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Physical and monetary input-output analysis: What makes the difference?

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  • Weisz, Helga
  • Duchin, Faye

Abstract

A recent paper in which embodied land appropriation of exports was calculated using a physical input-output model (Ecological Economics 44 (2003) 137-151) initiated a discussion in this journal concerning the conceptual differences between input-output models using a coefficient matrix based on physical input-output tables (PIOTs) in a single unit of mass and input-output models using a coefficient matrix based on monetary input-output tables (MIOTs) extended by a coefficient vector of physical factor inputs per unit of output. In this contribution we argue that the conceptual core of the discrepancies found when comparing outcomes obtained using physical vs. monetary input-output models lies in the assumption of prices and not in the treatment of waste as has been claimed (Ecological Economics 48 (2004) 9-17). We first show that a basic static input-output model with the coefficient matrix derived from a monetary input-output table is equivalent to one where the coefficient matrix is derived from an input-output table in physical units provided that the assumption of unique sectoral prices is satisfied. We then illustrate that the physical input-output table that was used in the original publication does not satisfy the assumption of homogenous sectoral prices, even after the inconsistent treatment of waste in the PIOT is corrected. We show that substantially different results from the physical and the monetary models in fact remain. Finally, we identify and discuss possible reasons for the observed differences in sectoral prices and draw conclusions for the future development of applied physical input-output analysis.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 57 (2006)
Issue (Month): 3 (May)
Pages: 534-541

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Handle: RePEc:eee:ecolec:v:57:y:2006:i:3:p:534-541

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References

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  1. Dietzenbacher, Erik, 2005. "Waste treatment in physical input-output analysis," Ecological Economics, Elsevier, vol. 55(1), pages 11-23, October.
  2. Giljum, Stefan & Hubacek, Klaus & Sun, Laixiang, 2004. "Beyond the simple material balance: a reply to Sangwon Suh's note on physical input-output analysis," Ecological Economics, Elsevier, vol. 48(1), pages 19-22, January.
  3. Stefan Giljum & Klaus Hubacek, 2004. "Alternative Approaches of Physical Input-Output Analysis to Estimate Primary Material Inputs of Production and Consumption Activities," Economic Systems Research, Taylor & Francis Journals, vol. 16(3), pages 301-310.
  4. Suh, Sangwon, 2004. "A note on the calculus for physical input-output analysis and its application to land appropriation of international trade activities," Ecological Economics, Elsevier, vol. 48(1), pages 9-17, January.
  5. Hubacek, Klaus & Giljum, Stefan, 2003. "Applying physical input-output analysis to estimate land appropriation (ecological footprints) of international trade activities," Ecological Economics, Elsevier, vol. 44(1), pages 137-151, February.
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Citations

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Cited by:
  1. Wiedmann, Thomas & Wilting, Harry C. & Lenzen, Manfred & Lutter, Stephan & Palm, Viveka, 2011. "Quo Vadis MRIO? Methodological, data and institutional requirements for multi-region input-output analysis," Ecological Economics, Elsevier, vol. 70(11), pages 1937-1945, September.
  2. Merciai, Stefano & Heijungs, Reinout, 2014. "Balance issues in monetary input–output tables," Ecological Economics, Elsevier, vol. 102(C), pages 69-74.
  3. Taelim Choi & Randall W. Jackson & Nancey Green Leigh, 2009. "Constructing a Baseline Input-Output Model with Environmental Accounts (IOEA)," Working Papers 200903, Regional Research Institute, West Virginia University.
  4. Nicolas Gonne, 2010. "Short-Term Price Effects of a Carbon Tax and Implications for Sectors Competitiveness in Small Open Economies," CESifo Working Paper Series 3257, CESifo Group Munich.
  5. Misato Sato, 2012. "Embodied carbon in trade: a survey of the empirical literature," Grantham Research Institute on Climate Change and the Environment Working Papers 77, Grantham Research Institute on Climate Change and the Environment.
  6. Liang, Sai & Wang, Can & Zhang, Tianzhu, 2010. "An improved input-output model for energy analysis: A case study of Suzhou," Ecological Economics, Elsevier, vol. 69(9), pages 1805-1813, July.
  7. Wang, Yafei & Zhao, Hongyan & Li, Liying & Liu, Zhu & Liang, Sai, 2013. "Carbon dioxide emission drivers for a typical metropolis using input–output structural decomposition analysis," Energy Policy, Elsevier, vol. 58(C), pages 312-318.
  8. Rodrigues, João & Domingos, Tiago, 2008. "Consumer and producer environmental responsibility: Comparing two approaches," Ecological Economics, Elsevier, vol. 66(2-3), pages 533-546, June.
  9. Erik Dietzenbacher & Umed Temurshoev, 2012. "Input-output impact analysis in current or constant prices: does it matter?," Journal of Economic Structures, Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 1(1), pages 1-18, December.
  10. Kitzes, Justin & Galli, Alessandro & Bagliani, Marco & Barrett, John & Dige, Gorm & Ede, Sharon & Erb, Karlheinz & Giljum, Stefan & Haberl, Helmut & Hails, Chris & Jolia-Ferrier, Laurent & Jungwirth, , 2009. "A research agenda for improving national Ecological Footprint accounts," Ecological Economics, Elsevier, vol. 68(7), pages 1991-2007, May.
  11. Wang, Yafei & Liang, Sai, 2013. "Carbon dioxide mitigation target of China in 2020 and key economic sectors," Energy Policy, Elsevier, vol. 58(C), pages 90-96.
  12. Moran, Daniel D. & Wackernagel, Mathis C. & Kitzes, Justin A. & Heumann, Benjamin W. & Phan, Doantam & Goldfinger, Steven H., 2009. "Trading spaces: Calculating embodied Ecological Footprints in international trade using a Product Land Use Matrix (PLUM)," Ecological Economics, Elsevier, vol. 68(7), pages 1938-1951, May.
  13. Choi, Jun-Ki & Bakshi, Bhavik R. & Haab, Timothy, 2010. "Effects of a carbon price in the U.S. on economic sectors, resource use, and emissions: An input-output approach," Energy Policy, Elsevier, vol. 38(7), pages 3527-3536, July.
  14. Zeng, Lin & Xu, Ming & Liang, Sai & Zeng, Siyu & Zhang, Tianzhu, 2014. "Revisiting drivers of energy intensity in China during 1997–2007: A structural decomposition analysis," Energy Policy, Elsevier, vol. 67(C), pages 640-647.

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