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Linkages,
Impact & Feedback
            in Light of

 Linear Similarity
      Nikolaos Adamou, Ph.D.
            Business Management
              BMCC / CUNY


  16th International Input – Output Conference
         Istanbul, Turkey, 2 – 6 July 2007
               www.io2007.itu.edu.tr
The basis of Linear Similarity
Same data
                   Same assumption
                  sectoral gross output
                       Proportional
                  to purchases & sales
       X    Yx
                                   ~ := X ij
                        Xij
      H          aij :=            aij
                        xj              xi
      x
                                               Row distributions


                        Column distributions       ~      Yx 1
                                                   A
                                                           1
                                                   Hm
                                                   xm      1
                                     Ym xm
                              A
                                      11
                              Hx
                              1
Similarity:
 matrices have different appearances
             Direct purchase                     Direct sales
   A                                ~
             coefficients                        coefficients
                                    A
                                  [     ]
[I−A]                             ~
             Production                          Allocation
                                I−A

                                   [I−A]
                                      ~
[I−A]        Total interrelations                Total interrelations
                      .
                                            −1
        −1
             in production                       in allocation



                                                                 3
St. Mark
    St. Apostles
                                                            Venice

                       Similarity:
    Constantinople




    matrices have the same structure
                                             (         )
                              tr (I − A ) = tr I − A
                                                   ~
           same trace
             net purchases and sales of an industry to itself
             matching each other
                                                  (                   )
                              det (I − A ) = det I − A
                                                     ~
same determinant
             purchases & sales provide the same ratio of
             net to gross output
same characteristic values
             purchases & sales provide the same signals

                                                                          4
Augusztinovics ’
        Fundamental Identity
                Lets not ignore it
          ~
H x ZY = HZ Yx                    but take it as a starting point of our analysis
value
added



        final demand


 Sum of row elements      total value added
 Sum of column elements   total final demand
 Sum of all elements      net production
                                                                              5
questioning traditional theory

►   Multipliers       ???
    column & row summation of Leontief inverse

►   linkage indices   ???
    Rasmussen’s Power & Sensitivity of Dispersion



                                                    6
Row & Column Multipliers
Power & Sensitivity of Dispersion
4.5                                                                    2.5

4.0
                                                                       2.0
3.5

3.0
                                                                       1.5
2.5

2.0
                                                                       1.0
1.5

1.0                                                                    0.5

0.5

                                                                       0.0
0.0
                                                                             01   02   03   04   05 06   07   08   09   10   11   12   13
      01   02    03   04   05   06   07 08   09    10   11   12   13


                                                                                            Power of Dispersion
                Total Column                      Total Row
                                                                                            Sensibility of Dispersion


                                     Same image, different scale                                                                        7
Traditional multipliers & Rasmussen’s linkage indices
                                                      are linearly related

                                                                                                                  Relationship between
                                      Relationship between
                                                                                                        Total Row Sum & Sensitivity of Dispersion
                            Total Column Sum & Power of Dispersion

                      2.5
                                                                                                       2.5
                                          y = 0.5858x + 3E-07




                                                                           Sensitivity of Dispersion
Power of Dispersion




                                                                                                                   y = 0.5858x + 2E-07
                                                                                                       2.0
                      2.0                         2
                                                 R =1                                                                     R2 = 1
                                                                                                       1.5
                      1.5
                                                                                                       1.0

                      1.0                                                                              0.5

                                                                                                       0.0
                      0.5
                                                                                                             1.0   1.5     2.0      2.5     3.0      3.5   4.0
                            1.0           1.5            2.0         2.5
                                                                                                                         Total of Row Coefficients
                                     Total of Column Coefficients
                                                                                                                          of the Leontief Inverse
                                        of the Leontief Inverse




                                                                                                                                                            8
Linkage is a connection
 given by two (or more) matrices
Linkages are either

multipliers               connection
                                       from a sectoral demand or
or                                          sectoral value added
                                            to sector’s output

                                       from a sectoral demand to
distributions                               sectoral value added
                                            & vice versa
                                           connection from
     one dimensional (Markov)
                                           value added (final demand)
     two dimensional
                                           to sectors or
                                           final demand & value added

                                                                   9
Multipliers are linkages that:


               transmit
                  action to an activity &
               generate
                  Result

           Multipliers refer to industrial sectors


                                                                          10
NOTE:   a multiplier is not just any algebraic or matrix multiplication
Smashing the Leontief inverse into pieces
         & act “procrustean” to exogenous factors


       Unitary Multiplier Structure                Uniform Multiplier Structure
               columns




                                            rows




    eliminate the impact
                                                                   stretch
  of (n–1) sectors to zero &
                                                              the impact of all
then stress the remaining to
                                                              sectors to a unit
            a unit


                                                                              11
                                  Procrustean actions
contrary to traditional assumptions
       actual final demand requires attention
       to its distributions
                   1995                            1        2              3          4      5     6         7




                                                                                                                                         Total Demand -
                                         Consumption.




                                                                                                                                         Gross Output
                                                         Consumption


                                                                       Consumption
                                         Intermediate




                                                                       Government
                                         Households




                                                                                     Increase in




                                                                                                                           Total Final
                                                                                     Formation
             In Trillions of Yen




                                                         (Private)




                                                                                                                           Demand
                                                                                                                 Imports
                                                                                                   Exports
                                         Output




                                                                                     Capital


                                                                                     Stocks
                                         Out
                                           13.3    0.1    4.1 0.0  0.2 0.5 0.0 -2.4                                          2.5          15.8
1    Agriculture, forestry and fishery
                                            7.4    0.0    0.0 0.0  0.0 0.0 0.0 -5.8                                         -5.8           1.7
2    Mining
                                          195.8    2.8   63.8 0.7 39.1 1.2 37.9 -26.7                                      118.8         314.6
3    Manufacturing
                                            8.1    0.0    0.0 0.0 80.0 0.0 0.0     0.0                                      80.0          88.1
4    Construction
                                           17.3    0.0    7.5 1.6  0.0 0.0 0.0     0.0                                       9.1          26.5
5    Electric Power, Gas and Water Supply
                                           36.1    2.2   50.5 0.0 10.4 0.2 3.1 -0.2                                         66.2         102.3
6    Commerce
                                           29.0    0.0    7.8 0.0  0.0 0.0 0.6 -1.0                                          7.4          36.3
7    Finance and insurance
                                           10.6    0.0   53.5 0.0  0.0 0.0 0.0     0.0                                      53.5          64.2
8    Real estate
                                           32.6    0.7   14.7 -0.1 0.8 0.2 3.7    -2.5                                      17.5          50.1
9    Transport
                                            9.5    0.1    5.2 0.0  0.0 0.0 0.0 -0.1                                          5.3          14.8
10   Communication and Broadcasting
                                            0.5    0.0    0.8 25.0 0.0 0.0 0.0     0.0                                      25.8          26.2
11   Public Administration
                                           65.6   13.5   64.0 41.9 9.2 0.0 1.3 -4.4                                        125.4         191.0
12   Services
                                            6.0    0.0    0.0 0.0  0.0 0.0 0.0 -0.6                                         -0.5           5.5
13   Activities not elsewhere classified
                                         431.9    19.4 271.8 69.2 139.7 2.1 46.8 -43.7                                     505.2         937.1
     Intermediate Input
                                                                                                                                         12
Unit distributions that matter
                                                  Other Activities
Distributions of Final Dem and & Value Added
                                                  Services
                                                  Public administ.
 100%
                                                  Communication
  75%
                                                  Transport
                                                  Real estate
  50%
                                                  Finance
  25%
                                                  Commerce
   0%                                             Electric power
                                                  Construction
  -25%
          1995      2000       1995      2000     Manufacturing
                                                  Mining
         Total Final Demand   Total Value Added
                                                  Agriculture


