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““International Input Output Analysis and SustainableInternational Input Output Analysis and SustainableRegional DevelopmentRegional Development""Dr. Alejandro Díaz-BautistaDr. Alejandro Díaz-BautistaProfesor Investigador en Economía,Profesor Investigador en Economía,ColefColefProfessor of International EconomicsProfessor of International Economicsadiazbau@gmail.comadiazbau@gmail.comhttp://www.linkedin.com/pub/alejandro-diaz-bautista/6/619/691http://www.linkedin.com/pub/alejandro-diaz-bautista/6/619/691Presentation prepared for the first conference of Input-Output Analysis,Organized by the Universidad Autónoma de Yucatán, México yAsociación Mexicana Matriz de Insumo Producto, March 14 -15, 2013,Mérida, Yucatán, Mexico.
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Input OutputInput OutputEconomicsEconomicsInput-output economics refers to the study of the effectsInput-output economics refers to the study of the effectsthat different sectors have on the economy as a whole, forthat different sectors have on the economy as a whole, fora particular nation or region. This type of economica particular nation or region. This type of economicanalysis was originally developed by Wassily Leontief,analysis was originally developed by Wassily Leontief,who later won the Nobel Memorial Prize in Economicwho later won the Nobel Memorial Prize in EconomicSciences for his work on this model.Sciences for his work on this model.Input-output analysis allows the various relationshipsInput-output analysis allows the various relationshipswithin an economic system to be analyzed as a whole,within an economic system to be analyzed as a whole,rather than individual components. The present studyrather than individual components. The present studyshows some of the empirical applications in Mexico andshows some of the empirical applications in Mexico andthe international experience in the development of Inputthe international experience in the development of InputOutput Matrix and analysis.Output Matrix and analysis.
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Input Output EconomicsInput Output EconomicsAn understanding of the economy as consisting of linkedAn understanding of the economy as consisting of linkedsectors goes back to the French economist François Quesnay,sectors goes back to the French economist François Quesnay,but was developed in general form by Léon Walras in 1874.but was developed in general form by Léon Walras in 1874.Leontiefs contribution was to state the model in such a way asLeontiefs contribution was to state the model in such a way asto make computation feasible.to make computation feasible.With his first publications from 1936 to 1941 Leontief foundedWith his first publications from 1936 to 1941 Leontief foundedthe input output analysis. Dantzig developed in 1951 the simplexthe input output analysis. Dantzig developed in 1951 the simplexalgorithm to solve linear optimization problems. His simplexalgorithm to solve linear optimization problems. His simplexalgorithm is still the basic foundation of linear programming andalgorithm is still the basic foundation of linear programming andoperations research. While Dorfman, Samuelson and Solowoperations research. While Dorfman, Samuelson and Solowdiscussed in 1958 the close relationship between input-outputdiscussed in 1958 the close relationship between input-outputanalysis and linear programminganalysis and linear programming
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The input output equation model systemThe input output equation model system is the following:is the following:Z = B(I - A)-1Y is the common equation system of input-outputZ = B(I - A)-1Y is the common equation system of input-outputanalysis.analysis.wherewhereB = matrix of input coefficients for specific variable in economicB = matrix of input coefficients for specific variable in economicanalysis (intermediates, labor, capital, energy and emissions).analysis (intermediates, labor, capital, energy and emissions).I = unit matrix.I = unit matrix.A = matrix of input coefficients for intermediates.A = matrix of input coefficients for intermediates.Y = diagonal matrix for final demand.Y = diagonal matrix for final demand.Z = matrix with results for direct and indirect requirementsZ = matrix with results for direct and indirect requirements(intermediates, labor, capital, energy and emissions).(intermediates, labor, capital, energy and emissions).Matrix B includes the input coefficients of the variable underMatrix B includes the input coefficients of the variable underinvestigation (intermediates, labor, capital, energy, emissions).investigation (intermediates, labor, capital, energy, emissions).The diagonal matrix Y denotes exogenous final demand for goodsThe diagonal matrix Y denotes exogenous final demand for goodsand services.and services.The matrix Z incorporates the results for the direct and indirectThe matrix Z incorporates the results for the direct and indirectrequirements (intermediates, labor, capital, energy) or joint productsrequirements (intermediates, labor, capital, energy) or joint products(emissions) for the produced goods and services.(emissions) for the produced goods and services.
