Amid Australia’s current housing crisis, a Leontief static linear input-output model was developed to simulate the type 1 output effect of a federally directed residential building construction plan.
Here, the model is extended to include type 1 and 2 employment and income effects. In reframing a classic Leontief research program, government spending is reallocated away from the defense industry (type 1 output and employment multipliers of 1.85 and 2.5 respectively) and into residential building construction (2.47 and 3.93 respectively) as a complement to the original plan. A government spending increase of 236.49% in residential building construction is found to offset an arbitrary 20% defense spending reduction.
Given the same level of output, the reallocation yields a net employment gain of 22,223 FTE labor units. Induced employment and income effects are studied over a marginal propensity to consume parameter range (0.07 to 0.38) and alternative industry income levels. Reallocated defense workers require an average wage of around 164,459 AUD to yield zero net induced income. The model generates useful policymaking benchmarks and threshold conditions for economic and housing planners operating in comparable federalist countries.
