SENSITIVITY AND UNCERTAINTY ANALYSIS IN MRIO MODELLING; SOME EMPIRICAL RESULTS WITH REGARD TO THE DUTCH CARBON FOOTPRINT

Environmental multi-regional input–output (MRIO) models require large amounts of data that all have their specific uncertainties. This paper presents a sensitivity and uncertainty analysis in order to gain an understanding of the directions in which efforts should be made to reduce these uncertainties. The analyses were carried out for an MRIO model to calculate the Dutch carbon footprint. A sensitivity analysis of the technical coefficients showed that changes in the coefficients in the domestic blocks and in the Dutch import blocks had the largest effects on the calculated footprint. The uncertainty analysis consisting of a Monte Carlo simulation based on probability distributions around the model coefficients showed a relatively low degree of uncertainty in the total Dutch carbon footprint; uncertainties in the carbon emissions allocated to regions, sectors and products were larger. Both analyses showed that, in certain cases, it is justified to apply a partial MRIO analysis.     

ON THE PARAMETERIZATION OF TECHNIQUES FOR REPRESENTING REGIONAL ECONOMIC STRUCTURES

This paper is concerned with two parameterized methods of regionalising input–output coefficients: the Flegg et al. Location Quotient (FLQ) and its augmented version (AFLQ). For applying the two techniques, a parameter δ has to be estimated. In this regard, the paper faces two matters that are still open in the literature: the existence of a range of δ that can be used in different regions and the estimation of the most appropriate value of δ. For this aim, a Monte Carlo simulation has been carried out in order to generate ‘true’ multiregional I-O tables randomly. From the simulation, analyses based on probability distributions and regression were also carried out. Finally, these simulation results have been compared with those of an empirical case. Results confirm that there is actually a range of values of δ within which the best δ is more likely to fall. For the FLQ, this range is centred on 0.3 with an associated probability of 33% (if the width of the range is set at 0.1), whereas, for the AFLQ, the relevant range is between 0.3 and 0.4 with a probability by 38%. Finally, this paper provided a way to estimate the best δ for a given region, without knowing the relevant and detailed economic structure at sectoral level.     

USING TIME-SERIES TO MEASURE UNCERTAINTY IN ENVIRONMENTAL INPUT–OUTPUT ANALYSIS

Environmental Input-Output Analysis (EIOA) is a tool for environmental analysis of broad classes of sectoral activities, taking into account indirect effects in other sectors in the supply chain. The core of EIOA is an input–output table (IOT) and national accounting matrix including environmental accounts (NAMEA) for a fixed base-year. We evaluate the uncertainty in EIOA using a time series of current-price IOT and NAMEA for 13 years from 1990 to 2002. We find annual variations in the current-price IOT and NAMEA, which may represent either realistic changes in production or measurement error. We assume the changes are errors and apply a regression analysis to remove the trends from the underlying data and estimate the uncertainty in the raw IOT. We then calculate the emissions for various final users and sectors to estimate the uncertainties from typical EIOA investigations. Using Monte Carlo analysis, we then investigate how well the variations in the current-price IOT and NAMEA over time may represent uncertainties. The results of this work have several implications for both statistical offices and the analyst. Statistical offices can provide details on data sources, methodologies, and estimates of annual variations. Analysts can incorporate this uncertainty information to understand the implications of uncertainty on their calculations and ultimately the policy recommendations derived from their studies.     

FINANCIAL DISTRESS AND INDUSTRY STRUCTURE: AN INTER-INDUSTRY APPROACH TO THE LOST DECADE IN JAPAN

This paper proposes a novel approach to investigating the propagation mechanism of balance sheet deterioration in financial institutions and firms, by extending the input–output analysis. First, we use a unique input–output table augmented by firm size dimension. Second, we link the input–output table with the balance sheet conditions of financial institutions and firms. Based on Japanese input–output tables, we find that the lending attitude of financial institutions affected firms’ input decision in the late 1990s and the early 2000s. Simulation exercises are conducted to evaluate the effects of changes in the lending attitude toward small firms as favorable as that toward large firms on sectoral allocations. We find that output was increased for small firms and reduced for large firms. The change in output was non-negligible, about 5.5% of the initial output of each sector. In particular, it exceeded 20% in textile, iron and steel and fabricated metal products.     

