THE FIRST ROUND OF THE KEYNESIAN REGIONAL INCOME MULTIPLIER
| Author | Charles M. S. Sutcliffe,M. Thea Sinclair |
| DOI | http://doi.org/10.1111/j.1467-9485.1978.tb00244.x |
| Published date | 01 June 1978 |
| Date | 01 June 1978 |
Scottish
Journal
of
Political
Economy,
Vol.
25,
No.
2,
June 1978
THE FIRST ROUND
OF
THE KEYNESIAN
REGIONAL INCOME MULTIPLIER
M.
THEA
SINCLAIR
AND
CHARLES
M.
S.
SUTCLIFFE
University
of
Kent; and University
of
Reading
Previous studies utilising the Keynesian regional income multiplier have paid
very limited attention to the estimation of the income generation which occurs
during the first round of the multiplier process. However, since the first round
of income generation is of greater magnitude than that of any other round,
it is particularly important that the first round effects should be estimated
correctly. This paper will attempt to analyse the way in which such estimation
depends upon the types and values of the propensities to withdraw which are
included in the first round. These are related, in turn, to the type of income
which the multiplier methodology is attempting to measure, and to the form
which the injection itself takes.
I
INCOME
GENERATION
COEFFICIENTS
AND
THE
DEFINITION
OF
INCOME
The type of multiplier which will be considered in this paper is the regional
income multiplier. No attention will be paid to the “turnover” (mistakenly
stated as income), multiplier
of
the type given by Clement (1967) and Zinder
(1
969).
Few authors who have carried out studies using the regional income
multiplier have defined the change in income to which the multiplier technique
relates. A number of different definitions are possible, those which are most
commonly utilised being regional GNP, regional GDP and regional disposable
income. It is vital to specify the type
of
regional income which is being
measured since alternative definitions lead to differing formulations
of
the
multiplier. This is due
to
the different first round leakages which have to be
taken into account in the computation of each type of income, as is illustrated
by Figure
1.
It should be noted that Figure
1
refers to the inflows and leakages which
take place within each round, and
not
to the time ordering of these events.
(For
a
discussion
of
the distinction between time and rounds see Sinclair and
Sutcliffe (1977a).) Unlike the models presented by Archer (1976), Archer,
Shea and De Vane (1974) and Buttler (1975, pp. 160-161), the propensity to
import has not been disaggregated into separate propensities relating to
producers and consumers. However, this modification could easily be carried
out, if this were
so
desired.
Date
of
receipt
of
final
manuscript:
6
February 1978.
177
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