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Some Conceptual Difficulties Regarding 'Net' Multipliers

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  • Ferran Sancho

Abstract

Multipliers are routinely used for impact evaluation of private projects and public policies at the national and subnational levels. Oosterhaven and Stelder (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 is 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.

Suggested Citation

  • Ferran Sancho, 2012. "Some Conceptual Difficulties Regarding 'Net' Multipliers," UFAE and IAE Working Papers 910.12, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    • Handle: RePEc:aub:autbar:910.12
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    References listed on IDEAS

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    1. Louis Mesnard, 2007. "A critical comment on Oosterhaven–Stelder net multipliers," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 41(2), pages 249-271, June.
    2. Jan Oosterhaven, 2007. "The net multiplier is a new key sector indicator: reply to De Mesnard’s comment," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 41(2), pages 273-283, June.
    3. Gim, Ho Un & Kim, Koonchan, 1998. "The General Relation between Two Different Notions of Direct and Indirect Input Requirements," Journal of Macroeconomics, Elsevier, vol. 20(1), pages 199-208, January.
    4. Ferran Sancho, 2012. "Straightening out the concept of direct and indirect input requirements," Economics Bulletin, AccessEcon, vol. 32(1), pages 502-509.
    5. Jan Oosterhaven & Dirk Stelder, 2002. "Net Multipliers Avoid Exaggerating Impacts: With A Bi–Regional Illustration for the Dutch Transportation Sector," Journal of Regional Science, Wiley Blackwell, vol. 42(3), pages 533-543, August.
    6. repec:dgr:rugsom:04c01 is not listed on IDEAS
    7. Louis De Mesnard, 2002. "NoteAbout the Concept of “Net Multipliers”," Journal of Regional Science, Wiley Blackwell, vol. 42(3), pages 545-548, August.
    8. Louis Mesnard, 2007. "Reply to Oosterhaven’s: the net multiplier is a new key sector indicator," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 41(2), pages 285-296, June.
    9. Erik Dietzenbacher, 2005. "More on multipliers," Journal of Regional Science, Wiley Blackwell, vol. 45(2), pages 421-426, May.
    10. Oosterhaven, Jan, 2004. "On the definition of key sectors and the stability of net versus gross multipliers," Research Report 04C01, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
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    Cited by:

    1. Miguel Vélez, Francisco Javier de & Llop Llop, Maria & Manresa, Antonio, 1954-, 2013. "Supply Multipliers in Two Regional Economies," Working Papers 2072/213636, Universitat Rovira i Virgili, Department of Economics.
    2. Erik Dietzenbacher & Manfred Lenzen & Bart Los & Dabo Guan & Michael L. Lahr & Ferran Sancho & Sangwon Suh & Cuihong Yang, 2013. "Input--Output Analysis: The Next 25 Years," Economic Systems Research, Taylor & Francis Journals, vol. 25(4), pages 369-389, December.

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    More about this item

    Keywords

    : gross multipliers; net multipliers; interindustry accounting; interindustry models.;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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