Industrial Productivity Growth Linkages Between OECD Countries, 1970–90

Technology ‘spillovers’ are increasingly being recognized as sources of productivity growth. International ‘convergence’ in productivity levels has also been noted in recent studies. This paper reports a study of international total factor productivity (TFP) growth for 11 industrial sectors in seven OECD countries. Spillover variables are defined based on interindusty and international invention input–output (I(IO)) weights. These variables are tested against import-weighted variables. The study concludes that I(IO)-weighted R&D ‘spill-ins’ are important determinants of TFP growth and that convergence is dependent on domestic RBD.     

Introduction: Invention Input–Output Analysis

The papers in this issue are directed towards the development of invention input–output (I(IO)) coefficients. They discuss the procedures for creating I(IO) coefficients using the Yale Technology Concordance, which assigns patented inventions to the industry of manufacture and sector of use, utilizing the International Patent Class system. Tests of reliability of the I(Io) coefficients and their use in economic studies are reported.     

Technology Flows Between Industries: Identification and Productivity Effects

This paper investigates whether the Yale Technology Concordance (YTC) succeeds in identzbing technology flows between sectors. As a test, total factor productivity (TFP)-R&D regressions based on the YTC matrix are compared with regressions using technology flow data constructed fram input–output matrices and randomly created interindusty linkages. Because results based on the YTC do not dzffer markedly from the other estimates, one cannot easily infer @om the empirical evidence whether the YTC matrix appropriately captures interindusty technology flows or not.     

IMPLICIT ELASTICITIES AND PRICE EFFECTS: AN UPDATED PROCEDURE

Based on the general procedure described by Casler [(2011) Coefficient Change, Price Effects, and Implicit Elasticities: Estimating Microeconomic Determinants over Two Time Periods. Economic Systems Research, 23, 153–174], this paper presents an updated approach to the estimation of input coefficient changes as functions of changing prices. The procedure makes direct use of relationships that emerge from the model of cost minimization subject to producing a desired level of output. Based on an initial specification of constant cross-price derivatives, the imposition of adding up and symmetry conditions allows the actual price and coefficient changes that occur between periods to identify implicit own and cross-price derivatives and corresponding elasticities, using data for only two time periods. With this updated approach, the calculation of derivatives is far simpler and leads to far more accurate measures of price-induced input–output coefficient changes than the original version.     

Measuring the Impact of Direct and Indirect R&D on the Productivity Growth of Industries: Using the Yale Technology Concordance

This paper investigates the impact of direct and indirect R&D on the productivity growth of 30 French industries during the period 1978–92. The main aim of this paper is to assess the appropriateness of the Yale Technology Concordance (YTC) as a proxy for indirect R&D flows. We compare the effect on productivity growth of the Yale proxy with the traditional proxy based on goods input–output flows, and assess their suitability for different groups of industries. Results indicate that the indirect YTC proxy performs slightly better than the traditional proxy, as a result of superior performance in the high-tech and service sectors in particular.     

STRUCTURAL DECOMPOSITION ANALYSIS APPLIED TO ENERGY AND EMISSIONS: AGGREGATION ISSUES

With the introduction of the environmentally extended input–output (I–O) framework, traditional economic I–O modeling and analysis can be conveniently adopted in energy and emission studies. Based on such an extended framework, many empirical studies investigating the driving forces of energy consumption and emission changes using structural decomposition analysis have been reported. Three aggregation issues are inherent in such decomposition studies, namely sector aggregation, spatial aggregation and temporal aggregation. This study, as an extension of our previous work on the first two issues, focuses on the third or temporal aggregation. An empirical study using the emission data of China from 1997 to 2007 is presented to illustrate the problems involved. How to deal with temporal aggregation and its possible interactions with the other two aggregations is also discussed.     

The growth of information workers in the US economy, 1950–2000: the role of technological change,computerization, and structural change

Using data from the decennial US Censuses of 1950, 1960, 1970, 1980, 1990, and 2000, I construct matrices of employment by 267 occupations and 64 industries and then aggregate the occupations into four categories: (i) knowledge producers; (ii) data processors; (iii) service workers; and (iv) goods-processing workers. I find that information workers (the sum of the first two categories) increased from 37% of the workforce in 1950 to 59% in 2000. Then, using an input–output decomposition analysis, I find that the growth in information workers was driven not by a shift in tastes toward information-intensive goods and services (as measured by the composition of final demand) but rather by a roughly equal combination of the substitution of information workers for goods and service workers within the structure of production of industries and the unbalanced growth effect (from differential rates of industry productivity growth). Finally, on the basis of regression analysis, I find that R&D expenditures and computer investment are positively associated with the growth in knowledge workers but negatively associated with the growth of data workers.     

