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Analytical Problems in Decomposing the System-wide Effects of Sectoral Technical Change

Author

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  • Francis Cronin
  • Mark Gold

Abstract

The disaggregated structure of input-output (IO) analysis makes it very attractive in analyzing technical change. Various authors have applied IO models in comparative static experiments to measure the effects of observed technical changes in individual industries on economy-wide total output (or related primary input) requirements. Less often have researchers performed similar analyses on the effects of changes across all consuming industries in the productive consumption of a sector's output, because of the need to append an external analysis of substitution. Despite the obstacles to joint analyses of sectoral production and cross-sectoral consumption change, its appeal has long been recognized. In this paper, an anomaly in such analyses is presented: the sum of the separate effects of changes in production and changes in productive consumption does not equal the effects of the joint change. A comparative static exercise reveals the root cause of the anomaly: essentially, an index number problem. Empirical analyses are performed across a comprehensive set of US sectors to estimate the range of discrepancies.

Suggested Citation

  • Francis Cronin & Mark Gold, 1998. "Analytical Problems in Decomposing the System-wide Effects of Sectoral Technical Change," Economic Systems Research, Taylor & Francis Journals, vol. 10(4), pages 325-336.
    • Handle: RePEc:taf:ecsysr:v:10:y:1998:i:4:p:325-336
    DOI: 10.1080/09535319800000024
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    References listed on IDEAS

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    1. Jan Oosterhaven & Jan Van Der Linden, 1997. "European Technology, Trade and Income Changes for 1975-85: An Intercountry Input-Output Decomposition," Economic Systems Research, Taylor & Francis Journals, vol. 9(4), pages 393-412.
    2. Cronin, Francis J. & Gold, Mark A. & Hebert, Paul L. & Lewitzky, Steven, 1993. "Factor prices, factor substitution, and the relative demand for telecommunications across US industries," Information Economics and Policy, Elsevier, vol. 5(1), pages 73-85, January.
    3. Feldman, Stanley J & McClain, David & Palmer, Karen, 1987. "Sources of Structural Change in the United States, 1963-78: An Input-Output Perspective," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 503-510, August.
    4. Hudson, Edward A. & Jorgenson, Dale W., 1978. "The economic impact of policies to reduce U.S. energy growth," Resources and Energy, Elsevier, vol. 1(3), pages 205-229, November.
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    Cited by:

    1. Jan A van der Linden & Erik Dietzenbacher, 2000. "The Determinants of Structural Change in the European Union: A New Application of RAS," Environment and Planning A, , vol. 32(12), pages 2205-2229, December.
    2. Aying Liu & David Saal, 2001. "Structural Change in Apartheid-era South Africa: 1975-93," Economic Systems Research, Taylor & Francis Journals, vol. 13(3), pages 235-257.
    3. Erik Dietzenbacher & Bart Los, 2000. "Structural Decomposition Analyses with Dependent Determinants," Economic Systems Research, Taylor & Francis Journals, vol. 12(4), pages 497-514.
    4. Julio Sanchez-Choliz & Rosa Duarte, 2000. "The Economic Impacts of Newly Irrigated Areas in the Ebro Valley," Economic Systems Research, Taylor & Francis Journals, vol. 12(1), pages 83-98.

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