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The Model of Dynamic Input-Output Analysis.The Model of Dynamic Input-Output Analysis.Standard models of dynamic input output analysis consider that someStandard models of dynamic input output analysis consider that someinputs contribute to the production process but are not immediatelyinputs contribute to the production process but are not immediatelyused up during production. In other words, a sector has a certainused up during production. In other words, a sector has a certaincapital stock of machinery, buildings and transport equipment that iscapital stock of machinery, buildings and transport equipment that isalso necessary for production. In consequence, investments arealso necessary for production. In consequence, investments arerequired for replacements and capacity additions.required for replacements and capacity additions.The dynamic input-output models are designed in line with theThe dynamic input-output models are designed in line with themultiplier-accelerator analysis of macroeconomic theory. According tomultiplier-accelerator analysis of macroeconomic theory. According tothis theory it is expected that investment is induced if final demand isthis theory it is expected that investment is induced if final demand isexpected to grow.expected to grow.
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The Model of Dynamic Input-Output Analysis.The Model of Dynamic Input-Output Analysis.We assume that induced investment is a function of expected growth.We assume that induced investment is a function of expected growth.The model equations are:The model equations are:Xt = AXt + Ct + DtXt = AXt + Ct + DtDt = BXt+1 - BXtDt = BXt+1 - BXtXt = AXt + Ct + BXt+1 - BXtXt = AXt + Ct + BXt+1 - BXt(I – A + B)Xt = Ct + BXt+1(I – A + B)Xt = Ct + BXt+1The production of period t is defined:The production of period t is defined:Xt = (I – A + B)-1 (Ct + BXt+1)Xt = (I – A + B)-1 (Ct + BXt+1)while the production of period t+1 is determined by:while the production of period t+1 is determined by:Xt+1 =B-1[(I – A + B)Xt - Ct]Xt+1 =B-1[(I – A + B)Xt - Ct]X = output. Y = final demand. I = unit matrix ; A = input coefficients forX = output. Y = final demand. I = unit matrix ; A = input coefficients forintermediates. (I-A)-1 = matrix of cumulative input coefficients (inverse).intermediates. (I-A)-1 = matrix of cumulative input coefficients (inverse).B = input coefficients for capital; C = exogenous final demand (consumption);B = input coefficients for capital; C = exogenous final demand (consumption);D = induced investment. T = time index.D = induced investment. T = time index.This is a system of linear difference equations, since the values of theThis is a system of linear difference equations, since the values of thevariables are related to different periods of time.variables are related to different periods of time.While consumption is expected to grow at the annual rate (1+m)t.While consumption is expected to grow at the annual rate (1+m)t.
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Updating input output matrices.Updating input output matrices.Methods for updating input-output tables can be categorized in univariate,Methods for updating input-output tables can be categorized in univariate,bivariate, econometric and stochastic proceduresbivariate, econometric and stochastic proceduresThe basic idea of univariate methods to update input-output tables is to correct theThe basic idea of univariate methods to update input-output tables is to correct thematrix of input coefficients row wise with a diagonal matrix of correction factors.matrix of input coefficients row wise with a diagonal matrix of correction factors.In contrast to univariate methods, which work with corrections of rows only,In contrast to univariate methods, which work with corrections of rows only,bivariate models correct rows and columns of one input-output table at the samebivariate models correct rows and columns of one input-output table at the sametime.time.The RAS procedure was developed by Richard Stone and named after the typicalThe RAS procedure was developed by Richard Stone and named after the typicalsequence of matrices. This time the matrix of input coefficients is pre-multipliedsequence of matrices. This time the matrix of input coefficients is pre-multipliedwith a diagonal matrix of row factors of correction and post multiplied with awith a diagonal matrix of row factors of correction and post multiplied with adiagonal matrix of column factors of correction. Simple and modified RASdiagonal matrix of column factors of correction. Simple and modified RASprocedures are widely used to update input output tables on the basis of aprocedures are widely used to update input output tables on the basis of abenchmark table that has been compiled with the help of census and survey data.benchmark table that has been compiled with the help of census and survey data.The basic idea is to adjust in an iterative procedure the matrix for intermediateThe basic idea is to adjust in an iterative procedure the matrix for intermediateinputs column and row wise with appropriate multipliers until the given totals forinputs column and row wise with appropriate multipliers until the given totals forintermediate input requirements are met.intermediate input requirements are met.The RAS procedure seems to have a sound economic basis with the capability toThe RAS procedure seems to have a sound economic basis with the capability toreflect technological change through the substitution and fabrication effects.reflect technological change through the substitution and fabrication effects.However, many economists view the RAS procedure as a purely mathematicalHowever, many economists view the RAS procedure as a purely mathematicalprocedure hardly capable of tracing the complex phenomenon of technologicalprocedure hardly capable of tracing the complex phenomenon of technologicalchange.change.