LABOUR PRODUCTIVITY CHANGES AND WORKING TIME: THE CASE OF GREECE

In terms of the annual hours worked per employee, Greece ranks first among EU-15 countries and second among OECD countries. In this context, the austerity measures it adopted (as suggested by the EU and IMF) imply, among other things, a reduction in the over-hours. If such reductions were not to be accompanied by increases in labour productivity, output would be reduced considerably. This paper therefore addresses the question: “What change in sectoral labour productivity levels would have been required to deliver the actual change in final demands in Greece between 1995 and 2005, if working hours in each sector had been reduced to their EU averages?” In this framework, we develop a methodology for calculating labour productivity change by sector of economic activity in an input–output context. Next, we apply it to the Greek economy for the time period 1995–2005, the most recent period for which the required data are available. We find that the required productivity changes are the most substantial for the hotels and restaurants sector, followed by machinery manufacturing and the trade sectors.     

THE POWER OF VISIBLE HANDS: AN ENVIRONMENTAL STRUCTURAL DECOMPOSITION ANALYSIS CONSIDERING THE PEOPLE'S DAILY EFFECT

As an organ of the Central Committee of the Communist Party of China, the People's Daily (PD) has a critical influence on China's policies and economy. This study examines the impact of the PD on China's economic structural changes and industry environmental performance. To separate the ‘PD effect’ from other effects in total sectoral CO₂ emission changes, we propose a new variation of structural decomposition analysis using the frequencies of keywords employed in the PD. We use data from the PD for 2001 to 2011 and the Chinese input–output tables for 2002, 2005, 2007, and 2010. The results show that, on average, the PD effect explains about 11% of changes in total sectoral CO₂ emissions. Specifically, the PD has a relatively strong impact on the mining and utility sectors, while its impact on the manufacturing sectors is relatively weak.     

THE LABOUR FOOTPRINT: A FRAMEWORK TO ASSESS LABOUR IN A COMPLEX ECONOMY

As addressing labour becomes crucial in the move towards sustainability, there is the need for assessment tools suitable for current complex economic systems. This article presents an input–output based framework (‘labour footprint’) for evaluating labour issues behind the production of different economic commodities, including entire supply chains. In line with the guidelines of the International Labour Organization, six labour issues are considered: collective bargaining, forced labour, child labour, gender inequality, hazardous work, and social security. This conceptual article sets to (a) define this footprint's labour dimensions, (b) cite relevant data sources, (c) describe its calculation, (d) illustrate its application through a case study, and (e) discuss this framework's relevance from ‘conscious consumption’, ‘supply chain responsibility’, and regulators' standpoints. Since it advances the evaluation of fundamental labour issues and the scope of multi-criteria analyses, this footprint may be a valuable tool for sustainability assessments.     

ESTIMATING THE ECONOMIC CONSEQUENCES OF A PORT SHUTDOWN: THE SPECIAL ROLE OF RESILIENCE

This paper develops a methodology for the estimation of the total economic consequences of a seaport disruption, factoring in the major types of resilience. The foundation of the methodology is a combination of demand-driven and supply-driven input–output analyses. Resilience is included through a series of ad hoc adjustments based on various formal models and expert judgment. Moreover, we have designed the methodology in a manner that overcomes the major shortcomings of the supply-driven approach. We apply the methodology to a 90-day disruption at the twin seaports of Beaumont and Port Arthur, Texas, which is a major port area that includes a petrochemical manufacturing complex. We find that regional gross output could decline by as much as $13 billion at the port region level, but that resilience can reduce these impacts by nearly 70%.     

ECONOMIC WELFARE ANALYSIS OF THE LEGALIZATION OF DRUGS: A CGE MICROSIMULATION MODEL FOR COLOMBIA

In this paper, a computable general equilibrium (CGE) microsimulation model is used to analyze the effects of an ex ante legalization of drugs on the Colombian economy. The model consists of 11 productive sectors, 3 different labor force categories with unemployment, and 20 households divided by income and location. Changes in wages and migration are estimated using a labor participation model, and a NIDS estimates the demands of the households. Changes in household economic welfare, measured by changes in income and prices (CV and EV measurements), are very sensitive to the reinvestments that the government makes in the economy. By analyzing six different scenarios with different assumptions about changes in drug prices, investments of the government, and the termination of the armed conflict, the results suggest that economic welfare improves when the government reinvests military expenditures in other productive sectors or when the ‘economy of war’ continues and the legalization does not end the armed conflict.