SNA Supply-Use and Input-Output 3: Input - Output tables

"While some users might find that in many instances the supply and use table could serve analytical as well as statistical purposes, other traditionally may want to prepare more analytical tables to meet their needs. Supply and use tables certainly can provide the framework for input-output analysis, including the construction of economic models needed for economic analysis. Indeed, analysts increasingly finds that there are advantages in starting off directly from the rectangular input-output tables (use-supply) instead of basing the analysis on symmetric input-output analysis..." (SNA93).

However, traditional input-output tables are prepared in statistical offices in several countries. While supply-use tables most likely are rectangular, with more products than industries, input-output tables are square, presented as industry x industry- or product x product-matrices.

Each column under the 'intermediate consumption' heading shows an industry's use of goods and services delivered by units within the same industry as well as by other industries. In addition, value added by components; compensation of employees, compensation of fixed capital (operating surplus), plus other taxes less subsidies on production. The columns illustrates the composition of an industry's costs of production. Any column for the final use categories shows how total final use is derived as supply by domestic industries, imports and taxes on products, net.

The input-output tables are constructed in such a way that for every industry is the sum of the line equal to the sum of the column, gross output in each industry equals sum of costs (including operating surplus).

A set of assumptions has to be made to construct a input-output table on the basis of supply- and use-tables. The assumptions are rather strong, and not very realistic. The two most important assumptions underling the input-output tables are; (i) There exists only one single technique of production for each product, and (ii) The tables are based on a linear fixed-coefficient production function. The need for building the input-output tables on these strong assumptions is one of the reasons why an increasing number of macro-economic models are based on use-supply-tables rather than square input-output tables.

When statistical offices chooses to develop input-output-tables, is it because the square tables do provide some additional information to the information provided by the rectangular use-supply-tables; a clear description of the industries cost-structure, and a unique description of the use of products produced within the economy.