An Input-Output model represents the flow of money in an economy, primarily through the connection between industries; to what extent are different industries buying and selling to one another in a particular geographic region. In other words, the I-O not only looks at the suppliers, it looks at the supplier’s suppliers. The model also accounts for things like government spending, housing spending, investments, imports, and exports, all of which help us gain a full picture of what is happening in an economy.
The I-O model has three important uses:
- Change – An I-O model can be used to demonstrate the effect job loss or job creation will have on a regional economy. To what extent will it affect other jobs in the area, additional earnings and sales.
- Supply Chain – An I-O model has the potential to expose the supply chain of goods via industries in a region, in particular, to what extent each industry is able to satisfy its purchasing needs in region, or out region. This can be very helpful to economic development organisations who are looking to strengthen a local supply chain and increase in-region purchasing.
- Industry Importance – An I-O model can be used to identify important industries in your region, not just those with a lot of jobs (like retail or healthcare) but also those which have an unusually large and positive economic impact, things like advanced manufacturing, technology etc.
Also called I-O, I.O, IO