Full text: Study week on the econometric approach to development planning

In an ID-system (18), on the other hand, it is perfectly legi- 
timate to incorporate relations (30a) and (31a), and the ensuing 
relation (32) may perfectly well be specified so as to make an 
eo 1pso predictor, 
E(g,lz,) —1 
but in the specification of the ID-system we must in general 
abandon the assumptions (30b) and (31b). This last point is 
entirely in line with the lack of counterpart to (13) in (18). 
The upshot of the argument is that accounting identities (24) 
can be incorporated into any VR-, CC- or ID-system, whereas 
an equilibrium (25) makes a parting of the ways between VR- 
and CC-systems on the one hand, and ID-systems on the other. 
The salient point is that (24) is an exact identity, whereas (25) 
is an approximation, inasmuch as the deviations from equili- 
brium are ignored. This comment also gives a clue to how 
the situation may be dealt with in CC-systems, namely by 
taking the difference between the two members (30a)-(31a) of 
the « equilibrium » into explicit account, and exploiting it, 
possibly with a suitable lagging, as an explanatory factor for 
the equilibrating variable ¢,. A simple example is given by 
the following model for the balance between demand and supply 
in a market under free competition (8). 
Demand relation: 
:.580 - 0.390 p,+ 0.520 f,+ u. 
(*) Model (36) refers to the US market for pork 1939-1956. Refs. 19 and 
20 give similar models for several agricultural products, based on US data, 
Ref. 21. The data having been revised, Ref. 22, I am indebted to Mr. Stoj- 
KOVIC for recalculating his pork model, Ref. 20, on the basis of the revised 
data for the purpose of the present report. 
To list the exogenous variables, f, is a price index for farm products; 
¢, is corn price; g, is a dummy variable representing war effects 1942-46; 
w, is the farm wage rate. Quantities are per capita values; prices and wages 
are in real terms. 
2] Wold - pag. 17

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