                                                                   13
Leontief Inverse
                          1      2      3      4      5     6       7     8       9     10     11     12     13
     1995 Leontief
1     Agriculture        1.15   0.01   0.06   0.02   0.01      0   0.01      0   0.01   0.01   0.01   0.02   0.01
2     Mining             0.01   1.01   0.03   0.02   0.06      0      0      0   0.01      0   0.01   0.01   0.01
3     Manufacturing      0.35   0.20   1.75   0.57   0.19   0.11   0.12   0.04   0.28   0.11   0.23   0.30   0.23
4     Construction       0.01   0.01   0.01   1.01   0.05   0.01   0.01   0.04   0.02   0.02   0.02   0.01   0.01
5     Electric power     0.02   0.05   0.05   0.03   1.12   0.02   0.01   0.01   0.04   0.02   0.05   0.04   0.03
6     Commerce           0.08   0.05   0.11   0.12   0.04   1.03   0.02   0.01   0.07   0.02   0.04   0.07   0.04
7     Finance            0.07   0.09   0.05   0.05   0.06   0.08   1.12   0.06   0.10   0.03   0.02   0.05   0.20
8     Real estate        0.01   0.02   0.02   0.02   0.02   0.04   0.03   1.01   0.03   0.02   0.01   0.02   0.02
9     Transport          0.08   0.29   0.08   0.10   0.07   0.07   0.04   0.01   1.14   0.05   0.06   0.05   0.05
10    Communication      0.01   0.01   0.01   0.02   0.01   0.02   0.03      0   0.02   1.07   0.02   0.03   0.01
11    Public Adm.           0      0      0      0      0      0      0      0      0      0      1      0   0.08
12    Services           0.07   0.12   0.16   0.16   0.15   0.09   0.15   0.03   0.21   0.18   0.12   1.13   0.13
13    Other Activities   0.02   0.02   0.02   0.01   0.01   0.01   0.01   0.01   0.01   0.01   0.02   0.01   1.01




                                                                                                              14
Similar Leontief Inverse
1995 Similar Leontier    1      2      3     4       5      6      7     8       9     10   11   12   13
 1 Agriculture          1.15   0.07   0.02      0   0.01   0.01   0.03      0   0.03   0.01    0 0.01 0.04
 2 Mining                  0   1.01      0      0      0      0      0      0   0.01      0    0    0 0.01
 3 Manufacturing                      1.75   0.05   0.55   0.34   0.47   0.08   0.53   0.28 0.02 0.26 0.96
                        1.28   6.08
 4 Construction         0.13          0.16   1.01   0.10   0.10   0.11   0.02   0.17   0.09    0 0.07 0.15
                               1.09
 5 Electric power       0.01   0.95   0.02   0.02   1.12   0.01   0.04   0.01   0.03   0.02    0 0.02 0.06
 6 Commerce             0.03   0.19   0.04   0.01   0.08   1.03   0.23   0.07   0.15   0.17    0 0.05 0.16
 7 Finance              0.01   0.06   0.01      0   0.02   0.01   1.12   0.01   0.03   0.07    0 0.03 0.05
 8 Real estate          0.01   0.05   0.01   0.03   0.02   0.01   0.11   1.01   0.01   0.01    0 0.01 0.11
 9 Transport            0.04   0.20   0.04   0.01   0.07   0.03   0.14   0.02   1.14   0.06    0 0.05 0.09
10 Communication        0.01   0.03   0.01      0   0.01      0   0.01   0.01   0.01   1.07    0 0.01 0.03
11 Public adm           0.02   0.10   0.02   0.01   0.05   0.01   0.02      0   0.03   0.04    1 0.02 0.10
12 Services             0.23   0.82   0.18   0.03   0.28   0.13   0.28   0.07   0.18   0.35 0.01 1.13 0.37
13 Other Activities        0   0.02      0      0   0.01      0   0.03      0   0.01      0 0.02    0 1.01




                                                                                                       15
Z



            Leontief & its similar inverses
            yield a unique output multiplier
                         (       )
                          ~T
                   Zy = h Z = x
                             T               from a model




               ~                         y
                                 Z
               Z
        T
    h


                             (       )
                         ~           T
                Zy m = h Z       T           to a multiplier

                                 m
                                                          16
A Unique Multiplier takes into account:
   y1      y2          yn   h1 ~    h2 ~         hn ~
z11 n + z12 n + L + z1n n = n z11 + n z 21 + L + n z n1
   ∑y      ∑y          ∑y ∑h       ∑h           ∑h
                             1        1          1
   1       1           1


 distributed final demand
                                 affecting the
 rows of the Leontief inverse
 &
 distributed value added
                                 affecting the
 columns of the similar Leontief inverse
                                                     17
Unique Gross Output Multiplier
  0.7                                                         Agriculture
                                                              Mining
  0.6
                                                              Manufacturing
                                                              Construction
  0.5
                                                              Electric power
  0.4                                                         Commerce
                                                              Finance
  0.3
                                                              Real estate
                                                              T ransport
  0.2
                                                              Communication
  0.1                                                         Public administ.
                                                              Services
  0.0
                                                              Other Activities
                1995                     2000



A unit of final demand and value added increases sectoral gross output

                                                                            18
Disaggregate gross output multiplier

                 Leontief inverse post–multiplied to         ZYd
Z      Yd        a final demand distribution matrix
                 Impact of each type of final demand
                 on the industrial gross output              result
 linkage


                                                                ~
                 Value added distribution matrix
       ~                                                     Hd Z
Hd
       Z         pre–multiplied to the similar Leontief inverse
                 Impact of each type of value added on the
                 industrial gross output
                                                                 19
Decomposed disaggregate multiplier


                  (I+A+A2+A3+A4 …) Yd
 Final demand
 affecting direct purchases
 affecting second round purchases
 affecting third round purchases …

                        ~ ~2 ~3 ~4
 Value added Hd (I+ A + A + A + A +…)
 affecting direct sales
 affecting second round sales
 affecting third round sales …
                                     20
Distributions (Markov & two dimensional)
are special linkages
      Direct distributions of a sectoral unit of
i.
      output as:                     ⎡A⎤
            [       ]
             ~
      sales A Yx or purchases ⎢H ⎥
                                     ⎣ x⎦
      Total distributed unit of output:
ii.
                   ~
      allocated    ZYx
      produced     H xZ
                          Hx (I+A+A2+A3+A4 …)
iii. Decomposed                 ~ ~2 ~3 ~4
                            (I+ A + A + A + A +…)Yx
                                                   21
The Linkage structure
of Leontief & its similar Inverses
Rows of the Leontief inverse connect to
          final demand distribution
Columns of the Leontief inverse connect to
          value added relationship to output

Columns of the similar Leontief inverse connect to
          value added distribution
Rows of the similar Leontief inverse connect to
          final demand relationship to output

                                                     22
Augusztinovics
Linkages from both sides                                    ~
                                                        H m ZYx
                                    H x Z Ym
Final Structure Matrices                       Adamou
                                                       ~
                                        H x Z Yd = H d ZYx
        Sectoral unit of output distributed to:
      columns of production        rows of allocation
                                        ~
                                        ZYx
           H xZ


                  Multiplier Matrices
Demand driven Production      Value added driven Allocation
                                 ~
                              HmZ
                    ZYm
                                 ~
                    ZYd       Hd Z
                                                             23
Production - Markov Final Structure Matrix
                                         -0.2           0.0             0.2          0.4          0.6          0.8           1.0                 1.2

                                      1995
    Cons.
     OH



                                      2000
                                      1995
    Private
    Cons.




