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Looking for the inverted pyramid: An application using input-output networks

Louison Cahen-Fourot, Emanuele Campiglio (), Elena Dawkins, Antoine Godin () and Eric Kemp-Benedict ()

No 25, Ecological Economic Papers from WU Vienna University of Economics and Business

Abstract: Herman Daly's view of the economy as an "inverted pyramid" sitting on top of essential raw material inputs is compelling, but not readily visible in monetary data, as the contribution of primary sectors to value added is typically low. This article argues that "forward linkages", a classical development theory concept capturing the relevance of a sector for downstream activities, is a more appropriate measure to identify key sectors. Using Input-Output (IO) data from eighteen European countries, we identify mining as the sector with the highest average forward linkages, and confirm the consistency of this result across countries via cluster analysis. By treating IO tables as the adjacency matrix of a directed network, we then build and visualise national inverted pyramid networks, and analyse their structure. Our approach highlights the key importance of natural resources in providing the necessary inputs to modern European economies.

Keywords: inverted pyramid; input-output; networks; forward linkages; natural resources (search for similar items in EconPapers)
Date: 2019-04
New Economics Papers: this item is included in nep-hme
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