input output analysis by roni bhowmik
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Input output analysis in Bangladesh by roni bhowmikTRANSCRIPT
Input Output Analysis
Input Output Analysis
Welcome to myWelcome to my
University of Chinese Academy of Sciences
Presentation
On November 17, 2013
Roni Bhowmik
ID: 2013A8000212129
PhD Student
Academy of Mathematics And Systems Science,
University of Chinese Academy of Sciences
Presented By
Input Output Analysis. Input Output Analysis. ((输入输出分析输入输出分析 .).)
Input Output Analysis. Input Output Analysis. ((输入输出分析输入输出分析 .).)
DISSERTATION TITLEDISSERTATION TITLE ONON
DISSERTATION TITLEDISSERTATION TITLE ONON
Bangladesh… at a Glance
Name: People’s Republic of Bangladesh Area: 147,570 sq. km. Capital: Dhaka Government System: Parliamentary Population: 150 million
Currency: Taka (৳) Main Export: Garments Product Official Language: English
Cox’s Bazar (World longest sea beach)
Sundarbans (World largest mangroves Forest)
Jamuna Bridge * 11th longest bridge in the whole world
Modern Bangladesh
Parliament House * designed by Louis I. Kahn
Bangladesh present 2nd position the Garment Industries in the world
Honor…The Nobel Peace Prize 2006
Dr. Muhammad Yunus (Banker for the poor) and Grameen Bank
Objective
1. What we have learned about input-output analysis
2. One example of the usefulness of input-output analysis
3. The possible ways to improve the input-output model
Input-Output Analysis
•Wassily Leontiefb. 1905
•Nobel Prize, 1973…for the development of the input
output method and for itsapplication to important economicproblems.Leontief passed away on Friday February 6th, 1999x = (I-A)-1 y
Professor deals with this particular question: "What level of output should each of the n industries in an
economy produce, in order that it will just be sufficient to satisfy the total demand for that product?"
Sectors purchase from other sectors Sectors sell to other sectors Sectors sell outside the local economy Sectors buy outside the local economy Sectors pay their employees Sectors pay taxes Input-Output analysis creates a picture of a regional
economy describing flows to and from industries and institutions.
Examples of Interrelationships Between Sectors
Overview of Community Economic System
Households
IndustryBasic
ServicesGoods &
$
Inputs
Products
Inputs
$ $
$
$
Services
$ $
Labor
What Input-Output Analysis Can Do?
Input-Output Analysis is an accounting framework
(Physical or in Monetary terms)
Input-Output analysis can be used to predict changes
in overall economic activity as a result of some
change in the local economy
Uses of Input-Output Analysis
Provides a description of a local economy
Predictive model to estimate impacts
Input-Output Table
Producers listed on the left Purchasers listed across the top
From the column point of view, these show each sector’s inputs; from the row point of view the figures are each sector’s outputs; hence the name input–output table. These figures are the core of input–output analysis.
“competitive” and “noncompetitive”
Competitive imports are goods that have a
domestic counterpart (that is, are also produced
in the Bangladesh).
Non-competitive imports have no domestic
counterpart.
The Price Model
An input/output table quantifies the transactions
between sectors in an economy.
It’s a “snap-shot” of the economy for a one-year period.
By understanding these linkages, we are able to predict
how a change in one sector will affect the other sectors.
Multipliers can be estimated.
