From Input-output to SUT Jörg Beutel Productivity in the European Union: A Comparative Industry Approach Workshop Inter-Industry Accounts WP 1 15-16 September 2005, Groningen From Input-output to SUT Jörg Beutel

Introduction Objectives Outline of present data situation Discussion of missing data Transformation of use tables from purchasers’ prices to basic prices Transformation of supply and use tables to input-output tables The dual approach: Transformation of input-output tables to supply and use tables Empirical example of transformation for Austria 1995 Estimation of missing supply and use tables

Data Situation ESA 1995 The tables Earlier years 1970-1994 Annual supply and use tables starting in year 1995 Five-yearly input-output tables 1995, 2000, 2005, etc. Submission mandatory for member countries of EU The tables Supply table at basic prices, including transformation into purchasers' prices Use table at purchasers' prices Input-output tables for total uses, domestic production and imports at basic prices Earlier years 1970-1994 Very few supply and use tables available SUT mostly internal data for compilation of IOT’s Various input-output tables with different classifications and price concepts were published

Period 1995-2002

Period 1970-1994

Challenge Earlier years 1970-1994 1995-2002 Collect supply and use tables from NewCronos (Eurostat) Compile missing supply and use tables 1995-2002 Estimate valuation matrices (trade and transport margins, taxes) Establish supply and use tables at basic prices for total supply, domestic production, imports Earlier years 1970-1994 Collect existing SUT’s and IOT’s Estimate supply tables for existing IOT’s Various price concepts and various classifications Estimate use tables at basic prices for existing IOT’s Estimate missing SUT’s at basic prices for other years Comparison with National Accounts in NewCronos

Valuation matrices Different valuation matrices Price concept Trade margins (wholesale trade, retail trade) Transport margins (inland, water, air and other transport) Taxes on products (product taxes, VAT) Subsidies on products Price concept Transformation of use tables at purchasers prices to use tables at basic prices Transformation of input-output tables at producers prices to basic prices

Access to valuation matrices Access to valuation matrices for selected countries in the course of the Eurostat data submission programme Germany, Denmark and Austria Austria published valuation matrices on CD-Rom in ‘Statistik Austria: Input-Output-Tabelle 1995’ Tax matrices were published by Eurostat in ‘Input-Output tables 1985’ for Denmark, France, and Ireland covering 59 sectors.

Transformation of supply and use tables to basic prices

Price system of the input-output framework Basic Prices = +Taxes on products - Subsidies on Products = Producers’ prices (net of all VAT) + Non-deductible VAT = Producers’ prices (net of deductible VAT) + Trade Margins +Transport Margins = Purchasers’ prices (net of deductible VAT)

PRICE SYSTEM OF THE INPUT-OUTPUT FRAMEWORK FOR DENMARK 1985 (Mio. DKR)

Transformation of supply and use tables to IOT’s Model assumptions Product technology assumption (Model A) Each product is produced in its own specific way, irrespective of the industry where it is produced.   Assumption of fixed industry sales structure (Model B) Each industry has its own specific sales structure, irrespective of its product mix Industry technology assumption (Model C) Each industry has its own specific way of production, irrespective of its product mix. Assumption of fixed product sales structure (Model D) Each product has its own specific sales structure, irrespective of the industry where it is produced.

Transformation of supply and use tables to input-output tables

Model assumptions for transformation to IOT’s Product technology assumption (Model A) Widely used by countries which publish product by product IOT Belgium, Denmark, Greece, Spain, France, Italy, Austria, Portugal, Sweden, UK, Estonia, Slovakia, Hungary Problems with negatives Analytical tables away from statistical sources Assumption of fixed product sales structure (Model D) Widely used by countries which publish industry by industry IOT Denmark, Netherlands, Finland, Canada, Norway, Hungary No negatives Close to statistical sources Other assumptions Hybrid technology (UK), Almon procedure (Test version for NL)

Transformation of input-output tables to supply and use tables

Transformation of input-output table to use table Data situation For earlier years often supply and use tables are not available If they exist they internal data of Statistical Offices for the compilation of IOT’s. Required input data Input-output table and supply table Supply table can be derived from benchmark years and official national accounts data. The structure of supply tables is rather stable in time.