                                      2000

                                      1995
    Imports Exports Formation Cons.
                              Gov.




                                      2000

                                      1995
                     Capital




                                      2000

                                      1995
                                      2000

                                      1995

                                      2000

                                        Consumption out HH                    Compensation of employees          Operating surplus
                                        Depreciation of fixed capital         Indirect taxes *                   (less) Current subsidies


Government Consumption increases employee compensation, operating surplus &
                                                                                                                                            24
decreases depreciation
Allo c a tio n - M a rko vF ina l S truc ture M a trix


                      -20%         0%                20%                  40%                     60%          80%                      100%

                1995

                2000

                1995

                2000

                1995

                2000

                1995

                2000

                1995

                2000

                1995

                2000


       C o ns um ptio n o ut HH     C o ns um ptio n (P riva te )         C o ns um ptio n Go ve rnm e nt   C a pita l F o rm a tio n
       Inc re a s e in S to c ks    Expo rts                              Im po rts



Depreciation affects private & government consumption & capital formation
                                                                                                                                               25
Production & Allocation Final Structure Matrices
                                                                                                  are identical
                                          in their two dimensional distribution
                                                                                       1995                                                                                                                              2000
                     Consumption Out_HH




                                                                                                                                                       Consumption Out_HH
                                          Private Consumption




                                                                                                                                                                            Private Consumption
                                                                              Capital Formation




                                                                                                                                                                                                                Capital Formation
                                                                                                   Increase in Stocks




                                                                                                                                                                                                                                    Increase in Stocks
                                                                Consumption




                                                                                                                                                                                                  Consumption
                                                                Government




                                                                                                                                                                                                  Government
                                                                                                                        Exports

                                                                                                                                  Imports




                                                                                                                                                                                                                                                         Exports

                                                                                                                                                                                                                                                                   Imports
                                                                                                                                              Total




                                                                                                                                                                                                                                                                               Total
Consumption out
HH                  0.00 0.02                                     0.01 0.01 0.00 0.01 -0.01                                                 0.04      0.00 0.02                                     0.01 0.01 0.00 0.00 0.00                                                 0.04
Compensation of
employees           0.02 0.26                                     0.10 0.15 0.00 0.06 -0.05                                                 0.53      0.02 0.26                                     0.09 0.16 0.00 0.05 -0.04                                                0.54
Operating surplus   0.01 0.13                                     0.02 0.03 0.00 0.02 -0.02                                                 0.19      0.01 0.13                                     0.02 0.04 0.00 0.02 -0.02                                                0.20
Depreciation of
                    0.01 0.10 0.04 0.04 0.00 0.02 -0.02                                                                                               0.01 0.10 0.02 0.04 0.00 0.01 -0.01
fixed capital                                                                                                                               0.18                                                                                                                             0.16
Indirect taxes *    0.00 0.04 0.01 0.02 0.00 0.01 -0.01                                                                                     0.08      0.00 0.04 0.01 0.02 0.00 0.01 -0.01                                                                                    0.07
(less) Current
subsidies           0.00 -0.01                                    0.00 0.00 0.00 0.00 0.00                                                  -0.01     0.00 -0.01                                    0.00 0.00 0.00 0.00 0.00                                                 -0.01
                                                                                                                                            1.00                                                                                                                             1.00
            Total 0.04 0.54                                       0.16 0.25 0.00 0.11 -0.10                                                           0.04 0.54                                     0.14 0.28 0.00 0.09 -0.09

                                                                                                                                                                                                                                                                             26
Feedback Matrices
                                  Connecting two final structure matrices

             Yd
   Z
                              ~                  Ym
                                          Yd                   Z
  Hx                          Z
  Hd
  ~          Yx              Hd                          Hx
  Z


       From the distributed final demand & value added
          to their relationship with the gross output

                                                                      27
Final Demand Feedback Matrices
                ~                                   ~
          T    T   T                           T      T    T
        Y Z H HmZYx                       Y Z H H d ZYx
          m        x                           d           x




               Decision   Process                  Process
                                    Summing
                                    Junction            Terminator
Final demand



                                                                     28
Value Added Feedback Matrices
                                             ~
        ~                                         TT   T
    H m ZYx Ym Z T H T
             T
                                         H d ZYx Yd Z H x
                     x




              Decision   Process              Process
                                   Summing
                                   Junction      Terminator

Value added




                                                              29
Feedback         two dimensional matrices
           ~                           ~
                                   H d ZYx Yd ZT H T
                                            T
  T    T   T
 Y Z H H d ZYx                                     x
  d        x


                 Symmetric matrices
                 Same eigenvalues


Feedback        Markov matrices
                Same eigenvalues
                Dominant value is a unit
          ~                          ~
   T   T   T
                                 H m ZYx Ym Z T H T
                                          T
  Y Z H HmZYx
   m       x                                      x
                                                       30
Feedback                                           Feedback - Final Demand
                              0.6
Matrices
                                                                               C o ns um ptio n. Out HH
                              0.5
                                                                               C o ns um ptio n
                              0.4
                                                                               Go ve rnm e nt C o n.
                              0.3
                              0.2                                              C a pita l F o rm .
                              0.1
                                                                               Inc re a s e in S to c ks
                              0.0
                              -0.1                                             Expo rts
                                       1995                           2000     Im po rts



              Feedback - Value Added
0.6
                                       C o ns um ptio n o ut HH
0.5
                                       C o m pe ns a tio n
0.4

                                                                               Final demand’s
0.3
                                       Ope ra ting s urplus
0.2
                                                                             feedback changes
                                       De pre c ia tio n o f fixe d
0.1
                                       c a pita l
0.0
                                       Indire c t ta xe s *
                                                                             while value added
-0.1
       1995            2000            (le s s ) C urre nt s ubs idie s
                                                                             feedback does not
                                                                                                           31
Multiplier Matrix
          Value Added       (cause)
              Final Demand  (result)

                              [I − A ]
                         i=                 ~T
                  Y                                   T
                                                   Hi
                                            Z
sectors


                                         Transposed
               Types                                  types of
                          Production
                                           similar
              of final                              value added
                            matrix
                                          Leontief
              demand
                                           inverse
                                                                  32
Multiplier Matrix
          Final Demand    (cause)
              Value added (result)

                                  [           ]
                                       ~
                               i = I − AT
                           T
                                                              Y
sectors                H                                            i
                                                    Z


types of value added
                                Transposed        Leontief    Types
                                 allocation       inverse    of final
                                  matrix                     demand
                                                                        33
Final Demand - Value Added Multiplier
0.3
                                                      Ag riculture
                                                      M ining
                                                      M anufacturing
0.2
                                                      Co ns tructio n
                                                      Electric p o wer
                                                      Co mmerce
0.1
                                                      Finance
                                                      Real es tate
                                                      Trans p o rt
0.0
                                                      Co mmunicatio n
       1995        2000       1995        2000        Pub lic ad minis t.
                                                      Services
-0.1          Hd   Cause of impact   Yd               Other Activities




                                                                         34
complete view

  WISDOM




                35
Japanese Economic structure 1995


                   1995                           1          2              3               4                 5             6           7            8             9       10               11                12       13                                          1              2             3               4                    5              6           7




                                                                                                                                                                                                                                Intermediate Output




                                                                                                                                                                                                                                                                                                                                                                         Total Final Demand
                                                                                                                                                                                                                                                      Consumption. Out




                                                                                                                                                                                                                                                                                                       Capital Formation


                                                                                                                                                                                                                                                                                                                           Increase in Stocks
                                                                                                                                                                           Communication




                                                                                                                                                                                                                                                                                                                                                                                              Total Demand -
                                                                     Manufacturing




                                                                                                      Electric power




                                                                                                                                                                                            Public Admin.




