A new approach to modeling waste in physical input-output analysis

It is important to treat waste properly in physical input-output analysis and a series of publications discussed this topic in this journal recently. In this paper, we propose a new approach to deal with physical input-output table (PIOT) measured in a single mass unit, by which the structure of PIOT need not be changed. The new approach yields consistent and reasonable results. It not only is simpler than the existing approaches but also can reflect the physical reality of economic systems. We first discuss and clarify the concept of different kinds of inputs and outputs of economic systems. We then present the details of the new approach. During the process we define a new multiplier, which builds a bridge between the total input and the final demand in PIOT, just like the traditional Leontief inverse in MIOT. We select the three-sector PIOT for Germany 1990 as a case study to show the validity of the new approach. Finally, we prove the equivalence between the new approach, Suh's approach and Dietzenbacher's approach and the equivalence of non-waste part and waste part multiplier of the new approach and Dietzenbacher's approach.