Closure in Cole's reformulated Leontief model: A response to R. W. Jackson, M. Madden, and H. A. Bowman

My paper The delayed impacts of plant closures in a reformulated Leontief model showed that the time-varying impacts of changes to a regional economy could be approximated usefully by a simple elaboration of the Leontief inverse (Cole, 1988). I have applied the method in a variety of situations, typically to calculate the shifts in community income and its distribution following a major catastrophe. In all cases I use a single or multi-region social accounting matrix. Since Jackson et al (1997) have been unable to reproduce my results I shall begin with a step-by-step demonstration. Then I shall show that their failure lies in their treatment of the external (rest-of-world) sector. This appears to arise from their overly restrictive definition of input-output analysis in relation to other types of model, and their confusion as to the difference between simplification, approximation, and model validation.