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International Input outputInternational Input outputAnalysesAnalysesInput output analyses are widely used in highlyInput output analyses are widely used in highlyindustrialized societies and developing countries. In theindustrialized societies and developing countries. In theUnited States, the Department of Commerce, for example,United States, the Department of Commerce, for example,has generated several input-output matrices, including thehas generated several input-output matrices, including theBench-Mark Tables. In Europe, countries as Denmark,Bench-Mark Tables. In Europe, countries as Denmark,France, Germany, the Netherlands, Norway, Spain andFrance, Germany, the Netherlands, Norway, Spain andthe United Kingdom, estimate input-output matrices everythe United Kingdom, estimate input-output matrices everyfive years. In Latin America input-output matrices arefive years. In Latin America input-output matrices areestimated every few years in Argentina, Colombia, Costaestimated every few years in Argentina, Colombia, CostaRica, Cuba, Mexico and Puerto Rico. Other countries withRica, Cuba, Mexico and Puerto Rico. Other countries witha long tradition of producing this analytical instrument area long tradition of producing this analytical instrument areIndia, Japan and Russia.India, Japan and Russia.
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United States InputUnited States InputOutput AnalysisOutput AnalysisHowever, the first government agency to undertake theHowever, the first government agency to undertake theconstruction of a full-scale national input-output table wasconstruction of a full-scale national input-output table wasthe Bureau of Labor Statistics of the Department of Laborthe Bureau of Labor Statistics of the Department of Laborin the U.S. This effort resulted in the publication of a 50-in the U.S. This effort resulted in the publication of a 50-sector table of interindustry relations in the United Statessector table of interindustry relations in the United Statesand of a much more detailed 200-sector table with finerand of a much more detailed 200-sector table with finerindustrial and sectoral classifications. To construct thisindustrial and sectoral classifications. To construct thistable, a separate Division of Interindustry Economics hadtable, a separate Division of Interindustry Economics hadbeen established in the Bureau of Labor Statistics. Anbeen established in the Bureau of Labor Statistics. Animportant result of this early work in input-output analysisimportant result of this early work in input-output analysiswas a projection of the U.S. economy to 1950.was a projection of the U.S. economy to 1950.
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United States InputUnited States InputOutput AnalysisOutput AnalysisIn the United States the annual input-output (I-O)In the United States the annual input-output (I-O)accounts provide a time series of detailed, consistentaccounts provide a time series of detailed, consistentinformation on the flow of goods and services that makeinformation on the flow of goods and services that makeup the production processes of industries. For each yearup the production processes of industries. For each yearbeginning with 1998, the accounts show how industriesbeginning with 1998, the accounts show how industriesinteract as they provide inputs to, and use outputs from,interact as they provide inputs to, and use outputs from,each other to produce GDP. The annual I-O accounts caneach other to produce GDP. The annual I-O accounts canbe used to study changes in structure of the U.S.be used to study changes in structure of the U.S.economy and the relative importance of an industry to alleconomy and the relative importance of an industry to allother industries. The accounts are an important tool forother industries. The accounts are an important tool foranalysis because they show the production functions ofanalysis because they show the production functions ofindividual industries and the interactions among producersindividual industries and the interactions among producersand between producers and final users in the economy.and between producers and final users in the economy.
