A Computable General Equilibrium Approach to Hypothetical Extractions and Missing Links

Abstract

Identifying key sectors or key locations in an interconnected economy is of paramount importance for improving policy planning and directing economic strategy. Hence the relevance of categorizing them and hence the corresponding need of evaluating their potential synergies in terms of their global economic thrust. We explain in this paper that standard measures based on gross outputs do not and cannot capture the relevant impact due to self- imposed modeling limitations. In fact, common gross output measures will be systematically downward biased. We argue that an economy wide Computable General Equilibrium (CGE) approach provides a modeling platform that overcomes these limitations since it provides (i) a more comprehensive measure of linkages and (ii) an alternate way of accounting for links' relevance that is in consonance with standard macromagnitudes in the National Income and Product Accounts.