How are Input-Output Models Used?

Input-output models are used to assess the total economic impact associated with a change in industry output or a change in the demand for one or more commodities.

These models use known information about inter-industry relationships to trace through all the changes in the output of supplier industries that are required to support an initial increase in an industry’s output, or an increase in commodity expenditures. This process is commonly referred to as shocking the model.

If a change in demand is met by increasing or decreasing imports from other jurisdictions, there is no net effect on domestic production. All the benefits or costs associated with employment generation or loss, and other economic effects, would occur outside the region. Therefore, it is important to identify whether or not a change in the demand for a good or service is met inside or outside a region.