CHAPTER 9
INPUT-OUTPUT FRAMEWORK

9.01 The input-output framework consists of three types of tables:

1. supply and use tables;
2. tables linking the supply and use tables to the sector accounts;
3. symmetric input-output tables.

9.02 Supply and use tables are matrices by industry and product describing the domestic production processes and the transactions in products of the national economy in great detail. These tables show:

1. the structure of the costs of production and the income generated in the production process;
2. the flows of goods and services produced within the national economy;
3. the flows of goods and services with the Rest of the World.

9.03 A supply table shows the supply of goods and services by product and by type of supplier, distinguishing output by domestic industries and imports. A simplified example of a supply table is given in Table 9.1.

9.04 A use table shows the use of goods and services by product and by type of use, i.e. as intermediate consumption (by industry), final consumption, gross capital formation or exports. Furthermore, the table shows the components of gross value added, i.e. compensation of employees, other taxes less subsidies on production, net mixed income, net operating surplus and consumption of fixed capital. A simplified example of a use table is given in Table 9.2.

9.05 Between the supply and use tables, two types of identities hold good (provided supplies and uses are valued consistently, see Tables 9.5 and 9.6):

1. The identity by industry:
   Output by industry = Input by industry.
   In terms of our simplified supply and use table, this indicates that the row vector in cell (2,1) in Table 9.1 should be equal to that in cell (3,1) in Table 9.2.

   So, for each industry:

   Output = Intermediate consumption + Value added;

2. the identity by product:
   Total supply by product = Total use by product.

   In terms of our simplified tables, the column vector in cell (1,3) of Table 9.1 should be equal to the column vector in cell (1,5) of Table 9.2.

   So, for each product:

   Output + Imports = Intermediate consumption + Exports + Final consumption expenditure + Gross capital formation.

These identities by industry and product can be used to check and improve the consistency and completeness of estimates (see paragraph 9.11.).

9.06 Supply and use tables are the central framework for all tables by industry, e.g. those on employment, gross fixed capital formation and capital stock.

9.07 The supply and use tables contain all the flows in the following accounts:

1. the goods and services account;
2. the production account;
3. the generation of income account.

9.08 A supply table and a use table can also be combined and presented as a single table (see Table 9.3). This can be achieved by adding two rows and a column to the use table (see Table 9.2), for output and imports. Note that the rows and columns from the supply table presented in paragraph 9.03. have been transposed here.

9.09 A symmetric input-output table is a product by product or industry by industry matrix describing the domestic production processes and the transactions in products of the national economy in great detail. A symmetric input-output table rearranges both supply and use in a single table. There is one major conceptual difference between a symmetric input-output table and a combined supply and use table: in the supply and use table, the statistics relate products to industries, while in the symmetric input-output table the statistics relate products to products or industries to industries. So, in a symmetric input-output table either a product or an industry classification is employed for both rows and columns (see Table 9.4).

9.10 Most statistical information that can be obtained from producer units indicates what type of products they have produced/sold and, usually less detailed, what type of products they have bought/used. The format of the supply and use tables is designed to fit in with this type of statistical information (i.e. industry by product). By contrast, information of a product by product or industry by industry nature as required by the symmetric input-output table is not often available. For example, surveys of industries usually provide information about the type of products used and about the products produced. However, information on the inputs in terms of products and value added components for each product produced is usually not collectable. Ideally, the administration of an enterprise should show all costs allocated to the various types of output and, simultaneously, show the composition of intermediate consumption by type of product. In practice, information arranged in the form of supply and use tables is therefore a practical starting point for constructing the more analytic information in the symmetric input-output tables. The industry by product information in the supply and use tables can be converted into product by product or industry by industry, statistics by adding extra statistical information on the input structures, or by assuming constant input structures by product or by industry (see paragraphs 9.54. – 9.60.).

