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

converted them into demands for industrial products and for 
each product have calculated the growth rate which would 
accompany a given growth rate in consumption as a whole. 
The first relationship we have to consider connects this inform- 
ation with the investment demands of industry. We can ignore 
replacement demands since, until we improve our production 
functions, these depend, as I have said, on past investment 
and on the fixed life-spans assumed for different assets. We 
need therefore a relationship connecting consumption demands. 
and their rates of growth with industrial extensions. 
To obtain this relationship, we first write the basic flow 
equation for products in the form 
(IV. 1) 
where q, v and e denote respectively vectors of output, in- 
dustrial investment and consumption, and where A denotes a 
current input-output coefficient matrix. Equation (IV. 1) states 
that output is divided between intermediate demands, Ag, and 
final demands, (v+e); and that final demands are divided 
between investment demands v, and consumption demands, e. 
Second, we write the relationship between investment de- 
mands and the growth of output from one year to the next in 
the form 
(IV. 2) 
where Ag denotes the excess of next year’s output over this 
year’s output and K denotes a capital input-output coefficient 
Finally, we consider the case in which the components of 
consumption are to grow exponentially. This can be expressed 
in the form 
IV. 3) 
Ee= (I+7)e 
I] Stone - pag. 42

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