An Input-Output Model with Stochastic Parameters for Economic Analysis

Abstract

This paper presents an input-output model where the technology coefficients and the demand variables are random variables, rather than fixed quantities. The model is able to relate data acquisition costs to forecasted production levels and uncertainty, as the error in the estimate of distribution parameters is reduced. The nonlinearity of the resulting system of equations remains tractable and techniques such as the Newton-Raphson method can be applied advantageously. A numerical example is included.