9.11 The supply and use tables serve both statistical and analytical purposes.

Important statistical purposes are:

1. identifying gaps and inconsistencies in basic data sources;
2. weighting and calculation of index numbers and price and volume measures;
3. making estimates by residual (estimating a variable by first estimating all other variables in the identity), e.g. for the production or final consumption of specific products;
4. checking and improving the consistency, plausibility and completeness of figures in the supply and use tables and the derived figures (such as those in the production accounts). To this end, the balancing process should not be limited to the supply and use tables at current prices:

   (1) by compiling supply and use tables at current and constant prices for two or more years, estimates of changes in volumes, values and prices can be balanced simultaneously: compared to integrating supply and use tables for a single year in isolation, this is a major extension of the effectiveness of the integration framework;

   (2) with the aid of the tables showing the linkage with the sector accounts, a direct comparison can be made with information from the latter, e.g. information on the distribution of income, on saving and on net lending (calculated as the result of financial transactions). This at least guarantees that, after the balancing process, consistency is obtained between the supply and use tables and the sector accounts;

   (3) trying to derive symmetric input-output tables from the supply and use tables may reveal inconsistencies and weaknesses in the supply and use tables. In this respect, there is therefore also a feedback from the symmetric input-output tables to the supply and use tables;

5. estimating figures for periods on which less reliable information is available, e.g. estimating annual figures on the basis of the detailed supply and use figures for a benchmark year or estimating quarterly figures on the basis of annual supply and use tables.

9.12 The supply and use tables and symmetric input-output table give a detailed picture of the composition of the supply and use of goods, services and labour and the primary incomes involved. These tables and the ratios that can be derived from them, such as productivity figures, are an important subject for economic analysis.

9.13 The supply and use tables and symmetric input-output tables can also be used as tools of economic analysis. Both types of tables have different merits. For calculating direct and indirect effects, the supply and use tables need to be accommodated with specific assumptions or extra statistical information. For calculating cumulative effects, these assumptions and extra data requirements are the strongest. In fact, the requirements for calculating cumulative effects with a supply and use table amount to constructing a symmetric input-output table. Therefore, for calculating cumulative effects, the symmetric input-output table is the preferable tool. However, for calculating direct effects and first-order effects, the supply and use tables adjusted with a selected amount of assumptions (or extra statistical information) is in general to be preferred, because:

1. the calculation is less dependent on assumptions;
2. the supply and use table provides more detail than the symmetric input-output table;
3. the information in the supply and use table can be better linked to other types of statistical data.

These features are also helpful when the supply and use tables are integrated in a macro-economic model: the resulting overall model is more close to real statistics, can show a lot of detail and can relatively easily be linked to areas on which other statistical data are available, e.g. on the labour market or the environment.

9.14 The supply and use tables and symmetric input-output tables can be used to calculate:

1. effects of changes in prices or tax rates on the values of supply or use;
2. effects of changes in volumes on the values of supply or use;
3. effects of changes in prices of supply on prices of use;
4. effects of changes in the volume of use on the volume of supply;
5. effects of changes in the volume of supply on the volume of use.

The calculations can show indirect as well as direct effects. For example, a significant increase in energy prices will affect not only those industries that use energy intensively, but also those industries that use the outputs of the energy-intensive producers. With the aid of some assumptions, estimates of the size of such indirect effects can be deduced from the supply and use and symmetric input-output tables. Examples of common assumptions are:

1. a constant input structure in terms of values;
2. a constant composition of the value of output by industry and by product;
3. a constant composition of the value of final consumption expenditure of households by product.

These assumptions are rather rigid as they imply that relative prices do not change, that the production processes remain technically the same and that no substitution occurs between categories of final consumption expenditure by households. However, these general assumptions can be modified by allowing first for changes in relative prices, e.g. the Leontief-price model. This can then be extended with econometric or other estimates of the influence of relative prices and other variables on technical coefficients or final consumption expenditure by households.

The calculations need not be confined to the supply and use of goods and services. They could also be applied to the supply and use of labour and the components of value added.

9.15 The supply and use tables and the symmetric input-output table can be integrated into macro-economic models to provide the latter with a detailed meso-economic foundation. Specific types of analysis served by supply and use tables and the symmetric input-output table are, for example:

1. analysis of production, cost structures and productivity;
2. analysis of prices;
3. analysis of employment;
4. analysis of the structure of capital formation, final consumption, exports, etc.;
5. analysis of the relationship between domestic production and the environment (e.g. focusing on the use of specific products like fuel, paper and glass);
6. analysis of imports of energy required;
7. impact analysis of new technologies;
8. sensitivity analysis of the effects of changes in tax rates and regulation.