CUSTOMS UNION AND THE ESTIMATION OF THE IMPORT LEAKAGE EFFECT

The purpose of this paper is to present estimates of the maximum potential import leakage effect (decrease in the multipliers) as a result of the U.K.'s joining the E.E.C. The 1970 U.K. input‐output model was used. As a first step the domestic input coefficient matrix was adjusted for changes in the relative price of domestic inputs under the assumption that all import duties on competitive imports from the E.E.C. were eliminated. Considerable variation in the ranking of each endogenous sector according to its leakage coefficient for output, income, and employment was found.