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United States InputUnited States InputOutput AnalysisOutput AnalysisThe Industry Economic Accounts (IEA) preparesThe Industry Economic Accounts (IEA) preparesbenchmark input-output (I-O) accounts in the U.S. forbenchmark input-output (I-O) accounts in the U.S. foryears ending in 2 and 7, which are based on detailedyears ending in 2 and 7, which are based on detaileddata from the quinquennial economic censuses thatdata from the quinquennial economic censuses thatare conducted by the Bureau of the Census. Theare conducted by the Bureau of the Census. Thebenchmark accounts show how industries interact atbenchmark accounts show how industries interact atthe detailed level; specifically, they show howthe detailed level; specifically, they show howapproximately 500 industries provide input to, and useapproximately 500 industries provide input to, and useoutput from, each other to produce gross domesticoutput from, each other to produce gross domesticproduct. These accounts provide detailed informationproduct. These accounts provide detailed informationon the flows of the goods and services that make upon the flows of the goods and services that make upthe production processes of industries.the production processes of industries.The 2002 benchmark I-O accounts are presented inThe 2002 benchmark I-O accounts are presented inthe standard make and use tables and severalthe standard make and use tables and severalsupplementary tables.supplementary tables.
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Canada’s Input OutputCanada’s Input OutputAnalysisAnalysisIn Canada, input-output tables are published on an annualIn Canada, input-output tables are published on an annualbasis. The publications begin in 1961 for the nationalbasis. The publications begin in 1961 for the nationalinput-output tables, and the provincial input-output tablesinput-output tables, and the provincial input-output tablesare available from 1997. Input-output tables are availableare available from 1997. Input-output tables are availablefor different levels of aggregation. Statistics Canadafor different levels of aggregation. Statistics Canadaoperates national and interprovincial input-output models.operates national and interprovincial input-output models.The models are open and they calculate the direct andThe models are open and they calculate the direct andindirect effects only.indirect effects only.Statistics Canada calculates national and provincialStatistics Canada calculates national and provincialmultipliers for all industries at all levels of aggregation.multipliers for all industries at all levels of aggregation.Multipliers for special impact can be calculated using theMultipliers for special impact can be calculated using theNational and Interprovincial input-output models.National and Interprovincial input-output models.
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European Input OutputEuropean Input OutputTableTableWhile the European Input Output Table can be used to evaluate theWhile the European Input Output Table can be used to evaluate theimpact of different policies on macroeconomic variables such as grossimpact of different policies on macroeconomic variables such as grossdomestic product, employment, consumption, productivity,domestic product, employment, consumption, productivity,competitiveness, etc, as well as on the environment. Moreover, inputcompetitiveness, etc, as well as on the environment. Moreover, inputoutput techniques allow quantitative impact assessment of policyoutput techniques allow quantitative impact assessment of policyactions either for regional, national or international levels.actions either for regional, national or international levels.The Institute for Prospective Technological Studies (IPTS) of theThe Institute for Prospective Technological Studies (IPTS) of theEuropean Commissions DG Joint Research Centre is developingEuropean Commissions DG Joint Research Centre is developinginput-output based models as a tool to support the development ofinput-output based models as a tool to support the development ofEuropean policies. The latest progress is the elaboration of aEuropean policies. The latest progress is the elaboration of acomplete homogeneous set of 27 symmetric input-output tables atcomplete homogeneous set of 27 symmetric input-output tables atindividual Member State level and an aggregate EU 27 table.individual Member State level and an aggregate EU 27 table.
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Input-Output Analysis in MexicoInput-Output Analysis in MexicoMexico has several input-output matrices referring to theMexico has several input-output matrices referring to theyears 1950, 1960, 1970, 1975, 1978 and 1980. Also, for thisyears 1950, 1960, 1970, 1975, 1978 and 1980. Also, for thislast year, Mexico has a matrix for the agriculture and forestrylast year, Mexico has a matrix for the agriculture and forestrysector. In regards to the matrices of 1950 and 1960, theysector. In regards to the matrices of 1950 and 1960, theywere developed by the Bank of Mexico and were allowed towere developed by the Bank of Mexico and were allowed tointegrate the first set of consolidated accounts of the country,integrate the first set of consolidated accounts of the country,while the following matrices were made by the Department ofwhile the following matrices were made by the Department ofStatistics (DGE) of National Institute of Statistics, GeographyStatistics (DGE) of National Institute of Statistics, Geographyand Informatics (INEGI).and Informatics (INEGI).The matrices for 1975 and 1978 were part of an upgrade ofThe matrices for 1975 and 1978 were part of an upgrade of1970, while the matrix of 1980 introduced innovative features1970, while the matrix of 1980 introduced innovative featuresin relation to the preceding matrix.in relation to the preceding matrix.In 2003, Inegi worked on the National MIP.In 2003, Inegi worked on the National MIP.The most recent work on the national matrix was conductedThe most recent work on the national matrix was conductedaround 2008.around 2008.