                                                                                                                                                                                                                                                                         Consumption


                                                                                                                                                                                                                                                                                       Consumption




                                                                                                                                                                                                                                                                                                                                                                                              Gross Output
                                                                                      Construction




                                                                                                                                                                                                              Act. not else




                                                                                                                                                                                                                                                                                       Government
                                                                                                                                                                                                                                                      Households
                                            Agriculture
               In Trillions of Yen




                                                                                                                        Commerce




                                                                                                                                               Real estate

                                                                                                                                                              Transport




                                                                                                                                                                                                              classified




                                                                                                                                                                                                                                                                         (Private)
                                                                                                                                                                                                              Services
                                                                                                                                    Finance




                                                                                                                                                                                                                                                                                                                                                 Exports

                                                                                                                                                                                                                                                                                                                                                             Imports
                                                          Mining
 1   Agriculture, Forestry & Fishery        1.9           0.0        9.9              0.2             0.0               0.0         0.0        0.0            0.0          0.0              0.0               1.2      0.0     13.3                        0.1               4.1           0.0         0.2                 0.5                   0.0        -2.4         2.5                    15.8
2    Mining                                 0.0           0.0        5.3              0.8             1.3               0.0         0.0        0.0            0.0          0.0              0.0               0.0      0.0      7.4                        0.0               0.0           0.0         0.0                 0.0                   0.0        -5.8        -5.8                     1.7
3    Manufacturing                          2.5           0.1      124.7             25.9             1.4               3.8         1.3        0.2            5.4          0.4              2.7              26.8      0.5    195.8                        2.8              63.8           0.7        39.1                 1.2                  37.9       -26.7       118.8                   314.6
4    Construction                           0.1           0.0        1.4              0.2             1.2               0.6         0.1        2.3            0.5          0.2              0.5               1.2      0.0      8.1                        0.0               0.0           0.0        80.0                 0.0                   0.0         0.0        80.0                    88.1
5    Electric Power, Gas & Water Supply     0.1           0.0        5.9              0.6             2.5               1.2         0.2        0.2            0.9          0.2              0.9               4.6      0.1     17.3                        0.0               7.5           1.6         0.0                 0.0                   0.0         0.0         9.1                    26.5
6    Commerce                               0.7           0.0       17.2              6.2             0.3               1.1         0.2        0.1            1.8          0.1              0.5               7.8      0.1     36.1                        2.2              50.5           0.0        10.4                 0.2                   3.1        -0.2        66.2                   102.3
     Finance & Insurance
 7                                          0.5           0.1        4.3              1.0             0.7               5.9         3.5        3.3            3.1          0.2              0.1               5.4      0.9     29.0                        0.0               7.8           0.0         0.0                 0.0                   0.6        -1.0         7.4                    36.3
8    Real Estate                            0.0           0.0        1.1              0.3             0.3               3.8         0.7        0.5            0.8          0.2              0.0               2.8      0.1     10.6                        0.0              53.5           0.0         0.0                 0.0                   0.0         0.0        53.5                    64.2
 9   Transport                              0.7           0.4        9.3              4.7             0.7               5.3         0.7        0.2            5.3          0.4              0.8               3.9      0.1     32.6                        0.7              14.7          -0.1         0.8                 0.2                   3.7        -2.5        17.5                    50.1
10   Communication & Broadcasting           0.0           0.0        0.9              0.5             0.1               1.9         0.7        0.0            0.3          0.9              0.4               3.7      0.0      9.5                        0.1               5.2           0.0         0.0                 0.0                   0.0        -0.1         5.3                    14.8
11   Public Administration                  0.0           0.0        0.0              0.0             0.0               0.0         0.0        0.0            0.0          0.0              0.0               0.0      0.5      0.5                        0.0               0.8          25.0         0.0                 0.0                   0.0         0.0        25.8                    26.2
12   Services                               0.2           0.1       20.7              7.0             2.4               5.3         3.8        1.0            6.6          2.0              1.9              14.3      0.3     65.6                       13.5              64.0          41.9         9.2                 0.0                   1.3        -4.4       125.4                   191.0
13   Activities not elsewhere classified    0.2           0.0        2.3              0.2             0.2               0.6         0.1        0.5            0.2          0.1              0.4               1.2      0.0      6.0                        0.0               0.0           0.0         0.0                 0.0                   0.0        -0.6        -0.5                     5.5

     Intermediate Input                     6.8           0.8      203.2             47.5            11.1              29.6        11.4        8.3           24.9          4.7              8.1              72.8      2.6    431.9                       19.4            271.8           69.2       139.7                 2.1                  46.8       -43.7       505.2                   937.1

     Consumption expenditure outside
1
     households (row)                       0.1           0.1        6.4              1.7             0.6               2.7         1.3        0.3            1.1          0.2              0.5               4.4      0.0     19.4
2    Compensation of employees              1.5           0.3       54.3             29.3             4.6              49.9        14.0        2.5           16.7          4.9             16.8              78.3      0.2    273.2
     Operating surplus
3                                           5.2           0.2       20.1              3.1             3.6              11.3         6.0       28.4            2.8          1.5              0.0              15.2      2.3     99.7
     Depreciation of fixed capital
4                                           1.8           0.2       16.8              4.5             5.4               5.0         3.7       20.8            3.3          2.8              0.8              15.5      0.3     80.8
     Indirect taxes *
5                                           0.6           0.1       14.3              2.2             1.5               4.0         1.6        4.1            1.6          0.6              0.1               5.8      0.0     36.5
     (less) Current subsidies
6                                          -0.2           0.0       -0.4             -0.2            -0.2              -0.2        -1.5       -0.2           -0.3          0.0              0.0              -1.1      0.0     -4.3

     Value Added                            9.0           0.9      111.4             40.6            15.3              72.7        24.9       55.9           25.2         10.1             18.1             118.2      2.9    505.2


     Domestic production (gross inputs)    15.8           1.7      314.6             88.1            26.5 102.3                    36.3       64.2           50.1         14.8             26.2             191.0      5.5    937.1




                                                                                                                                                                                                                                                                                                                                                                                              36
Japanese Economic structure 2000


                   2000                            1          2              3               4                5              6           7            8             9        10               11                12                13                             1             2             3               4                    5                6           7




                                                                                                                                                                                                                                                                                                     Capital Formation


                                                                                                                                                                                                                                                                                                                          Increase in Stocks
                                                                                                                                                                             Communication




                                                                                                                                                                                                                                                                                                                                                                                    Total Demand -
                                                                       Manufacturing




                                                                                                        Electric power




                                                                                                                                                                                              Public Admin.




                                                                                                                                                                                                                                                                       Consumption


                                                                                                                                                                                                                                                                                     Consumption




                                                                                                                                                                                                                                                                                                                                                                                    Gross Output
                                                                                        Construction




                                                                                                                                                                                                                                           Intermediate
                                                                                                                                                                                                                           Act. not else




                                                                                                                                                                                                                                                                                     Government
                                                                                                                                                                                                                                                          Households
                                              Agriculture




                                                                                                                                                                                                                                                                                                                                                                      Total Final
                                                                                                                          Commerce




                                                                                                                                                 Real estate
               In Trillions of Yen




                                                                                                                                                                Transport




                                                                                                                                                                                                                           classified




                                                                                                                                                                                                                                                                       (Private)
                                                                                                                                                                                                                Services




                                                                                                                                                                                                                                                                                                                                                                      Demand
                                                                                                                                      Finance




