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Merging the Hypothetical Extraction Method and the Classical Multiplier Approach: A Hybrid Possibility for Identifying Key Distributive Sectors

Ana-Isabel Guerra ()

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: The two main alternative methods used to identify key sectors within the input- output approach, the Classical Multiplier method (CMM) and the Hypothetical Extraction method (HEM), are formally and empirically compared in this paper. Our findings indicate that the main distinction between the two approaches stems from the role of the internal effects. These internal effects are quantified under the CMM while under the HEM only external impacts are considered. In our comparison, we find, however that CMM backward measures are more influenced by within-block effects than the proposed forward indices under this approach. The conclusions of this comparison allow us to develop a hybrid proposal that combines these two existing approaches. This hybrid model has the advantage of making it possible to distinguish and disaggregate external effects from those that a purely internal. This proposal has also an additional interest in terms of policy implications. Indeed, the hybrid approach may provide useful information for the design of ''second best'' stimulus policies that aim at a more balanced perspective between overall economy-wide impacts and their sectoral distribution.

Keywords: Sectoral linkages; Key sectors; Extraction methods; Multiplier methods. (search for similar items in EconPapers)
JEL-codes: C63 C67 I28 (search for similar items in EconPapers)
Pages: 31
Date: 2011-10-14
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:886.11

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