Interindustry Analysis with Social Accounting Methods

This paper evaluates the role of income-expenditure linkages in interindustry analysis. Using matrix decomposition methods and a social accounting matrix of the USA, it is shown that multiplier estimates which omit such linkages are not reliable measures of the effects of exogenous shocks upon industrial output and income. The paper further applies the decomposition method to study relative income determination between sectors, i.e. how the composition of national product changes in response to exogenous shocks.