                                                                                                                                                                                                                                                                                                                                                Exports


                                                                                                                                                                                                                                                                                                                                                            Imports
                                                            Mining




                                                                                                                                                                                                                                           Output

                                                                                                                                                                                                                                                          C. Out
1  Agriculture, Forestry & Fishery           1.6            0.0        8.4              0.2             0.0               0.0         0.0        0.0            0.0          0.0              0.0               1.3             0.0         11.5              0.1         3.9            0.0         0.2                  0.8                   0.1        -2.1         2.9          14.4
 2 Mining                                    0.0            0.0        7.4              0.7             2.0               0.0         0.0        0.0            0.0          0.0              0.0               0.0             0.0         10.1              0.0         0.0            0.0         0.0                  0.0                   0.0        -8.7        -8.7           1.4
 3 Manufacturing                             2.5            0.1      122.9             21.6             1.7               3.2         1.3        0.2            6.1          0.5              2.9              28.2             0.4        191.4              3.3        61.6            0.5        39.7                 -0.6                  46.6       -34.3       116.8         308.2
 4 Construction                              0.1            0.0        1.3              0.2             1.3               0.5         0.2        2.8            0.5          0.2              0.6               1.4             0.0          9.0              0.0         0.0            0.0        68.3                  0.0                   0.0         0.0        68.3          77.3
 5 Electric Power, Gas & Water Supply        0.1            0.0        6.3              0.5             1.6               1.2         0.2        0.2            0.9          0.3              1.0               5.5             0.1         18.1              0.0         8.1            0.8         0.0                  0.0                   0.0         0.0         8.9          27.0
 6 Commerce                                  0.7            0.0       16.3              4.9             0.4               1.4         0.2        0.1            1.6          0.1              0.5               8.3             0.1         34.6              1.9        45.9            0.0        10.7                  0.1                   4.5        -0.7        62.4          96.9
   Finance & Insurance
 7                                           0.5            0.1        4.0              0.9             0.8               4.9         2.9        3.3            2.9          0.5              0.1               5.8             1.0         27.6              0.0        10.5            0.0         0.0                  0.0                   0.4        -0.4        10.5          38.1
 8 Real Estate                               0.0            0.0        0.9              0.3             0.2               2.9         0.6        0.4            0.7          0.4              0.0               2.7             0.0          9.1              0.0        56.7            0.0         0.0                  0.0                   0.0         0.0        56.7          65.9
 9 Transport                                 0.6            0.4        8.2              4.0             0.7               4.6         0.7        0.1            5.0          0.5              1.1               4.2             0.2         30.5              0.5        14.7            0.0         0.7                  0.0                   4.3        -2.9        17.4          47.9
                                                                                                                                     0.8
10 Communication & Broadcasting              0.0            0.0        1.1              0.9             0.1               2.5                    0.1            0.4          2.7              0.5               4.9             0.1          14.2            0.2          7.8           0.0          0.0                 0.0                    0.1        -0.1         7.9          22.1
11 Public Administration                     0.0            0.0        0.0              0.0             0.0               0.0         0.0        0.0            0.0          0.0              0.0               0.0             0.7           0.7            0.0          0.7          34.8          0.0                 0.0                    0.0         0.0        35.5          36.2
12 Services                                  0.2            0.1       23.1              6.4             2.8               6.3         5.0        1.7            6.7          3.6              2.8              19.3             0.3          78.2           13.1         71.1          49.7         10.4                 0.0                    1.6        -4.8       141.0         219.2
13 Activities not elsewhere classified       0.1            0.0        1.7              0.3             0.1               0.6         0.3        0.3            0.2          0.1              0.0               0.7             0.0           4.4            0.0          0.0           0.0          0.0                 0.0                    0.0        -0.2        -0.2           4.2

     Intermediate Input                      6.3            0.7      201.5             40.9            11.7              28.3        12.1        9.2           25.0          8.8              9.5              82.3             2.9        439.4            19.2       281.0           85.7        130.0                 0.3                   57.5       -54.2       519.5         958.9

     Consumption expenditure outside
1
     households (row)                        0.1            0.1        5.6              1.3             0.5               2.3         1.3        0.2            1.0          1.4              0.6               4.7             0.1          19.2
2    Compensation of employees                1.3           0.2       53.1             26.8             4.7              47.3        12.5        2.4           14.8          5.9             16.6              89.8             0.3        275.6
     Operating surplus
3                                             4.7           0.2       16.9              1.4             3.5              10.0         9.0       29.6            2.6          1.5              0.0              16.7             0.4         96.5
     Depreciation of fixed capital
4                                             1.5           0.1       16.7              4.1             5.0               4.8         3.4       20.7            3.0          3.8              9.5              20.3             0.4         93.4
     Indirect taxes *
5                                             0.7           0.1       15.0              3.3             1.7               4.5         1.5        4.0            1.6          0.7              0.1               6.9             0.1         40.0
     (less) Current subsidies
6                                            -0.2           0.0       -0.6             -0.3            -0.3              -0.2        -1.6       -0.2           -0.2          0.0              0.0              -1.5             0.0         -5.2

     Total Value Added                       8.1            0.7      106.6             36.5            15.3              68.6        26.0       56.6           22.9         13.3             26.7             136.9             1.3        519.5

     Domestic production (gross inputs)       14.4    1.4 308.2 77.3                                   27.0              96.9        38.1       65.9           47.9         22.1             36.2             219.2             4.2        958.9
     * (except custom duties and commodity taxes on imported goods)