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Applied Input-Output Analysis forApplied Input-Output Analysis forMexico’s Energy SectorMexico’s Energy Sector
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Proposed Applied Analysis for Mexico’sProposed Applied Analysis for Mexico’sNational Energy SectorNational Energy Sector
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Proposed Applied Analysis for Mexico’sProposed Applied Analysis for Mexico’sNational Energy SectorNational Energy Sector
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Mexico’s Energy SectorMexico’s Energy SectorThe National Energy Strategy 2013-27 was approved by majority voteThe National Energy Strategy 2013-27 was approved by majority votein the Senate during March of 2013.in the Senate during March of 2013.The strategy outlines plans to deal with the country’s growing energyThe strategy outlines plans to deal with the country’s growing energyneeds in an efficient, safe and sustainable way.needs in an efficient, safe and sustainable way.Mexico’s energy policy looks for opportunities in energy conservation;Mexico’s energy policy looks for opportunities in energy conservation;expands energy services to regions with fewer resources; and seeks toexpands energy services to regions with fewer resources; and seeks tominimize the health and environmental impacts that result from theminimize the health and environmental impacts that result from thegeneration and consumption of energy, both regionally and globally.generation and consumption of energy, both regionally and globally.The strategy promotes sharing the benefits of energy use with all ofThe strategy promotes sharing the benefits of energy use with all ofsociety, while exploring the sector’s long-term sustainability and wayssociety, while exploring the sector’s long-term sustainability and waysto mitigate greenhouse gas emissions.to mitigate greenhouse gas emissions.The upcoming energy reform shows a clear goal of expanding foreignThe upcoming energy reform shows a clear goal of expanding foreigndirect investment in the energy sector.direct investment in the energy sector.
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ConclusionsConclusionsOne of the key conclusions of the use of this type of modeling, whichOne of the key conclusions of the use of this type of modeling, whichintegrates economic, energy and environmental interactions in anintegrates economic, energy and environmental interactions in aninput-output framework, is that it allows the analysis of how energy,input-output framework, is that it allows the analysis of how energy,and therefore emissions, are related to industrial production, andand therefore emissions, are related to industrial production, andultimately to final demand, making it a tool particularly important forultimately to final demand, making it a tool particularly important forpolicy analysis purposes.policy analysis purposes.In addition to studying the structure of national economies, inputIn addition to studying the structure of national economies, inputoutput economics has been used to study regional economies withinoutput economics has been used to study regional economies withina nation, and as a tool for national and regional economic planning.a nation, and as a tool for national and regional economic planning.Indeed a main use of input-output analysis is for measuring theIndeed a main use of input-output analysis is for measuring theeconomic impacts of events and projects as well as publiceconomic impacts of events and projects as well as publicinvestments or economic programs. Input output models are alsoinvestments or economic programs. Input output models are alsoused to identify economically related industry clusters and keyused to identify economically related industry clusters and keyindustries that are most likely to enhance the internal structure of aindustries that are most likely to enhance the internal structure of aspecified economy.specified economy.
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““International Input Output Analysis and SustainableInternational Input Output Analysis and SustainableRegional DevelopmentRegional Development""Dr. Alejandro Díaz-BautistaDr. Alejandro Díaz-BautistaProfesor Investigador en Economía,Profesor Investigador en Economía,ColefColefProfessor of International EconomicsProfessor of International Economicsadiazbau@gmail.comadiazbau@gmail.comhttp://www.linkedin.com/pub/alejandro-diaz-bautista/6/619/691http://www.linkedin.com/pub/alejandro-diaz-bautista/6/619/691Presentation prepared for the first conference of Input-Output Analysis,Organized by the Universidad Autónoma de Yucatán, México yAsociación Mexicana Matriz de Insumo Producto, March 14 -15, 2013,Mérida, Yucatán, Mexico.
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