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External dependency, value added generation and structural change: an inter-industry approach

  • João Ferreira do Amaral

    (ISEG, Universidade Técnica de Lisboa / UECE)

  • João Carlos Lopes

    (ISEG, Universidade Técnica de Lisboa / UECE)

  • João Dias

    (ISEG, Universidade Técnica de Lisboa / UECE)

The external dependency of many industries and the corresponding low value added generated in production, combined with a relatively weak export potential, create high external deficits and growing debt to GDP ratios in several open economies. In this paper we propose an empirical method to assess the evolution of these vulnerabilities, based on a new treatment of interindustry production multipliers. The (gross)output growth potential given by the column sums of the Leontief inverse matrix (backward linkage indicators) results from three terms: interindustry consumptions, value added and imported inputs. After a convenient arrangement of these terms, the evolution of backward linkage indicators can be used to detect structural changes, particularly quantifying a (net) growth effect (more value-added generation) and an external dependency effect (more imported inputs), and to classify the productive sectors accordingly. An application to the Portuguese Economy is made, using input-output tables for the years 1980, 1995 and 2005. This method can also be useful as a simple, but suggestive, device to compare the evolution of two or more economies, along their development processes in time.

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Article provided by Faculdade de Economia, Universidade de Coimbra in its journal Notas Económicas.

Volume (Year): (2011)
Issue (Month): 33 (June)
Pages: 06-19

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Handle: RePEc:gmf:journl:y:2011:i:33:p:06-19
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  1. Jan Oosterhaven & Dirk Stelder, 2002. "Net Multipliers Avoid Exaggerating Impacts: With A Bi-Regional Illustration for the Dutch Transportation Sector," Journal of Regional Science, Wiley Blackwell, vol. 42(3), pages 533-543.
  2. Chokri Dridi & Geoffrey J.D. Hewings, 2002. "An Investigation of Industry Associations, Association Loops, and Economic Complexity: Application to Canada and the United States," Urban/Regional 0210001, EconWPA, revised 23 Feb 2005.
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