Input-Output Models
Interindustry Demand
ZFinal Demand
Y
Outputs
Inp
uts
Total Output, X
Input-Output Table
Three basic components of Input-Output Models
Transactions Table
Direct Requirements Table
Total Requirements Table
Input-Output Models
A transactions table shows the monetary flows of
goods and services in a local economy
Represents monetary flows for a given time period,
usually one year
Transactions Table
Total outlays = Total output
Intermediate purchases are goods and services
purchased and used in the local production process
Final demands are purchases for final consumption
Final payments are payments for factors or inputs
outside intermediate production process
Transactions Table Flows
Direct requirements are the purchases of resources
(inputs) by a sector from all sectors to produce one
dollar of output
Creates a production recipe
Direct Requirements Table
The Transactions Table(in thousands of units)
Intermediate Purchasers Final Purchasers Total--Agriculture --Manufacturing --Households Sales (outputs)
Intermediate Suppliers--Agriculture 10 30 60 100--Manufacturing 5 10 35 50Primary Suppliers--Households 85 10 15 110
Total Purchases (inputs) 100 50 110 260
Direct Requirements Table(in thousands of units)
--Agriculture --ManufacturingIntermediate Suppliers Every unit of output--Agriculture 0.10 0.60 requires inputs of a certain--Manufacturing 0.05 0.20 amount from other areasPrimary Suppliers of the economy.--Households 0.85 0.20
Total Purchases (inputs) 1.00 1.00
Purchasers
The Transaction Table and Direct Reqs. Tables
Direct Requirements Table(in thousands of units)
Intermediate Purchasers--Agriculture --Manu
Intermediate Suppliers--Agriculture 0.10 0.60--Manufacturing 0.05 0.20Primary Suppliers--Households 0.85 0.20
Total Purchases (inputs) 1.00 1.00
Total Requirements Calculation (First Round)(in thousands of units)
Sales to Sales as Direct InputsFinal Purch. To Agr To Manu Total
By Agriculture 200 20 60 80By Manufacturing 100 10 20 30By Households 0 170 20 190
Total indirect rounds
By All Supliers 300 300
The First Round of Economic Impacts
ToRd. 2
Total Requirements Calculation (Second Round)(in thousands of units)
Sales to Sales as Direct InputsFinal Purch. To Agr To Manu Total
By Agriculture 80 8.0 18.0 26.0By Manufacturing 30 4.0 6.0 10.0By Households 0 68.0 6.0 74.0
Total indirect rounds 110.0
Total Requirements Calculation (Third Round)(in thousands of units)
Sales to Sales as Direct InputsFinal Purch. To Agr To Manu Total
By Agriculture 26 2.6 6.0 8.6By Manufacturing 10 1.3 2.0 3.3By Households 0 22.1 2.0 24.1
Total indirect rounds 36.0
Total Requirements Calculation (Fourth Round)(in thousands of units)
Sales to Sales as Direct InputsFinal Purch. To Agr To Manu Total
By Agriculture 8.6 0.9 2.0 2.8By Manufacturing 3.3 0.4 0.7 1.1By Households 0 7.3 0.7 8.0
Total indirect rounds 11.9
The Second-Fourth Rounds of Econ. Impacts
and so onuntil the mult.
effect ends
The Total Requirements Results
Total Direct and Indirect Requirements Calculation(in thousands of units)
Sales to Final Total Total Total Purchasers Direct Sales Indirect Sales Sales
Agriculture 200.0 80.0 38.7 318.7Manufacturing 100.0 30.0 14.9 144.9Households -- 190.0 109.6 299.6
Total 300.0 300.0 163.1 763.1
When: 1) there are “Final Sales” of Agriculture = 200 and “Final Sales” of
Manufacturing = 1002) we see a Total Economic Impact = 763.1, with that impact broken down
as:1) 300.0 in Initial Sales to Final Purchasers2) 300.0 in Total Direct Sales3) 163.1 in Total Indirect Sales
The 300 units in Final Sales generate an additional 463.1 units of economic activity. This illustrates the multiplier effect captured by IO models.
The Total Requirements TableTotal Requirements Table
Every Unit in Final Demand of…Requires Total Sales by Agriculture Manufacturing
Agriculture 1.15 0.86Manufacturing 0.07 1.29Households 1.00 1.00
Total 2.22 3.15
For Agriculture 1.00 Sales to Final Purchasers1.00 Sales by Primary Suppliers0.22 Interindustry transactions
Similar to our Base Multiplier in Econ Base TheoryA 1.0 unit increase in demand for agriculture leads toa total of 2.22 of sales.
