Intensive Income in Demo-Economic input-output Models

Abstract

In this paper, the treatment of intensive income in extended input-output models of a ‘demo-economic’ nature is discussed. In the first section of the paper a model is presented that allows for intensive, extensive, redistributive, and exogenous income changes in response to an increase in exogenous final demand for the output of an economy. It is shown that use of Blackwell's method of estimating intensive and extensive income changes in such a model implies a particular growth path for average earnings. In the second section the possibility of intensive income changes arising from increased utilisation of labour is examined. The existence of underutilisation of labour is shown to have a marked effect on output and employment multipliers. Some comments are made on the practical implications of the analysis, illustrated by a simple model of the Queensland economy.