A precise description of the equation system of the economic model modis III

The estimation of the input-ouput coefficients is an integrated part of the automatised computing routines in the model. The extremely simple method of estimation, presently applied, is derived from the very strong assumptions made in section 3, the so-called “structural assumptions”. This method can, of course, be replaced by better methods, but probably more complicated ones. I think, however, that more complicated methods will quite likely require separate sets of coefficients for price and quantity calculations. Base year for estimation of coefficients will at any time be the immediate preceding year. The estimation routines are based on regular renewal of nearly all data, that means renewal two or three times a year. This estimation and renewal procedure is only possible due to the high standards of the work done by the National Accounts Division of the Bureau. These items are divided between gross investment in fixed capital (94), private consumption (47), public consumption (27), and exports (126) 16 of the 153 groups are not imported commodities at all but indirect taxes and subsidies. This will be cleared up in section 10. Until then we shall treat those taxes and subsidies for purely formal reasons as imports. This national accounts table differs only in details from the one provided by the National Accounts Division. The table of the model requires some additional data. The automatised routines in the model work directly from the tapes produced by the National Accounts Division. The subsidy variables have negative values For wages and salaries, subsidies, and indirect taxes we shall conventionally define quantity as proportionate to the quantity of gross product in each sector. Quantity of Entrepreneurial income is residually defined by 2.17. This may seem unfounded as such sectors may be exposed to hard economic competition in the domestic market. The crucial assumption involved here is really not competition but under what circumstances entrepreneurial income per unit of product can be considered as an exogenous cost component in a short term analysis. This question has not been sufficiently investigated yet. Historical data indicate undoubtedly that the entrepreneurial income shares of the sheltered sectors are much more stable that for the exposed sectors. The problem has been discussed from slightly different premises by Odd Aukrust in “A Model of the Mechanism of Wages, Prices and Income Distribution in an Open Economy”, presented to the Symposium on National Accounts in Warszaw in February 1968. The exposed sectors comprice inter alia Forestry, Fishing, Canning of fish and meat, Manufacture of textiles, Basic Metal industries, and Ocean transport. Among the regulated sectors are Agriculture and livestock production, Alcoholic beverage industries, Electricity supply, Railways, and Communications. There are 47 items of private consumption but only 46 relative prices. Consumption item 47 is “foreigners' consumption in Norway”, a negative correction item exogenously determined. The factual consumption by foreigers in Norway is included under the various consumption items. In this section we treat private consumption as completely exogenous (included in ΔY *). This simplifies the presentation of quantity relations. All relations will be connected in section 11. The exogenous production sectors include inter alia Agriculture and livestock production, Forestry, Fishing, Fish processing, Aluminium production, Financial institutions, Railways, and Communications.