Input-output analysis

An input-output analysis is an estimation of the economic activities by the use of an input-output model.
Contents
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1 Description

2 Relevance

3 Input-output table

4 Multiplier effects

5 Related subjects

6 Footnotes and references

Description
Industries use the products and services of other industries to produce their own products. [1] An input-output
model is a quantitative economic tool that captures these interindustry transactions. It contains large tables of
data that describe the interindustry transactions in defined areas. These tables help the users to track the flow
of money (in this case triggered by a development plan or existing urban object) from one industry to the next.
The technique of Input-output analysis is originally created by Wassily Leontief (1966)[2]
For more information about input-output analysis:

Wikipedia: Input-output models

Website: Pearson education. Inc

Relevance
Knowledge about some frequently used economic models such as input-output models help the urban planner
to systematically survey all the relevant (socio-economic) impact caused by an urban development and security
threats. These insights will help the responsible urban planner to make the best choices from an socioeconomic point of view.

Input-output table
Based on the supporting report, an input-output table is created (see figure below). This table is used to
calculate the infinite circulation of capital through inter-industry transactions (indirect effects) and internalizing
the wages and transactions of households (induced effects). Since in each round capital flows out of the
system (taxes, import and wages), the impact becomes gradually smaller and tends to zero in the end. This
results in the so-called Leontief multipliers.

Table: Concept of an input-output model

Multiplier effects
The multiplier effect is an effect in economics "in which an increase in spending produces an increase in
national income and consumption greater than the initial amount spent"[3]. For example, if a firm realises a new
factory plant, it will employ construction workers and their suppliers as well as those who work in the plant.
Indirectly, the new plant will stimulate employment in laundries, restaurants, and service industries in the urban
environment.
The multipliers of the input-output model provide an indication of what the indirect and induced effects are of an
extra unit of expenditure (the direct impact).
There are two main types of multipliers:
Type I: is the multiplier of the indirect effects (compared to the direct impulse). For example, if an urban project
development of 1 million euro leads to an additional 0.5 million euro of indirect production, the type I multiplier
is 1.5; Type II: is the multiplier of the induced effects (compared to the direct impulse). For example, if an urban
project development of 1 million euro generates an additional consumption spending by employees of 250,000
euro, the type II multiplier is 1.25.

Related subjects
Urban planning processes employ a host of other economic tools/models:

Social cost-benefit analysis

Economic impact study

Business case

Other economic tools

Economic tools

See also the clickable map below:

Other related subjects:

Economic tools

Economic impact

Economic dimension of urban planning