External dependency, value added generation and structural change: an interindustry approach

João Ferreira do Amaral, João Lopes (jcflopes@iseg.ulisboa.pt) and João Dias

No 2010/12, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: The external dependency of many industries and the corresponding low value added generated in production create high external deficits and growing debt to GDP ratios in several open economies. In this paper we propose an empirical method to assess the evolution of these vulnerabilities, based on a new treatment of interindustry production multipliers. The (gross) output growth potential given by the column sums of the Leontief inverse matrix (backward linkage indicators) results from three terms: interindustry consumptions, value added and imported inputs. After a convenient arrangement of these terms, the evolution of backward linkage indicators can be used to detect structural changes, particularly quantifying a (net) growth effect (more value-added generation) and an external dependency effect (more imported inputs), and to classify the productive sectors accordingly. An application to the Portuguese Economy is made, using input-output tables for the years 1980, 1995 and 2005. This method can also be useful as a simple, but suggestive, device to compare the evolution of two or more economies, along their development processes in time.

Keywords: input-output linkages; external dependency; structural change; Portugal (search for similar items in EconPapers)
JEL-codes: C67 D57 (search for similar items in EconPapers)
Date: 2010-06
New Economics Papers: this item is included in nep-cse
References: View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: External dependency, value added generation and structural change: an inter-industry approach (2011)
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