                                                                                                                                                                                                                                                                                                                                                                                    37

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  • 1. Linkages, Impact & Feedback in Light of Linear Similarity Nikolaos Adamou, Ph.D. Business Management BMCC / CUNY 16th International Input – Output Conference Istanbul, Turkey, 2 – 6 July 2007 www.io2007.itu.edu.tr
  • 2. The basis of Linear Similarity Same data Same assumption sectoral gross output Proportional to purchases & sales X Yx ~ := X ij Xij H aij := aij xj xi x Row distributions Column distributions ~ Yx 1 A 1 Hm xm 1 Ym xm A 11 Hx 1
  • 3. Similarity: matrices have different appearances Direct purchase Direct sales A ~ coefficients coefficients A [ ] [I−A] ~ Production Allocation I−A [I−A] ~ [I−A] Total interrelations Total interrelations . −1 −1 in production in allocation 3
  • 4. St. Mark St. Apostles Venice Similarity: Constantinople matrices have the same structure ( ) tr (I − A ) = tr I − A ~ same trace net purchases and sales of an industry to itself matching each other ( ) det (I − A ) = det I − A ~ same determinant purchases & sales provide the same ratio of net to gross output same characteristic values purchases & sales provide the same signals 4
  • 5. Augusztinovics ’ Fundamental Identity Lets not ignore it ~ H x ZY = HZ Yx but take it as a starting point of our analysis value added final demand Sum of row elements total value added Sum of column elements total final demand Sum of all elements net production 5
  • 6. questioning traditional theory ► Multipliers ??? column & row summation of Leontief inverse ► linkage indices ??? Rasmussen’s Power & Sensitivity of Dispersion 6
  • 7. Row & Column Multipliers Power & Sensitivity of Dispersion 4.5 2.5 4.0 2.0 3.5 3.0 1.5 2.5 2.0 1.0 1.5 1.0 0.5 0.5 0.0 0.0 01 02 03 04 05 06 07 08 09 10 11 12 13 01 02 03 04 05 06 07 08 09 10 11 12 13 Power of Dispersion Total Column Total Row Sensibility of Dispersion Same image, different scale 7
  • 8. Traditional multipliers & Rasmussen’s linkage indices are linearly related Relationship between Relationship between Total Row Sum & Sensitivity of Dispersion Total Column Sum & Power of Dispersion 2.5 2.5 y = 0.5858x + 3E-07 Sensitivity of Dispersion Power of Dispersion y = 0.5858x + 2E-07 2.0 2.0 2 R =1 R2 = 1 1.5 1.5 1.0 1.0 0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 1.0 1.5 2.0 2.5 Total of Row Coefficients Total of Column Coefficients of the Leontief Inverse of the Leontief Inverse 8
  • 9. Linkage is a connection given by two (or more) matrices Linkages are either multipliers connection from a sectoral demand or or sectoral value added to sector’s output from a sectoral demand to distributions sectoral value added & vice versa connection from one dimensional (Markov) value added (final demand) two dimensional to sectors or final demand & value added 9
  • 10. Multipliers are linkages that: transmit action to an activity & generate Result Multipliers refer to industrial sectors 10 NOTE: a multiplier is not just any algebraic or matrix multiplication
  • 11. Smashing the Leontief inverse into pieces & act “procrustean” to exogenous factors Unitary Multiplier Structure Uniform Multiplier Structure columns rows eliminate the impact stretch of (n–1) sectors to zero & the impact of all then stress the remaining to sectors to a unit a unit 11 Procrustean actions
  • 12. contrary to traditional assumptions actual final demand requires attention to its distributions 1995 1 2 3 4 5 6 7 Total Demand - Consumption. Gross Output Consumption Consumption Intermediate Government Households Increase in Total Final Formation In Trillions of Yen (Private) Demand Imports Exports Output Capital Stocks Out 13.3 0.1 4.1 0.0 0.2 0.5 0.0 -2.4 2.5 15.8 1 Agriculture, forestry and fishery 7.4 0.0 0.0 0.0 0.0 0.0 0.0 -5.8 -5.8 1.7 2 Mining 195.8 2.8 63.8 0.7 39.1 1.2 37.9 -26.7 118.8 314.6 3 Manufacturing 8.1 0.0 0.0 0.0 80.0 0.0 0.0 0.0 80.0 88.1 4 Construction 17.3 0.0 7.5 1.6 0.0 0.0 0.0 0.0 9.1 26.5 5 Electric Power, Gas and Water Supply 36.1 2.2 50.5 0.0 10.4 0.2 3.1 -0.2 66.2 102.3 6 Commerce 29.0 0.0 7.8 0.0 0.0 0.0 0.6 -1.0 7.4 36.3 7 Finance and insurance 10.6 0.0 53.5 0.0 0.0 0.0 0.0 0.0 53.5 64.2 8 Real estate 32.6 0.7 14.7 -0.1 0.8 0.2 3.7 -2.5 17.5 50.1 9 Transport 9.5 0.1 5.2 0.0 0.0 0.0 0.0 -0.1 5.3 14.8 10 Communication and Broadcasting 0.5 0.0 0.8 25.0 0.0 0.0 0.0 0.0 25.8 26.2 11 Public Administration 65.6 13.5 64.0 41.9 9.2 0.0 1.3 -4.4 125.4 191.0 12 Services 6.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.6 -0.5 5.5 13 Activities not elsewhere classified 431.9 19.4 271.8 69.2 139.7 2.1 46.8 -43.7 505.2 937.1 Intermediate Input 12
  • 13. Unit distributions that matter Other Activities Distributions of Final Dem and & Value Added Services Public administ. 100% Communication 75% Transport Real estate 50% Finance 25% Commerce 0% Electric power Construction -25% 1995 2000 1995 2000 Manufacturing Mining Total Final Demand Total Value Added Agriculture 13
  • 14. Leontief Inverse 1 2 3 4 5 6 7 8 9 10 11 12 13 1995 Leontief 1 Agriculture 1.15 0.01 0.06 0.02 0.01 0 0.01 0 0.01 0.01 0.01 0.02 0.01 2 Mining 0.01 1.01 0.03 0.02 0.06 0 0 0 0.01 0 0.01 0.01 0.01 3 Manufacturing 0.35 0.20 1.75 0.57 0.19 0.11 0.12 0.04 0.28 0.11 0.23 0.30 0.23 4 Construction 0.01 0.01 0.01 1.01 0.05 0.01 0.01 0.04 0.02 0.02 0.02 0.01 0.01 5 Electric power 0.02 0.05 0.05 0.03 1.12 0.02 0.01 0.01 0.04 0.02 0.05 0.04 0.03 6 Commerce 0.08 0.05 0.11 0.12 0.04 1.03 0.02 0.01 0.07 0.02 0.04 0.07 0.04 7 Finance 0.07 0.09 0.05 0.05 0.06 0.08 1.12 0.06 0.10 0.03 0.02 0.05 0.20 8 Real estate 0.01 0.02 0.02 0.02 0.02 0.04 0.03 1.01 0.03 0.02 0.01 0.02 0.02 9 Transport 0.08 0.29 0.08 0.10 0.07 0.07 0.04 0.01 1.14 0.05 0.06 0.05 0.05 10 Communication 0.01 0.01 0.01 0.02 0.01 0.02 0.03 0 0.02 1.07 0.02 0.03 0.01 11 Public Adm. 0 0 0 0 0 0 0 0 0 0 1 0 0.08 12 Services 0.07 0.12 0.16 0.16 0.15 0.09 0.15 0.03 0.21 0.18 0.12 1.13 0.13 13 Other Activities 0.02 0.02 0.02 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.02 0.01 1.01 14
