Input output analysis in Bangladesh by roni bhowmik

1. Input Output
Analysis

3. Welcome to my
Presentation
On November 17, 2013
University of Chinese Academy of Sciences

4. Presented By
Roni Bhowmik
ID: 2013A8000212129
PhD Student
Academy of Mathematics And Systems Science,
University of Chinese Academy of Sciences

5. DISSERTATION TITLE
ON
Input Output Analysis.
( 输入输出分析 .)

6. Bangladesh… at a Glance
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Name: People’s Republic of Bangladesh
Area: 147,570 sq. km.
Capital: Dhaka
Government System: Parliamentary
Population: 150 million
Currency: Taka (৳)
Main Export: Garments Product
Official Language: English

7. Cox’s Bazar (World longest sea beach)

8. Sundarbans (World largest mangroves
Forest)

9. Modern Bangladesh
Bangladesh present 2nd position the
Garment Industries in the world
Parliament House * designed by
Louis I. Kahn
Jamuna Bridge * 11th
bridge in the whole world
longest

10. Honor…The Nobel Peace Prize 2006
Dr. Muhammad Yunus (Banker for the poor) and Grameen Bank

11. Objective
1. What we have learned about input-output
2.
3.
analysis
One example of the usefulness of inputoutput analysis
The possible ways to improve the inputoutput model

12. Input-Output Analysis
•Wassily Leontief
b. 1905
•Nobel Prize, 1973
x = (I-A)-1 y
…for the development of the input
output method and for its
application to important economic
problems.
Leontief passed away on Friday February 6th, 1999
Professor deals with this particular question: "What level of output should each of the n industries in an
economy produce, in order that it will just be sufficient to satisfy the total demand for that product?"

13. Examples of Interrelationships Between Sectors






Sectors
Sectors
Sectors
Sectors
Sectors
Sectors
purchase from other sectors
sell to other sectors
sell outside the local economy
buy outside the local economy
pay their employees
pay taxes
Input-Output analysis creates a picture of a
regional economy describing flows to and
from industries and institutions.

14. Overview of Community Economic System
Inputs
$
$
Products
Basic
Industry
Labor
$
$
Inputs
Goods &
Services
Households
$
$
Services
$

15. What Input-Output Analysis Can Do?
 Input-Output Analysis is an accounting framework
(Physical or in Monetary terms)
 Input-Output analysis can be used to predict changes
in overall economic activity as a result of some
change in the local economy

16. Uses of Input-Output Analysis
 Provides a description of a local economy
 Predictive model to estimate impacts

17. Input-Output Table
 Producers listed on the left
 Purchasers listed across the top
 From the column point of view, these show each sector’s
inputs; from the row point of view the figures are each
sector’s outputs; hence the name input–output table. These
figures are the core of input–output analysis.

18. “competitive” and “noncompetitive”
 Competitive imports are goods that have a
domestic counterpart (that is, are also produced
in the Bangladesh).
 Non-competitive
counterpart.
imports
have
no
domestic

19. The Price Model

20. Input-Output Models
An input/output table quantifies the transactions
between sectors in an economy.
It’s a “snap-shot” of the economy for a one-year period.
By understanding these linkages, we are able to predict
how a change in one sector will affect the other sectors.
Multipliers can be estimated.

21. Input-Output Table
Inputs
Outputs
Interindustry Demand
Final Demand
Z
Y
Total Output,
X

22. Input-Output Models
Three basic components of Input-Output
Models
Transactions Table
Direct Requirements Table
Total Requirements Table

23. Transactions Table
A transactions table shows the monetary flows of
goods and services in a local economy
Represents monetary flows for a given time period,
usually one year

24. Transactions Table Flows
Total outlays = Total output
Intermediate purchases are goods and services
purchased and used in the local production process
Final demands are purchases for final consumption
Final payments are payments for factors or inputs
outside intermediate production process

25. Direct Requirements Table
Direct requirements are the purchases of resources
(inputs) by a sector from all sectors to produce one
dollar of output
Creates a production recipe