Model assumptions for transformation to SUT’s Recommendation Use the complements of Model A for product by product IOT’s and Model D for industry by industry IOT’s. Product technology assumption (Model A2) Widely used by countries which publish product by product IOT Transformation to SUT is not creating negatives Assumption of fixed product sales structure (Model D2) Widely used by countries which publish industry by industry IOT Transformation may create negatives. If negatives are generated Model B2 is an option.

Transformation of SUT 1995 to IOT 1995 for Austria Statistik Austria Product by product IOT‘s were compiled which are based on product technology assumption (Model A) In the course of the transformation numerous small negative elements were generated. Large negatives are an indication for the mismatch of statistical sources with the technology assumption. The negatives were deleted in a manual balancing procedure. EUKLEMS transformation All 4 transformation models were compiled using SAS software with dynamic data exchange with Excel files The results of Model A were very close to the published IOT’s.

Transformation of IOT 1995 to SUT 1995 for Austria EUKLEMS transformation Required inputs are IOT 1995 and supply table 1995 All 4 transformation models were compiled using SAS software with dynamic data exchange with Excel files The results of Model A2 were close to the published SUT. The manual balancing caused minor deviations for value added and intermediate inputs for most sectors. In some cases larger differences were caused which can be revised in a manual balancing procedure. GDP and components of value added and final demand are correct.

Projection of SUT‘s and IOT‘s Requirements Supply and use tables or input-output table at basic prices for base year Real growth rates for valued added of industries (EUK60) Real growth rates for final demand (private consumption, government consumption, gross fixed capital formation, change in stocks, exports) Real growth rate of imports

Updating input-output tables

Eurostat method The main advantages of the Eurostat update procedure Robust update procedure at low costs Limited data requirements Only official sources from New Cronos are used. Integrated estimation of all four quadrants of IOT No arbitrary changes of input coefficients as in RAS Row and column totals for intermediates derived not given Structure of final demand estimated during the iteration Consistency of supply and demand provided by io-model. Successfully implemented for DG Regio Evaluation of the European Structural Funds in Greece, Portugal, Ireland, Germany, Italy, and Spain Documentation of updating procedures in Eurostat Input-Output Manual

Updating supply and use tables

Recommendations Classification Data base of EUKLEMS should cover all 60 individual industries (A60) of ESA 1995. EUK60 requires the disaggregation of 10 additional industries. In consequence the supply and use tables will comprise 70 industries. The data base will always allow to aggregate the results to A60. Input-output tables Collect all input-output tables, also if supply and use tables are available. The input-output tables may be the only reliable source of import matrices. Transformation of use tables at purchasers’ prices to use tables at basic prices Establish a standard procedure for the transformation of use tables at purchasers’ prices to use tables at basic prices. Estimate or collect all recommended valuation matrices.  

Recommendations Valuation matrices If valuation matrices are missing use reference year or reference country to blow up the valuation vectors of the supply table to a full size valuation matrix.   Transformation of supply and use tables to input-output tables and vice versa Use appropriate technology assumption for the transformation of input-output tables to supply and use tables and the transformation of input-output tables to supply and use tables. Compilation of missing supply and use tables Use a projection model to compile the missing supply and use tables. The main aggregates (GDP, value added by industry, components of final demand) shall be compared with the macroeconomic data in NewCronos of Eurostat.

Software for transformation Excel Restrictions for calculation of an inverse (maximum matrix size 52x52) No programme code Not transparent for other users SAS  No restrictions for calculation of an inverse Documentation of programme code Easy search for programming errors Three windows document the program code (Program), errors in the compilation procedure (Log) and the results (Output) Dynamic data exchange with Excel for input and output   Excel and SAS Powerful tool for complex macroeconomic models Professional documentation Easy generation of tables and figures for publication  

Documentation Compilation of supply and use tables at basic prices Paper for the Amsterdam meeting of the Data C-ordination Group DC note1beutelc WP1.doc   Transformation of supply and use tables and symmetric input-output tables Numerical examples with Excel hybridrev8.xls   Transformation of supply and use tables and symmetric input-output tables Empirical application for Austria 1995 with SAS and dynamic data exchange with Excel files ausut95sept05b.xls