A multiplier evaluation of primary factors supply–shocks in a regional economy

Abstract

Demand-side multipliers have ruled within multisectoral models as the main indicators for policy effectiveness and key-sector determination. The causal link between new exogenous final demand and responded endogenous total output is well understood and has been the basis for such a prevalent demand-side analysis both in linear interindustry analysis and in non-linear applied general equilibrium models. In this paper we shift the perspective to supply-side injections and we do so by studying the repercussion effects of marshalling additional primary factors, labor and capital services, which are injected into the economy and give rise to a general resource reallocation. As a result, we obtain estimates of supply multipliers that provide complementary information to standard demand multipliers. We illustrate the methodology using an empirical general equilibrium model built with the most recent data for the region of Andalusia, Spain.