26. The Transaction Table and Direct Reqs. Tables
The Transactions Table
(in thousands of units)
Intermediate Purchasers
--Agriculture --Manufacturing
Intermediate Suppliers
--Agriculture
--Manufacturing
Primary Suppliers
--Households
Total Purchases (inputs)
Final Purchasers
--Households
Total
Sales (outputs)
10
5
30
10
60
35
100
50
85
10
15
110
100
50
110
260
Direct Requirements Table
(in thousands of units)
Purchasers
--Agriculture --Manufacturing
Intermediate Suppliers
--Agriculture
--Manufacturing
Primary Suppliers
--Households
Total Purchases (inputs)
0.10
0.05
0.60
0.20
0.85
0.20
1.00
1.00
Every unit of output
requires inputs of a certain
amount from other areas
of the economy.

27. The First Round of Economic Impacts
Direct Requirements Table
(in thousands of units)
Intermediate Purchasers
--Agriculture
--Manu
Intermediate Suppliers
--Agriculture
0.10
0.60
--Manufacturing
0.05
0.20
Primary Suppliers
--Households
0.85
0.20
Total Purchases (inputs)
1.00
1.00
Total Requirements Calculation (First Round)
(in thousands of units)
Sales to
Sales as Direct Inputs
Final Purch.
To Agr
To Manu Total
By Agriculture
200
20
60
80
By Manufacturing
100
10
20
30
By Households
0
170
20
190
Total indirect rounds
By All Supliers
300
300
To
Rd. 2

28. The Second-Fourth Rounds of Econ. Impacts
Total Requirements Calculation (Second Round)
(in thousands of units)
Sales to
Sales as Direct Inputs
Final Purch. To Agr
To Manu Total
By Agriculture
80
8.0
18.0
26.0
By Manufacturing
30
4.0
6.0
10.0
By Households
0
68.0
6.0
74.0
Total indirect rounds
110.0
Total Requirements Calculation (Third Round)
(in thousands of units)
Sales to
Sales as Direct Inputs
Final Purch. To Agr
To Manu Total
By Agriculture
26
2.6
6.0
8.6
By Manufacturing
10
1.3
2.0
3.3
By Households
0
22.1
2.0
24.1
Total indirect rounds
36.0
Total Requirements Calculation (Fourth Round)
(in thousands of units)
Sales to
Sales as Direct Inputs
Final Purch. To Agr
To Manu Total
By Agriculture
8.6
0.9
2.0
2.8
By Manufacturing
3.3
0.4
0.7
1.1
By Households
0
7.3
0.7
8.0
Total indirect rounds
11.9
and so on
until the mult.
effect ends

29. The Total Requirements Results
Total Direct and Indirect Requirements Calculation
(in thousands of units)
Sales to Final
Total
Total
Purchasers
Direct Sales
Indirect Sales
Agriculture
200.0
80.0
38.7
Manufacturing
100.0
30.0
14.9
Households
-190.0
109.6
Total
300.0
300.0
163.1
Total
Sales
318.7
144.9
299.6
763.1
When:
1) there are “Final Sales” of Agriculture = 200 and “Final Sales” of
Manufacturing = 100
2) we see a Total Economic Impact = 763.1, with that impact broken down
as:
1) 300.0 in Initial Sales to Final Purchasers
2) 300.0 in Total Direct Sales
3) 163.1 in Total Indirect Sales
The 300 units in Final Sales generate an additional 463.1 units of
economic activity. This illustrates the multiplier effect captured by IO
models.

30. The Total Requirements Table
Total Requirements Table
Requires Total Sales by
Agriculture
Manufacturing
Households
Total
Every Unit in Final Demand of…
Agriculture
Manufacturing
1.15
0.86
0.07
1.29
1.00
1.00
2.22
3.15
For Agriculture
1.00 Sales to Final Purchasers
1.00 Sales by Primary Suppliers
0.22 Interindustry transactions
Similar to our Base Multiplier in Econ Base Theory
A 1.0 unit increase in demand for agriculture leads to
a total of 2.22 of sales.
For Manufacturing
1.00 Sales to Final Purchasers
1.00 Sales by Primary Suppliers
1.15 Interindustry transactions
Similar to our Base Multiplier in Econ Base Theory
A 1.0 unit increase in demand for manufacturing leads to
a total of 3.15 of sales.

