Input-Output Analysis, Linear Programming and Modified Multipliers

In turn, the (output) multipliers for restricted model are calculated as follows

Note that the original multipliers are α = [1.397

1.461 1.320 1.211 1.353].

There are two things should be addressed here. First, the modified multiplier for
the restricted sector is zero (in the short-run). This is because the final demand should
decrease proportionally to reductions in production. Until then increases in final demand
doesn’t have any effect. Second, the last element in α vector, α6 = 1.179, is the marginal
value of restriction. If the exogenous restriction on the production decreases by $1,
which means production increases by $1, overall economic impact would be $1.179. In
other words, if manufacturing sector has $1 more restriction, overall economy will lose
$1.179.

If there are 10% reduction in production from manufacturing sector, the whole
economy will lose $1,869 (= $1,416x1.32). Suppose that the central government try to
recover this loss by increasing government expenditure or investing service sector. The

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