Input–output model facts for kids

The world has many different businesses and industries, like farms, factories, and shops. They all depend on each other! For example, a car factory needs steel from a steel mill, and the steel mill needs iron ore from a mine. An input-output model is like a special map that shows how all these parts of a country's economy are connected. It helps us understand what happens if one part changes, like if a factory closes or a new technology appears.

A smart economist named Wassily Leontief (born in 1906, died in 1999) created this amazing way of looking at the economy. He even won the Nobel Prize in Economics for his work on this model!

What is an Input-Output Model?

Imagine a big puzzle where each piece is a different part of the economy, like farming, manufacturing, or services. An input-output model shows how these pieces fit together. It tracks what each industry needs (its "inputs") to make its products or services (its "outputs").

For example:

• A bakery's inputs include flour, sugar, and electricity. Its output is bread.
• A farmer's inputs include seeds and water. Its output is wheat.
• The bakery needs wheat (flour) from the farmer. The farmer might need electricity from a power plant.

This model helps experts see how much each industry relies on others.

How Does the Model Work?

The input-output model uses a special table, a bit like a giant spreadsheet. This table lists all the different industries in a country. It shows:

• How much each industry buys from other industries.
• How much each industry sells to other industries.
• How much they sell to regular people (consumers) or for export.

By looking at this table, economists can see the flow of goods and services. They can tell if one industry grows, which other industries will also need to grow to supply it.

Understanding Inputs and Outputs

Every business or industry has inputs and outputs.

• Inputs are the things an industry buys or uses to make its products. Think of them as ingredients.
• Outputs are the products or services an industry sells. Think of them as the finished goods.

For example, a car factory's inputs include steel, plastic, tires, and electricity. Its output is a finished car. The steel factory's inputs include iron ore and coal, and its output is steel. This shows how they are connected.

Who Uses Input-Output Models?

These models are very useful for many people and groups:

• Governments: They use it to plan for the future. If the government wants to build more houses, the model can show how much more wood, steel, and labor will be needed.
• Businesses: Companies can use it to understand their supply chains better. They can see which industries are important suppliers or customers.
• Economists: They use it to study how different parts of the economy affect each other. It helps them predict what might happen if there are big changes.

Why is it Important?

The input-output model helps us understand the big picture of an economy. It can show:

• How a change in one industry can ripple through the entire economy.
• Which industries are most important for creating jobs or economic growth.
• How different regions of a country depend on each other.

It's a powerful tool for making smart decisions about how to manage a country's resources and plan for its future.

Wassily Leontief: The Creator

Wassily Leontief was a brilliant economist who came up with the input-output model. He was born in Russia in 1906 and later moved to the United States. He spent many years studying how economies work and how different industries are linked. His work changed how economists think about the economy.

Leontief's model was a breakthrough because it provided a clear, mathematical way to map these connections. Before his work, it was harder to see these detailed relationships. His ideas are still used today by governments and researchers around the world.

See also

In Spanish: Modelo input-output para niños