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lectures/input_output.md

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@@ -4,14 +4,13 @@ jupytext:
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extension: .md
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format_name: myst
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format_version: 0.13
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jupytext_version: 1.14.5
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jupytext_version: 1.14.4
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kernelspec:
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display_name: Python 3 (ipykernel)
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language: python
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name: python3
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---
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# Input-Output Models
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## Overview
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import matplotlib.pyplot as plt
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```
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The following figure illustrates a network of linkages between 15 sectors
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obtained from the US Bureau of Economic Analysis’s 2019 Input-Output Accounts
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Data.
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```{code-cell} ipython3
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---
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:tags: [hide-cell]
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mystnb:
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figure:
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caption: "US 15 sector production network"
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caption: US 15 sector production network
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name: us_15sectors
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:tags: [hide-cell]
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---
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centrality = qbn_io.eigenvector_centrality(A)
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plt.show()
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```
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|Label| Sector |Label| Sector |Label| Sector |
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|:---:|:-------------:|:---:|:--------------:|:---:|:-------------------------:|
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| ag | Agriculture | wh | Wholesale | pr | Professional Services |
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(TODO add link to lpp lecture)
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## Input Output Analysis
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## Input output analysis
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Let
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x_j = \min_{i \in \{0, \ldots , n \}} \left( \frac{z_{ij}}{a_{ij}}\right)
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$$
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### Two Goods
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### Two goods
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To illustrate ideas, we begin by setting $n =2$.
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+++ {"user_expressions": []}
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## Production Possibility Frontier
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## Production possibility frontier
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The second equation of {eq}`eq:inout_1` can be written
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This connection surfaces again in a classic linear program and its dual.
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## Linear Programs
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## Linear programs
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A **primal** problem is
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L = \sum_{i=0}^{\infty} A^i
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$$
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### Demand Shocks
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### Demand shocks
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Consider the impact of a demand shock $\Delta d$ which shifts demand from $d_0$ to $d_1 = d_0 + \Delta d$.
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E = \{(i,j) \in V \times V : a_{ij}>0\}
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$$
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In {numref}`us_15sectors` weights are indicated by the widths of the arrows, which are proportional to the corresponding input-output coefficients.
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In {ref}`us_15sectors` weights are indicated by the widths of the arrows, which are proportional to the corresponding input-output coefficients.
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We can now use centrality measures to rank sectors and discuss their importance relative to the other sectors.
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### Eigenvector Centrality
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### Eigenvector centrality
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Eigenvector centrality of a node $i$ is measured by
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$$
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\end{aligned}
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$$
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We plot a bar graph of hub-based eigenvector centrality for the sectors represented in {numref}`us_15sectors`.
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We plot a bar graph of hub-based eigenvector centrality for the sectors represented in {ref}`us_15sectors`.
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```{code-cell} ipython3
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:tags: [hide-cell]
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plt.show()
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```
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A higher measure indicates higher importance as a supplier.
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As a result demand shocks in most sectors will significantly impact activity in sectors with high eigenvector centrality.
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The above figure indicates that manufacturing is the most dominant sector in the US economy.
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### Output Multipliers
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### Output multipliers
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Another way to rank sectors in input output networks is via outuput multipliers.
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A demand shock in such sectors will cause a large impact on the whole production network.
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The following figure displays the output multipliers for the sectors represented
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in {numref}`us_15sectors`.
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in {ref}`us_15sectors`.
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```{code-cell} ipython3
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:tags: [hide-cell]
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A, F = build_coefficient_matrices(Z, X)
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omult = qbn_io.katz_centrality(A, authority=True)
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fig, ax = plt.subplots()
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plt.show()
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```
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We observe that manufacturing and agriculture are highest ranking sectors.
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