A LONG-RUN INTERPRETATION OF REGIONAL INPUT-OUTPUT-ANALYSIS

Regional input-output (I-O) analysis is traditionally motivated by a s hort-run, extreme Keynesian vision of markets. In this paper we argue that an appropriately formulated, investment-endogenous, I-O system re plicates the long-run equilibria of a wide range of regional models, m any of which do not operate as I-O systems in the short run. In partic ular, we use a computable general equilibrium (CGE) framework to illus trate the impact of an aggregate demand disturbance on an I-O and stan dard neoclassical model. When run forward over a number of periods, th e results from the capacity-constrained neoclassical model asymptotica lly approach the I-O outcome. We use sensitivity analysis to examine t he speed of adjustment of the neo-classical system and investigate bar riers to the attainment of the I-O result.