A much more sophisticated approach to development planning is to use some
variant of the interindustry or input-output model, in which the activities of
the major industrial sectors of the economy are interrelated by means of a set
of simultaneous algebraic equations expressing the specific production
processes or technologies of each industry. All industries are viewed both as
producers of outputs and users of inputs from other industries. For example,
the agricultural sector is both a producer of output (e.g., wheat) and a user of
inputs from, say, the manufacturing sector (e.g., machinery, fertilizer). Thus
direct and indirect repercussions of planned changes in the demand for the
products of any one industry on output, employment, and imports of all other
industries can be traced throughout the entire economy in an intricate web of
economic interdependence. Given the planned output targets for each sector
of the economy, the interindustry model can be used to determine intermediate
material, import, labor, and capital requirements with the result that a
comprehensive economic plan with mutually consistent production levels and
resource requirements can, in theory, be constructed.