31. Example Transactions Table
Purchasing Sectors ($ million)
Agriculture Health
Selling Sectors
($ million)
Agriculture
Services Final
Total
Demands Output
10
6
2
18
36
Health
4
4
3
26
37
Services
6
2
1
35
44
Final
Payments
16
25
38
0
79
Total Input
36
37
44
79
196

32. Predictive Use of Input-Output Analysis
Impacts are tracked throughout the economy
The multipliers are derived from regional economic
accounts
Only local transactions are used to create the
multiplier effect

33. Direct Requirements Table
Purchasing Sectors
Agriculture
Health
Services
Selling Sectors
Agriculture
0.278
0.162
0.045
Health
0.111
0.108
0.068
Services
0.167
0.054
0.023
Final Payments
0.444
0.676
0.864
Total
1.000
1.000
1.000

34. Total Requirements Table
Purchasing Sectors ($ million)
AgricultureHealth
Services
Selling Sectors
($ million)
Agriculture
1.446
0.268
0.085
Health
0.199
1.163
0.090
Services
0.258
0.110
1.043
Total
1.903
1.541
1.218

35. What are Multipliers?
Multipliers measure total change throughout the
economy from one unit change for a given sector.
Three Types of Multipliers are calculated from Model
1. Output
2. Employment
3. Income

36. Three levels of Multipliers
Type I Multipliers
Type II Multipliers
Type III Multipliers

37. Type I Multipliers
Include direct or initial spending
Include indirect spending or businesses buying and
selling to each other
The multiplier is direct plus indirect effect divided by
direct effect

38. Type II Multipliers
Includes Type I Multiplier effects
Plus household spending based on the income earned
from the direct and indirect effects – the induced
effects

39. TYPE III MULTIPLIERS
Type III Multipliers are modified Type II multipliers.
Therefore, Type III Multipliers also include the direct,
indirect, and induced effects.
Type III Multipliers adjust Type II Multipliers based on
spending patterns amongst different income groups.

40. Caution When Using Multipliers
Multiplier values include direct effects
Do not aggregate sector multipliers to derive an
aggregate multiplier
Be cautious of large multipliers
Be cautious in using a multiplier from another study
area

41. The Economic Base Theoretical Model
The EB model assumes that the basic sector is the
primary cause of local economic growth; that is, it is the
economic
base
of
the
local
economy.
Non-Local $$$’s
Basic Sector
Employment
Local
$$$’s
Non-Basic Sector
Employment
The Local Economy

42. How can we use I-O Model?
Example: The effect of fuel tax on Bangladesh economy.
Fuel tax
Demand system
Weight
Income (GDP)
Final demand
I-O Model
Output
Emissions
EIO Model
GDP

43. Basic Input-Output Problem
The main problem of input-output analysis is the following:
Consider an economy with several industries. Each
industry has a demand for products from other
instructress (internal demand). Because each industry has
homogenous, and only one, production function. There are
also external demands from the outside. Find a production
level for the industries that will meet both internal and
external demands.

44. Example to show the usefulness of input-output analysis
 IO tables serve primarily statistical purposes and provide an
integrated framework for checking consistency and completeness of
national accounts data.
 IO tables provide the main macroeconomic aggregates such as GDP,
components of value added and output by industry, import, final
consumption, gross capital formation and export.
 IO table describes the supply of goods and services, which are either
produced in the domestic industry or imported.

46. Simplicity I follow only one product in my
example: Garments Sector

47. Input-Output
A product by product input-output gtable shows how
much of each product is being used as input for the
production of another product. Similarly, it also shows
how much of each product is consumed by different
user categories (production, households, government,
non-profit institutions serving households, investment
and foreign trade)

48. Conclusion
 The possible ways to improve the
input-output
situation
model
depend
on