  • 15. Similar Leontief Inverse 1995 Similar Leontier 1 2 3 4 5 6 7 8 9 10 11 12 13 1 Agriculture 1.15 0.07 0.02 0 0.01 0.01 0.03 0 0.03 0.01 0 0.01 0.04 2 Mining 0 1.01 0 0 0 0 0 0 0.01 0 0 0 0.01 3 Manufacturing 1.75 0.05 0.55 0.34 0.47 0.08 0.53 0.28 0.02 0.26 0.96 1.28 6.08 4 Construction 0.13 0.16 1.01 0.10 0.10 0.11 0.02 0.17 0.09 0 0.07 0.15 1.09 5 Electric power 0.01 0.95 0.02 0.02 1.12 0.01 0.04 0.01 0.03 0.02 0 0.02 0.06 6 Commerce 0.03 0.19 0.04 0.01 0.08 1.03 0.23 0.07 0.15 0.17 0 0.05 0.16 7 Finance 0.01 0.06 0.01 0 0.02 0.01 1.12 0.01 0.03 0.07 0 0.03 0.05 8 Real estate 0.01 0.05 0.01 0.03 0.02 0.01 0.11 1.01 0.01 0.01 0 0.01 0.11 9 Transport 0.04 0.20 0.04 0.01 0.07 0.03 0.14 0.02 1.14 0.06 0 0.05 0.09 10 Communication 0.01 0.03 0.01 0 0.01 0 0.01 0.01 0.01 1.07 0 0.01 0.03 11 Public adm 0.02 0.10 0.02 0.01 0.05 0.01 0.02 0 0.03 0.04 1 0.02 0.10 12 Services 0.23 0.82 0.18 0.03 0.28 0.13 0.28 0.07 0.18 0.35 0.01 1.13 0.37 13 Other Activities 0 0.02 0 0 0.01 0 0.03 0 0.01 0 0.02 0 1.01 15
  • 16. Z Leontief & its similar inverses yield a unique output multiplier ( ) ~T Zy = h Z = x T from a model ~ y Z Z T h ( ) ~ T Zy m = h Z T to a multiplier m 16
  • 17. A Unique Multiplier takes into account: y1 y2 yn h1 ~ h2 ~ hn ~ z11 n + z12 n + L + z1n n = n z11 + n z 21 + L + n z n1 ∑y ∑y ∑y ∑h ∑h ∑h 1 1 1 1 1 1 distributed final demand affecting the rows of the Leontief inverse & distributed value added affecting the columns of the similar Leontief inverse 17
  • 18. Unique Gross Output Multiplier 0.7 Agriculture Mining 0.6 Manufacturing Construction 0.5 Electric power 0.4 Commerce Finance 0.3 Real estate T ransport 0.2 Communication 0.1 Public administ. Services 0.0 Other Activities 1995 2000 A unit of final demand and value added increases sectoral gross output 18
  • 19. Disaggregate gross output multiplier Leontief inverse post–multiplied to ZYd Z Yd a final demand distribution matrix Impact of each type of final demand on the industrial gross output result linkage ~ Value added distribution matrix ~ Hd Z Hd Z pre–multiplied to the similar Leontief inverse Impact of each type of value added on the industrial gross output 19
  • 20. Decomposed disaggregate multiplier (I+A+A2+A3+A4 …) Yd Final demand affecting direct purchases affecting second round purchases affecting third round purchases … ~ ~2 ~3 ~4 Value added Hd (I+ A + A + A + A +…) affecting direct sales affecting second round sales affecting third round sales … 20
  • 21. Distributions (Markov & two dimensional) are special linkages Direct distributions of a sectoral unit of i. output as: ⎡A⎤ [ ] ~ sales A Yx or purchases ⎢H ⎥ ⎣ x⎦ Total distributed unit of output: ii. ~ allocated ZYx produced H xZ Hx (I+A+A2+A3+A4 …) iii. Decomposed ~ ~2 ~3 ~4 (I+ A + A + A + A +…)Yx 21
  • 22. The Linkage structure of Leontief & its similar Inverses Rows of the Leontief inverse connect to final demand distribution Columns of the Leontief inverse connect to value added relationship to output Columns of the similar Leontief inverse connect to value added distribution Rows of the similar Leontief inverse connect to final demand relationship to output 22
  • 23. Augusztinovics Linkages from both sides ~ H m ZYx H x Z Ym Final Structure Matrices Adamou ~ H x Z Yd = H d ZYx Sectoral unit of output distributed to: columns of production rows of allocation ~ ZYx H xZ Multiplier Matrices Demand driven Production Value added driven Allocation ~ HmZ ZYm ~ ZYd Hd Z 23
  • 24. Production - Markov Final Structure Matrix -0.2 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1995 Cons. OH 2000 1995 Private Cons. 2000 1995 Imports Exports Formation Cons. Gov. 2000 1995 Capital 2000 1995 2000 1995 2000 Consumption out HH Compensation of employees Operating surplus Depreciation of fixed capital Indirect taxes * (less) Current subsidies Government Consumption increases employee compensation, operating surplus & 24 decreases depreciation
  • 25. Allo c a tio n - M a rko vF ina l S truc ture M a trix -20% 0% 20% 40% 60% 80% 100% 1995 2000 1995 2000 1995 2000 1995 2000 1995 2000 1995 2000 C o ns um ptio n o ut HH C o ns um ptio n (P riva te ) C o ns um ptio n Go ve rnm e nt C a pita l F o rm a tio n Inc re a s e in S to c ks Expo rts Im po rts Depreciation affects private & government consumption & capital formation 25
  • 26. Production & Allocation Final Structure Matrices are identical in their two dimensional distribution 1995 2000 Consumption Out_HH Consumption Out_HH Private Consumption Private Consumption Capital Formation Capital Formation Increase in Stocks Increase in Stocks Consumption Consumption Government Government Exports Imports Exports Imports Total Total Consumption out HH 0.00 0.02 0.01 0.01 0.00 0.01 -0.01 0.04 0.00 0.02 0.01 0.01 0.00 0.00 0.00 0.04 Compensation of employees 0.02 0.26 0.10 0.15 0.00 0.06 -0.05 0.53 0.02 0.26 0.09 0.16 0.00 0.05 -0.04 0.54 Operating surplus 0.01 0.13 0.02 0.03 0.00 0.02 -0.02 0.19 0.01 0.13 0.02 0.04 0.00 0.02 -0.02 0.20 Depreciation of 0.01 0.10 0.04 0.04 0.00 0.02 -0.02 0.01 0.10 0.02 0.04 0.00 0.01 -0.01 fixed capital 0.18 0.16 Indirect taxes * 0.00 0.04 0.01 0.02 0.00 0.01 -0.01 0.08 0.00 0.04 0.01 0.02 0.00 0.01 -0.01 0.07 (less) Current subsidies 0.00 -0.01 0.00 0.00 0.00 0.00 0.00 -0.01 0.00 -0.01 0.00 0.00 0.00 0.00 0.00 -0.01 1.00 1.00 Total 0.04 0.54 0.16 0.25 0.00 0.11 -0.10 0.04 0.54 0.14 0.28 0.00 0.09 -0.09 26
  • 27. Feedback Matrices Connecting two final structure matrices Yd Z ~ Ym Yd Z Hx Z Hd ~ Yx Hd Hx Z From the distributed final demand & value added to their relationship with the gross output 27
  • 28. Final Demand Feedback Matrices ~ ~ T T T T T T Y Z H HmZYx Y Z H H d ZYx m x d x Decision Process Process Summing Junction Terminator Final demand 28
  • 29. Value Added Feedback Matrices ~ ~ TT T H m ZYx Ym Z T H T T H d ZYx Yd Z H x x Decision Process Process Summing Junction Terminator Value added 29
  • 30. Feedback two dimensional matrices ~ ~ H d ZYx Yd ZT H T T T T T Y Z H H d ZYx x d x Symmetric matrices Same eigenvalues Feedback Markov matrices Same eigenvalues Dominant value is a unit ~ ~ T T T H m ZYx Ym Z T H T T Y Z H HmZYx m x x 30
  • 31. Feedback Feedback - Final Demand 0.6 Matrices C o ns um ptio n. Out HH 0.5 C o ns um ptio n 0.4 Go ve rnm e nt C o n. 0.3 0.2 C a pita l F o rm . 0.1 Inc re a s e in S to c ks 0.0 -0.1 Expo rts 1995 2000 Im po rts Feedback - Value Added 0.6 C o ns um ptio n o ut HH 0.5 C o m pe ns a tio n 0.4 Final demand’s 0.3 Ope ra ting s urplus 0.2 feedback changes De pre c ia tio n o f fixe d 0.1 c a pita l 0.0 Indire c t ta xe s * while value added -0.1 1995 2000 (le s s ) C urre nt s ubs idie s feedback does not 31
