Endogenization of Household Consumption in the Expanded Input-Output Model

Abstract

The article examines the relationship between the level of demand of income groups of the population and labor income. The influence of demand of various income groups of the population on production parameters has been investigated. As a calculation tool, input-output tables with an expanded total cost coefficient matrix by adding elements of wages and household consumption to it have been used. The conclusion has been substantiated that the growth of income and demand in low-income groups of the population has the greatest effect on production in the real sector, and in high-income groups of the population-on the products of the service sector. Large-scale sectors of the economy have been identified, the activities of which are most influenced by the demand of certain income groups, taking into account the induced effects that form in the economy. It has been noted that the growth in demand in low-income groups of the population is most reflected in the incomes of high-income groups of the population. It has been shown that even relatively modest structural shifts in the volume of wages by decile groups can lead to tangible structural and total changes in output. The analysis of the impact on production volumes of changes in the qualification structure of employment, reflecting smaller differences in the response of sectors of the economy to changes in demand of different qualification groups of workers than income groups, has been carried out.

Keywords: economic growth; household consumption; income differentiation of the population; input–output tables; labor income; qualification structure of employment; structural changes; wages.