passed

Course workload

Course workload category	Hours
Lectures	24.00
Exercises	24.00
Preparation / Self-Study	77.00

Sum	125.00

Content

Day 1: Essential matrix algebra for input-output analysis

We start with an introductory review of matrix algebra concepts and methods used throughout this course.

Reading material: Appendix A in book (page 753-766)

Day 2: Foundations of input-output analysis

In this session we get introduced to Leontief’s conceptual IO framework and learn how to develop the fundamental mathematical relationships from the interindustry transactions table. We will examine the key assumptions associated with the basic Leontief model, including implications of those assumptions. We will also explore the economic interpretation of the basic framework, which will be illustrated with a basic model of the US economy. In addition, the role of prices will be explored by introducing the “price model” formulation of the input– output framework.

Reading material: Chapter 2 in book (page 10-60)

Day 3: Input-output models at the regional level

During this session the basic IO framework is extended to include regions and the relationships between them. First, “single-region” models are presented and the various assumptions employed in formulating regional models versus national models are explored. Next, the structure of an interregional input–output (IRIO) model and the multiregional input–output (MRIO) model is presented. Finally, you will get introduced to the fast-growing range of applications of MRIO to multinational and global economic models.

Reading material: Chapter 3 in book (page 63-107)

Day 4: Organization of basic data for input-output models

During this session we will construct IO tables from commodity-by-industry tables, known better as supply–use tables (SUT). A simplified SUT is derived from fundamental economic concepts of the circular flow of income and expenditure. The process is illustrated with the US IO model and some of the key traditional conventions widely applied for the construction of the model. Finally, we will examine issues associated with the level of sectoral and spatial detail in IO models, e.g., the potential bias introduced by the level of aggregation of industries or regions.

Reading material: Chapter 4 in book (page 112-169)

Day 5: The commodity-by-industry approach in input-output models

We will explore variations to the commodity-by-industry IO framework by expanding it to include distinguishing between commodities and industries, i.e., the supply of specific commodities in the economy and the use of those commodities by collections of businesses defined as industries. The chapter introduces the fundamental commodity-by-industry accounting relationships and how they relate to the basic IO framework. The formulations of commodity-driven and industry-driven models are also presented along with illustrations of variants on combining alternative assumptions for secondary production.

Reading material: Chapter 5 in book (page 176 – 234)

Day 6: Multipliers in the input-output model

Day 6 examines a number of key summary analytical measures known as multipliers that can be derived from IO models to estimate the effects of exogenous changes on (1) new outputs of economic sectors, (2) income earned by households resulting from new outputs, and (3) employment generated from new outputs or (4) value-added generated by production. The general structure of multiplier analysis and special considerations associated with regional, IRIO, and MRIO models are developed.

Reading material: Chapter 6 in book (page 238-286) and introduction to the pymrio package

Day 7: Supply-side models, linkages, and important coefficients

We explore the so-called supply side IO model. It is discussed both as a quantity model and as a price model. Relationships to the standard Leontief quantity and price models are also explored. In addition, the fast-growing literature on quantification of economic linkages and analysis of the overall structure of economies using IO data is examined. Finally, approaches for identifying key or important coefficients in IO models and alternative measures of coefficient importance are presented.

Reading material: Chapter 7 in book (page 289-340)

Day 8: Decomposition approaches

This session introduces and illustrates the basic concepts of structural decomposition analysis (SDA) within an IO framework. The concept of decomposition of multipliers introduced in Day 6 is revisited as a way to analyze economic structure. The application of SDA to MRIO is developed to introduce a spatial context.

Reading material: Chapter 8 in book (page 347-396)

Day 9: Energy input-output analysis

During this session we explore the extension of the IO framework to more detailed analysis of energy consumption associated with industrial production, including some of the complications that can arise when measuring IO transactions in physical units of production rather than in monetary terms of the value of production. Alternative approaches to energy IO analysis are reviewed and compared. Special methodological considerations such as adjusting for energy conversion efficiencies are developed and a number of illustrative applications are presented, including estimation of the energy costs of goods and services and impacts of new energy technologies. Finally, the role of structural change of an IO economy associated with changing patterns of energy use is introduced.

Reading material: Chapter 12 in book (page 547-594)

Day 10: Environmental input-output analysis

During Day 10 we review the extensions of the IO framework to incorporate activities of environmental pollution and elimination associated with economic activities as well as the linkages of IO to models of ecosystems. We begin with the augmented Leontief model for incorporating pollution generation and elimination. We continue with the application of IO analysis to life-cycle assessment and the calculation of footprints of industrial activities with particular attention on the carbon footprint. We then look at the “generalized” IO framework which assumes that pollution generation (as well as other measurable factors associated with industrial production, such as energy or material consumption measured in physical units) simply vary in direct proportion to the level of industrial production. Applications are presented of the generalized IO formulation to measuring impacts of specified changes to industrial activity and to planning problems where the objective is to seek an optimal mix of industrial production subject to IO relationships between industrial sectors and to constraints on factors associated with industrial production, such as pollution, energy use and employment. In exploring the application of the generalized IO framework to planning problems, basic concepts of linear and multi objective programming are introduced. Finally, expansion of the IO framework to include ecologic sectors to more comprehensively trace economic–ecosystem relationships is presented along with a variety of illustrative applications.

Reading material: Chapter 13 in book (page 601-665) and available documentation of the pymrio package

Day 11: Mixed and dynamic models (could be left out if too complex or irrelevant)

We look at models driven by a mix of output and final demand rather than driven solely by specification of one or the other. We also introduce dynamic models that capture more explicitly the role of capital investments and utilisation in the production process.

Reading material: Chapter 14 in book (page 678-719)

Day 12: Additional topics

Upon request from the participants.

Enrolment guidelines

This course introduces the students to the framework of input-output (IO) modelling and its many applications. The course begins with the theory and assumptions of the basic IO framework, then exploring many of the extensions developed for a variety of applications in environmental sciences, such as environmental footprint analysis. The course deals with both methodological and practical issues associated with implementation of IO models. Days 1–6 cover the main methodological considerations, including the key assumptions and economic interpretations, expanding the single-country analysis to interregional and multiregional level, as well as going deeper into the data sources and mechanics of the IO model. Days 7–12 focus on specific applications of the input–output analysis to practical problems relevant for environmental-economic analyses, specifically energy and emissions IO-based analyses.

There is a possibility for customisation of the course depending on participants needs.

Formal requirements

Basic knowledge of matrix algebra

Basic knowledge of python

Learning outcome

• Implement matrix algebra and data handling for IO-based analyses.
• Analyse a basic IO model for a single country, for several regions within a country, and for the world as a whole.
• Use the System of National Accounts and its supply-use tables to construct industry- and commodity-based IO models.
• Perform an environmental IO analysis and calculate carbon footprints.
• Download and analyse global environmentally extended multi-regional IO tables with the pymrio python package.

Teaching and learning methods

We will base our sessions on content from the selected chapters of the book Input-Output Analysis by Ronald E. Miller and Peter D. Blair (2022).

Structure:
• Short recap lecture presenting key content of the reading material, led by Bogomil Iliev (15 – 30 min)
• Class exercises based on the studied chapter in the book or practical project-based material provided by Marianne Thomsen (30 – 60 min)
• Discussion of results of the exercises (15 – 30 min)
• Q&A and wrap up (15-30 minutes)

In between sessions there will be homework in terms of reading the chapters of the book and other sources necessary for active participation during the sessions. The amount of pages to be read is about 40 pages per session.

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