  • 32. Multiplier Matrix Value Added (cause) Final Demand (result) [I − A ] i= ~T Y T Hi Z sectors Transposed Types types of Production similar of final value added matrix Leontief demand inverse 32
  • 33. Multiplier Matrix Final Demand (cause) Value added (result) [ ] ~ i = I − AT T Y sectors H i Z types of value added Transposed Leontief Types allocation inverse of final matrix demand 33
  • 34. Final Demand - Value Added Multiplier 0.3 Ag riculture M ining M anufacturing 0.2 Co ns tructio n Electric p o wer Co mmerce 0.1 Finance Real es tate Trans p o rt 0.0 Co mmunicatio n 1995 2000 1995 2000 Pub lic ad minis t. Services -0.1 Hd Cause of impact Yd Other Activities 34
  • 35. complete view WISDOM 35
  • 36. Japanese Economic structure 1995 1995 1 2 3 4 5 6 7 8 9 10 11 12 13 1 2 3 4 5 6 7 Intermediate Output Total Final Demand Consumption. Out Capital Formation Increase in Stocks Communication Total Demand - Manufacturing Electric power Public Admin. Consumption Consumption Gross Output Construction Act. not else Government Households Agriculture In Trillions of Yen Commerce Real estate Transport classified (Private) Services Finance Exports Imports Mining 1 Agriculture, Forestry & Fishery 1.9 0.0 9.9 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.2 0.0 13.3 0.1 4.1 0.0 0.2 0.5 0.0 -2.4 2.5 15.8 2 Mining 0.0 0.0 5.3 0.8 1.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.4 0.0 0.0 0.0 0.0 0.0 0.0 -5.8 -5.8 1.7 3 Manufacturing 2.5 0.1 124.7 25.9 1.4 3.8 1.3 0.2 5.4 0.4 2.7 26.8 0.5 195.8 2.8 63.8 0.7 39.1 1.2 37.9 -26.7 118.8 314.6 4 Construction 0.1 0.0 1.4 0.2 1.2 0.6 0.1 2.3 0.5 0.2 0.5 1.2 0.0 8.1 0.0 0.0 0.0 80.0 0.0 0.0 0.0 80.0 88.1 5 Electric Power, Gas & Water Supply 0.1 0.0 5.9 0.6 2.5 1.2 0.2 0.2 0.9 0.2 0.9 4.6 0.1 17.3 0.0 7.5 1.6 0.0 0.0 0.0 0.0 9.1 26.5 6 Commerce 0.7 0.0 17.2 6.2 0.3 1.1 0.2 0.1 1.8 0.1 0.5 7.8 0.1 36.1 2.2 50.5 0.0 10.4 0.2 3.1 -0.2 66.2 102.3 Finance & Insurance 7 0.5 0.1 4.3 1.0 0.7 5.9 3.5 3.3 3.1 0.2 0.1 5.4 0.9 29.0 0.0 7.8 0.0 0.0 0.0 0.6 -1.0 7.4 36.3 8 Real Estate 0.0 0.0 1.1 0.3 0.3 3.8 0.7 0.5 0.8 0.2 0.0 2.8 0.1 10.6 0.0 53.5 0.0 0.0 0.0 0.0 0.0 53.5 64.2 9 Transport 0.7 0.4 9.3 4.7 0.7 5.3 0.7 0.2 5.3 0.4 0.8 3.9 0.1 32.6 0.7 14.7 -0.1 0.8 0.2 3.7 -2.5 17.5 50.1 10 Communication & Broadcasting 0.0 0.0 0.9 0.5 0.1 1.9 0.7 0.0 0.3 0.9 0.4 3.7 0.0 9.5 0.1 5.2 0.0 0.0 0.0 0.0 -0.1 5.3 14.8 11 Public Administration 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.5 0.5 0.0 0.8 25.0 0.0 0.0 0.0 0.0 25.8 26.2 12 Services 0.2 0.1 20.7 7.0 2.4 5.3 3.8 1.0 6.6 2.0 1.9 14.3 0.3 65.6 13.5 64.0 41.9 9.2 0.0 1.3 -4.4 125.4 191.0 13 Activities not elsewhere classified 0.2 0.0 2.3 0.2 0.2 0.6 0.1 0.5 0.2 0.1 0.4 1.2 0.0 6.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.6 -0.5 5.5 Intermediate Input 6.8 0.8 203.2 47.5 11.1 29.6 11.4 8.3 24.9 4.7 8.1 72.8 2.6 431.9 19.4 271.8 69.2 139.7 2.1 46.8 -43.7 505.2 937.1 Consumption expenditure outside 1 households (row) 0.1 0.1 6.4 1.7 0.6 2.7 1.3 0.3 1.1 0.2 0.5 4.4 0.0 19.4 2 Compensation of employees 1.5 0.3 54.3 29.3 4.6 49.9 14.0 2.5 16.7 4.9 16.8 78.3 0.2 273.2 Operating surplus 3 5.2 0.2 20.1 3.1 3.6 11.3 6.0 28.4 2.8 1.5 0.0 15.2 2.3 99.7 Depreciation of fixed capital 4 1.8 0.2 16.8 4.5 5.4 5.0 3.7 20.8 3.3 2.8 0.8 15.5 0.3 80.8 Indirect taxes * 5 0.6 0.1 14.3 2.2 1.5 4.0 1.6 4.1 1.6 0.6 0.1 5.8 0.0 36.5 (less) Current subsidies 6 -0.2 0.0 -0.4 -0.2 -0.2 -0.2 -1.5 -0.2 -0.3 0.0 0.0 -1.1 0.0 -4.3 Value Added 9.0 0.9 111.4 40.6 15.3 72.7 24.9 55.9 25.2 10.1 18.1 118.2 2.9 505.2 Domestic production (gross inputs) 15.8 1.7 314.6 88.1 26.5 102.3 36.3 64.2 50.1 14.8 26.2 191.0 5.5 937.1 36
  • 37. Japanese Economic structure 2000 2000 1 2 3 4 5 6 7 8 9 10 11 12 13 1 2 3 4 5 6 7 Capital Formation Increase in Stocks Communication Total Demand - Manufacturing Electric power Public Admin. Consumption Consumption Gross Output Construction Intermediate Act. not else Government Households Agriculture Total Final Commerce Real estate In Trillions of Yen Transport classified (Private) Services Demand Finance Exports Imports Mining Output C. Out 1 Agriculture, Forestry & Fishery 1.6 0.0 8.4 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.3 0.0 11.5 0.1 3.9 0.0 0.2 0.8 0.1 -2.1 2.9 14.4 2 Mining 0.0 0.0 7.4 0.7 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.1 0.0 0.0 0.0 0.0 0.0 0.0 -8.7 -8.7 1.4 3 Manufacturing 2.5 0.1 122.9 21.6 1.7 3.2 1.3 0.2 6.1 0.5 2.9 28.2 0.4 191.4 3.3 61.6 0.5 39.7 -0.6 46.6 -34.3 116.8 308.2 4 Construction 0.1 0.0 1.3 0.2 1.3 0.5 0.2 2.8 0.5 0.2 0.6 1.4 0.0 9.0 0.0 0.0 0.0 68.3 0.0 0.0 0.0 68.3 77.3 5 Electric Power, Gas & Water Supply 0.1 0.0 6.3 0.5 1.6 1.2 0.2 0.2 0.9 0.3 1.0 5.5 0.1 18.1 0.0 8.1 0.8 0.0 0.0 0.0 0.0 8.9 27.0 6 Commerce 0.7 0.0 16.3 4.9 0.4 1.4 0.2 0.1 1.6 0.1 0.5 8.3 0.1 34.6 1.9 45.9 0.0 10.7 0.1 4.5 -0.7 62.4 96.9 Finance & Insurance 7 0.5 0.1 4.0 0.9 0.8 4.9 2.9 3.3 2.9 0.5 0.1 5.8 1.0 27.6 0.0 10.5 0.0 0.0 0.0 0.4 -0.4 10.5 38.1 8 Real Estate 0.0 0.0 0.9 0.3 0.2 2.9 0.6 0.4 0.7 0.4 0.0 2.7 0.0 9.1 0.0 56.7 0.0 0.0 0.0 0.0 0.0 56.7 65.9 9 Transport 0.6 0.4 8.2 4.0 0.7 4.6 0.7 0.1 5.0 0.5 1.1 4.2 0.2 30.5 0.5 14.7 0.0 0.7 0.0 4.3 -2.9 17.4 47.9 0.8 10 Communication & Broadcasting 0.0 0.0 1.1 0.9 0.1 2.5 0.1 0.4 2.7 0.5 4.9 0.1 14.2 0.2 7.8 0.0 0.0 0.0 0.1 -0.1 7.9 22.1 11 Public Administration 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.7 0.7 0.0 0.7 34.8 0.0 0.0 0.0 0.0 35.5 36.2 12 Services 0.2 0.1 23.1 6.4 2.8 6.3 5.0 1.7 6.7 3.6 2.8 19.3 0.3 78.2 13.1 71.1 49.7 10.4 0.0 1.6 -4.8 141.0 219.2 13 Activities not elsewhere classified 0.1 0.0 1.7 0.3 0.1 0.6 0.3 0.3 0.2 0.1 0.0 0.7 0.0 4.4 0.0 0.0 0.0 0.0 0.0 0.0 -0.2 -0.2 4.2 Intermediate Input 6.3 0.7 201.5 40.9 11.7 28.3 12.1 9.2 25.0 8.8 9.5 82.3 2.9 439.4 19.2 281.0 85.7 130.0 0.3 57.5 -54.2 519.5 958.9 Consumption expenditure outside 1 households (row) 0.1 0.1 5.6 1.3 0.5 2.3 1.3 0.2 1.0 1.4 0.6 4.7 0.1 19.2 2 Compensation of employees 1.3 0.2 53.1 26.8 4.7 47.3 12.5 2.4 14.8 5.9 16.6 89.8 0.3 275.6 Operating surplus 3 4.7 0.2 16.9 1.4 3.5 10.0 9.0 29.6 2.6 1.5 0.0 16.7 0.4 96.5 Depreciation of fixed capital 4 1.5 0.1 16.7 4.1 5.0 4.8 3.4 20.7 3.0 3.8 9.5 20.3 0.4 93.4 Indirect taxes * 5 0.7 0.1 15.0 3.3 1.7 4.5 1.5 4.0 1.6 0.7 0.1 6.9 0.1 40.0 (less) Current subsidies 6 -0.2 0.0 -0.6 -0.3 -0.3 -0.2 -1.6 -0.2 -0.2 0.0 0.0 -1.5 0.0 -5.2 Total Value Added 8.1 0.7 106.6 36.5 15.3 68.6 26.0 56.6 22.9 13.3 26.7 136.9 1.3 519.5 Domestic production (gross inputs) 14.4 1.4 308.2 77.3 27.0 96.9 38.1 65.9 47.9 22.1 36.2 219.2 4.2 958.9 * (except custom duties and commodity taxes on imported goods) 37