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Merging the Hypothetical Extraction Method and the Classical Multiplier Approach: A Hybrid Possibility for Identifying Key Distributive Sectors

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  • Ana-Isabel Guerra

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    Abstract

    The two main alternative methods used to identify key sectors within the input- output approach, the Classical Multiplier method (CMM) and the Hypothetical Extraction method (HEM), are formally and empirically compared in this paper. Our findings indicate that the main distinction between the two approaches stems from the role of the internal effects. These internal effects are quantified under the CMM while under the HEM only external impacts are considered. In our comparison, we find, however that CMM backward measures are more influenced by within-block effects than the proposed forward indices under this approach. The conclusions of this comparison allow us to develop a hybrid proposal that combines these two existing approaches. This hybrid model has the advantage of making it possible to distinguish and disaggregate external effects from those that a purely internal. This proposal has also an additional interest in terms of policy implications. Indeed, the hybrid approach may provide useful information for the design of ''second best'' stimulus policies that aim at a more balanced perspective between overall economy-wide impacts and their sectoral distribution.

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    Bibliographic Info

    Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 886.11.

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    Length: 31
    Date of creation: 14 Oct 2011
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    Handle: RePEc:aub:autbar:886.11

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    Keywords: Sectoral linkages; Key sectors; Extraction methods; Multiplier methods.;

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    1. Julio Sanchez-Choliz & Rosa Duarte, 2003. "Production Chains and Linkage Indicators," Economic Systems Research, Taylor & Francis Journals, vol. 15(4), pages 481-494.
    2. Mirko Titze & Matthias Brachert & Alexander Kubis, 2008. "The Identification of Regional Industrial Clusters Using Qualitative Input-Output Analysis," IWH Discussion Papers 13, Halle Institute for Economic Research.
    3. Kelton, Christina M.L. & Pasquale, Margaret K. & Rebelein, Robert P., . "Using NAICS to Identify National Industry Cluster Templates for Applied Regional Analysis," Vassar College Department of Economics Working Paper Series 88, Vassar College Department of Economics.
    4. E Dietzenbacher, 1989. "On the relationship between the supply-driven and the demand-driven input - output model," Environment and Planning A, Pion Ltd, London, vol. 21(11), pages 1533-1539, November.
    5. Guerra, Ana-Isabel & Sancho, Ferran, 2010. "Measuring energy linkages with the hypothetical extraction method: An application to Spain," Energy Economics, Elsevier, vol. 32(4), pages 831-837, July.
    6. M. Alejandro Cardenete & Ferran Sancho, 2006. "Missing links in key sector analysis," Economic Systems Research, Taylor & Francis Journals, vol. 18(3), pages 319-325.
    7. Louis de Mesnard, 2009. "Is The Ghosh Model Interesting?," Journal of Regional Science, Wiley Blackwell, vol. 49(2), pages 361-372.
    8. Jan Oosterhaven & Gerard Eding & Dirk Stelder, 2001. "Clusters, Linkages and Interregional Spillovers: Methodology and Policy Implications for the Two Dutch Mainports and the Rural North," Regional Studies, Taylor & Francis Journals, vol. 35(9), pages 809-822.
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