THE DELAYED IMPACTS OF PLANT CLOSURES IN A REFORMULATED LEONTIEF MODEL

ABSTRACT The paper uses a reformulated input‐output approach to calculate the medium‐run regional economic impact of plant closures or similar changes taking nun account expenditure lags. The approach lends to a straightforward modification of the generalized Lecontief inverse method. An example is used show that the inclusion of expenditure lags m impact analysis ran he quite substantial and that the usual approach of partitioning the accounts into infinitely last and infinitely slow activities, and the Consequent assumption that equilibrium is reached, is an especially weak approximation. Revising the contribution of all activities to account for expenditure lags changes both short‐ and medium‐term predictions by up to a factor of two. The approach has a variety of applications, but may be especially useful for calculating the distributed impact over time on household income, local taxes, employment, and other businesses.