For Manufacturing 1.00 Sales to Final Purchasers1.00 Sales by Primary Suppliers1.15 Interindustry transactions
Similar to our Base Multiplier in Econ Base TheoryA 1.0 unit increase in demand for manufacturing leads toa total of 3.15 of sales.
Example Transactions Table
Se
lling S
ectors ($
millio
n)
Purchasing Sectors ($ million)
Agriculture Health Services Final TotalDemands Output
Agriculture 10 6 2 18 36
Health 4 4 3 26 37
Services 6 2 1 35 44
Final 16 25 38 0 79Payments
Total Input 36 37 44 79 196
Impacts are tracked throughout the economy
The multipliers are derived from regional economic
accounts
Only local transactions are used to create the
multiplier effect
Predictive Use of Input-Output Analysis
Direct Requirements Table
Agriculture Health Services
Agriculture 0.278 0.162 0.045
Health 0.111 0.108 0.068
Services 0.167 0.054 0.023
Final Payments 0.444 0.676 0.864
Total 1.000 1.000 1.000
Se
lling S
ectors
Purchasing Sectors
Total Requirements Table
AgricultureHealth Services
Agriculture 1.446 0.268 0.085
Health 0.199 1.163 0.090
Services 0.258 0.110 1.043
Total 1.903 1.541 1.218
Purchasing Sectors ($ million)
Se
lling S
ectors ($
millio
n)
Multipliers measure total change throughout the
economy from one unit change for a given sector.
Three Types of Multipliers are calculated from Model
1. Output
2. Employment
3. Income
What are Multipliers?
Type I Multipliers
Type II Multipliers
Type III Multipliers
Three levels of Multipliers
Include direct or initial spending
Include indirect spending or businesses buying and
selling to each other
The multiplier is direct plus indirect effect divided by
direct effect
Type I Multipliers
Includes Type I Multiplier effects
Plus household spending based on the income earned
from the direct and indirect effects – the induced
effects
Type II Multipliers
Type III Multipliers are modified Type II multipliers.
Therefore, Type III Multipliers also include the direct,
indirect, and induced effects.
Type III Multipliers adjust Type II Multipliers based on
spending patterns amongst different income groups.
TYPE III MULTIPLIERS
Multiplier values include direct effects
Do not aggregate sector multipliers to derive an
aggregate multiplier
Be cautious of large multipliers
Be cautious in using a multiplier from another study
area
Caution When Using Multipliers
The Economic Base Theoretical Model
The EB model assumes that the basic sector is the primary cause of local economic growth; that is, it is the economic base of the local economy.
Non-Local $$$’s
Basic SectorEmployment
Non-Basic SectorEmployment
Local$$$’s
The Local Economy
How can we use I-O Model?
Example: The effect of fuel tax on Bangladesh economy.
GDP
Fuel tax
Weight
Final demand
Output Emissions
Income (GDP)
Demand system
I-O Model
EIO Model
The main problem of input-output analysis is the following:
Consider an economy with several industries. Each
industry has a demand for products from other
instructress (internal demand). Because each industry has
homogenous, and only one, production function. There are
also external demands from the outside. Find a production
level for the industries that will meet both internal and
external demands.
Basic Input-Output Problem
IO tables serve primarily statistical purposes and provide an
integrated framework for checking consistency and completeness of
national accounts data.
IO tables provide the main macroeconomic aggregates such as GDP,
components of value added and output by industry, import, final
consumption, gross capital formation and export.
IO table describes the supply of goods and services, which are either
produced in the domestic industry or imported.
Example to show the usefulness of input-output analysis
Simplicity I follow only one product in my example: Garments Sector
A product by product input-output gtable shows how
much of each product is being used as input for the
production of another product. Similarly, it also shows
how much of each product is consumed by different
user categories (production, households, government,
non-profit institutions serving households, investment
and foreign trade)
Input-Output
The possible ways to improve the input-output model depend on situation
ConclusionConclusion
