Supply and Use and Input-Output Tables
The supply and use tables focus on measuring the productive structure of the economy. They trace production of commodities by domestic industries, combined with imports, through their use as intermediate inputs or as final consumption, investment or exports. The system provides a measure of value added by industry—total output (or sales) less intermediate inputs. These tables can be used to calculate economy-wide gross domestic product (GDP) either directly, by summing value added over the industries, or indirectly, by summing to the economy-wide cost of primary inputs (income-based GDP) or by computing the grand total of the flow of products into final demand categories (expenditure-based GDP)—the link to the national income and expenditure accounts.
While the supply and use tables closely reflect actual economic transactions, certain analytical and modeling purposes, however, require symmetric industry-by-industry tables. These symmetric industry-by-industry tables are referred to as input-output tables. The input-output tables show the inter-industry transactions, that is, all purchases of an industry from all other industries, including expenditures on imports and inventory withdrawals, as well as all expenditures on primary inputs. Similarly, the symmetric final demand table shows all purchases by a final demand category from all other industries, including expenditures on imports and inventory withdrawals as well as all expenditures on indirect taxes.
The input-output tables allow the analyst to explore “what if?” questions at a fairly detailed level, exploring the impact of exogenous changes in final demand on output while taking account of the interdependencies between different industries and regions of the economy and the leakages to imports and taxes. For example, such models might be used to study the question: "If Canadian oil and gas exports doubled, what industries would be most affected and in which provinces"? The use of an input-output model to address such a question would permit the estimation of indirect, and possibly also some of the induced effects of a demand shock of this nature, and the calculation of the corresponding multipliers.
Input-output models were originally developed in the 1930s by Wassily Leontief, a Russian-American who earned the Nobel Prize in Economic Sciences for this work in 1973. His models were inspired by earlier studies by François Quesnay on the “Tableau économique” in 1758 and Léon Walras on general equilibrium theory in 1874. Leontief’s models simplified earlier formulations by assuming that the proportions of industry inputs to industry outputs are fixed in the short-term, with no substitutability among any of the intermediate or factor inputs.
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