Input output tables capture the flows of goods and services in an economy. Typically produced at a national level (Gross Domestic Product), these tables can also be constructed for specific regions (Gross Regional Product), so long as enough data is available.
DESCRIPTION
Input–output tables capture the flows of goods and services in an economy. Typically produced at a national level, input–output tables can also be constructed for regions, so long as enough data is available. Input–output analysis seeks to measure the value of the range of inputs to a region’s industries, as well as the value of the outputs, and the value added during transformation. The total value of output across all regions adds to the national Gross Domestic Product (GDP). If data is available for a region, it will add up to the Gross Regional Product.
USES
Input–output analysis can help regions understand the kinds of interlocking relationships between industry types, thus pointing towards particular strengths or weaknesses in the region’s economic web that may need attention.
Input–output table is a matrix or table that has inputs down the left hand side and outputs across the top. This means for example, that it will show the value of fuel inputs in the transport industry or the value of food products in the restaurant trade. The table is only as good as the data that goes into it, the more this data is aggregated, the less fine-tuning users can do.
Input–output tables can easily be used to calculate the ‘coefficients of production’ to find how efficient particular industries are, in comparison to national averages. By looking, for example, at the ratio of the value of timber inputs into the paper pulp (or furniture) industries, to the value of the outputs, an overall measure of the efficiency of the industry is derived.
These coefficients can also be used to derive multipliers for particular inputs. The total value added to agricultural outputs across all industries in a region, for example, will give an estimate of the impact of a drought on the region’s whole economy. Input–output analysis can thus be a useful part of a regional impact assessment.
HOW IT WORKS
Data is collected annually by the ABS for Australia’s national accounts. Unfortunately in Australia, while the national aggregates are produced each quarter, input–output tables for the country as a whole take years to appear. The most recent tables that are currently available are from data collected in 1994-95.
PREREQUISITES
As with many statistics-based tools, it helps to know what you are looking for before picking up and using a particular tool. With input–output analysis it is also important to find out pretty early on, whether data is available for your region, and how up to date it is.
HOW TO START
The first step is to find out from the ABS what is the most recent input–output data available for your region. The second step is finding someone who can interpret, manipulate and draw on whatever input–output data is available to find the answers you need. Though it is no longer fashionable in ‘mainstream’ economics departments, most universities have people who are used to working with input–output data.
STRENGTHS
Input–output analysis is very good for identifying and quantifying the often complex inter-relationships in a regional economy. Co-efficients of production and multipliers are valuable in understanding which industries add the most throughout the regional economy. Allowing ready benchmarking on comparable data against other regions and the nation as a whole means Input–output analysis is also very good for comparisons.
WEAKNESSES
Input–output analysis in Australia is really only useful for an understanding of the bigger picture. Disaggregated analysis either by region or by industry types is not possible. As such it can often be frustrating that hints of interesting underlying relationships can be seen in an input–output table, but they cannot be picked apart any further. The results of input–output analysis are only as good as the data that goes in to it, and with the levels of aggregation in Australian data, it can be hard to refine the results to aid in determination of policies and programs to improve regional industry performance.
Input–output analysis in Australia is also limited by the age of the data that is available. In addition, the analysis is retrospective and needs to be undertaken over a number of years if trends are to be discerned that will help with forward projections.
WARNINGS
Don’t expect too much from this tool, especially in terms of practical suggestions to boost the region’s economy. It is a very powerful tool for capturing the flows of goods and services and value added in a community, but it is in danger of falling into the ‘Gee, that’s interesting, but so what?’ category.
INDICATIVE PRICE/COSTS
Check ABS for costs of data. Processing and analysis depends on the quality of data available and required, but expect it to take at least two weeks to iron out the bugs in the basic input–output table. Once the table is ready, the co-efficients and multipliers can be derived quite easily. But input–output analysis generates a lot of numbers very quickly, and your analyst will need to have another week or so to digest the data that is generated and summarise and explain the key features.
FUNDING RESOURCE OPTIONS
Businesses or business organisations in key industries in the area may be willing to contribute to a study that should confirm how much they mean to the regional economy. Regional councils or development groups (public or private) may also be willing to assist to help determine where to allocate resources for basic infrastructure to ensure the greatest spin-offs.
MONITORING AND PERFORMANCE EVALUATION
As with many statistical tools, the results of input–output analysis need to be tested against community knowledge of their economy. The last thing the commissioning group needs is for the bravely produced top-down analysis to be undermined by perceptions that it doesn’t really capture the local scene. If possible, the analysis should be updated whenever new data becomes available, allowing checks to be made for any sudden jumps away from previous data, and allowing the validity of any projections to be tested.
SIMILAR TOOLS
• Economic Impact Analysis.
INFORMATION RESOURCES
TBA
Software for Input-Output
TBA
Useful conrtacts
TBA