INDUSTRY SECTORS and INPUT OUTPUT ANALYSIS

1
INDUSTRY SECTORS and INPUT OUTPUT ANALYSIS

• EEP 255
• CLASS 4 SEPT 4, 2003

2
ECONOMIC SECTOR CLASSIFICATION

• Most countries have a classification system for
  their economic sectors
• US(SIC), North America (NAICS), UN (System of
  National Accounts (SNA))
• This classification facilitates
• Systematic accounting of the output of the
  economy and its use (National Income and Product
  Accounts NIPA)
• Reporting and monitoring of performance measures
  such as GDP, Productivity
• Comparison and benchmarking
• Planning and forecasting Input-Output Analysis

3
NAICS SYSTEM

• The Economic activity is classified into sectors
  based on commonality of products, production
  technology, inputs and end use.
  http//www.census.gov/epcd/www/naicstab.htm
• 20 main sectors (2 digit sectors)
• These are subdivided into 100, 3 digit sectors
• Further division into 500, 4 digit sectors
• Over 7000, product groups (6-7 digit)

4
(No Transcript)
5
Major(2 digit) industries

• 11 Agriculture, Forestry, Fishing, and hunting
• 21 Mining
• 22 Utilities
• 23 Construction
• 31-33 Manufacturing
• 42 Wholesale Trade
• 44-45 Retail Trade

6
11 Agriculture etc

• Establishments that grow crops, raise animals,
  harvest timber, and harvest fish and other
  animals from a farm, ranch, or their natural
  habitats.
• 111 Crop Production
• 1111 Oilseed and grain Farming
• 11111 Soybean farming
• 11112 oilseed except soybean (mustard, sesame
  etc)
• http//www.census.gov/epcd/ec97/us/US000.HTM

7
Major(2 digit) industries

• 48-49 Transportation and Warehousing
• 51 Information
• 52 Finance and Insurance
• 53 Real Estate and Rental and Leasing
• 54 Professional, Scientific and Technical
  Services
• 55 Management of Companies and Enterprises
• 56 Administrative and Support and Waste
  Management and Remediation Services

8
Major(2 digit) industries

• 61 Educational Services
• 62 Health Care and Social Assistance
• 71 Arts, Entertainment and Recreation
• 72 Accommodation and Food Services
• 81 Other Services (except Public Administration)
• 92 Public Administration

9
Economic Census

• http//www.census.gov/
• Censuses conducted once in five years
• Census of Agriculture
• Census of Manufactures etc
• Annual surveys (sample surveys)
• Quarterly surveys
• Special surveys
• Manufacturing energy consumption
• Pollution Abatement and Control Exp Survey

10
1997 Economic Census

• Summary Statistics available at
• http//www.census.gov/epcd/ec97/us/US000.HTM
• PLEASE EXPLORE THESE TABLES AND SUBSECTORS
• Also 2002 Census forms http//help.econ.census.go
  v/econhelp/resources/

11
INPUT OUTPUT ANALYSIS
12
What is IO Analysis?

• A snapshot of the economy at a moment in time
  (e.g., 1999)
• IO Accounts summarize on production and
  utilization of the output of different sectors of
  the economy
• A description of the physical relationships among
  industry sectors (e.g., who supplies and who
  demands intermediate and final goods and services)

13
IO Analysis

• Input Output Transaction Tables
• Accounts for how the output of different sectors
  is used in the economy
• Direct Requirements Model
• Shows the immediate economic effects of a change
  in demand for an output (i.e., direct effects)
• Total Requirements Model
• Shows the ripple (direct and indirect) effects
  of a change in demand for an output

14
Why is an IO Model Useful?

• IO Accounts enable measures such as GDP, sector
  output, income
• IO models help to forecast the effect of changes
  in demand for outputs
• Example Increase in foreign demand for US autos
  increases demand for the inputs used to build
  auto, including the demand for labor, land,
  energy, raw materials, and waste disposal

15
Input-Output Transaction Table

• Input output transactions table shows
• the output of different sectors and how it was
  consumed
• Output (X) Intermediate demand final demand
  (Y)
• Components of final demand (ConsumptionInvestment
  Government purchases Exports)
• Value added in output

16
IO Transactions Table
17
US IO Use Tables 1999

• http//www.bea.gov/bea/industry/iotables/prod/opti
  ons_list.cfm?test_set_all_com_indnoget_resultss
  howgotogo_to_optionsanon132

18
Direct and Indirect Requirements for Producing an
Output

• Direct requirement examples The output of autos
  requires inputs of electricity, steel, plastic,
  glass, water, and skilled labor
• Indirect requirement example the steel used to
  build the auto is produced using iron ore, so
  iron ore is an indirect input requirement in
  producing auto outputs. The electricity used to
  build the auto is produced using coal, so coal is
  an indirect input requirement for building autos.

19
Product Flow Diagram
20
Industry Sector Flow Diagram
Steel
Natural Gas
Electric Power
Metal pipes
Cement
Water
Plumbing
21
Industry Sector Interrelationships
Steel
Natural Gas
Electric Power
Metal pipes
Cement
Water
Plumbing
22
Direct vs. Indirect Relationships Between
Industry Sectors
Steel
Natural Gas
Electric Power
Metal pipes
Cement
Water
Plumbing
23
Relationships Between All Industry Sectors
Steel
Natural Gas
Electric Power
Metal pipes
Cement
Water
Plumbing
24
Input-Output Matrix
The diagram in the previous slide is too
complicated. Fortunately, a clever economist,
Wassily Leontief, developed a better way to
depict the product flow and interdependencies
among industry sectors in an economy by using a
matrix. (He received a Nobel prize for this.)