Input-output symmetric tables

For educational purposes, consider an economy with no foreign trade, no taxes, and no
secondary production by industry of products characteristics of another industry. This last
condition implies that products and industry groups have a one to one correspondence – there is
no difference in data between products and industries. Value added components of industry
production are considered as the only primary inputs (as distinct from intermediate inputs)

Under these conditions, the input-output framework can be shown as

Industries use Final demand Total supply

Industry production W f q
Primary inputs y
Total q

In the diagram, W is a square matrix showing the value of purchases by industries of sales by
industries – the Use matrix. A typical entry in a cell of this matrix is wij, where i indicates the row
and j the column.

Also q is a vector of commodity output, f is a vector fof inal demand. And y a vector of primary
inputs (in this case, value added).

In this scheme and considering the rows of the above matrix set-up, , the output of each industry
can be defined in terms of its sales to the various users – intermediate demand and final
demand.

So q1 = w11 + w12 + w13 + . . . . . . . . + w1n + f1

q2 = w21 + w22 + w23 + . . . . . . . . + w2n + f2
q3 = w31 + w32 + w33 + . . . . . . . . + w3n + f3

qn = wn1 + wn2 + wn3 + . . . . . . . . + wnn + fn

If we express the entries in W not as flows, but in coefficient form showing each cell as a
proportion of the purchasing industry in the column, then we can define a coefficient matrix A as
shown on the next page.
 q1 = a11.q1 + a12.q2 + a13.q3 + . . . . . . . . + a1n.qn + f1
q2 = a21.q1 + a22.q2 + a23.q3 + . . . . . . . . + a2n.qn + f2
q3 = a31.q1 + a32.q2 + a33.q3 + . . . . . . . . + a3n.qn + f3

. .

qn = an1.q1 + an2.q2 + an3.q3 + . . . . . . . . + ann.qn + fn

In matrix form, we have

q=A.q + f
If the level of final demand is known and the coefficient matrix is given, we can solve this
equation for q in terms of f. Note that this equation enshrines the fundamental philosophy of
input-output analysis: industries use products in a production function, and as industry output
varies, so will the inputs to the production function. The extreme case in the simple i-o models is
that inputs respond in in linear proportion to the change in output - if output doubles, so does
every input.

The supply use tables equivalent form of this relationship is

q=B.g + f
This matrix B in this relationship is the coefficient version of the use matrix, where g is the vector
of industrial outputs as opposed to the output of products. The difference between the two
arises because of secondary production in industries of products not characteristic of the
industry – e.g. the goods-producing industry may also undertake retailing activity and provide
repair services, and so total industry output of the goods-producing industry will be greater than
the output of the products. Thus g will be greater than q for the goods-producing industry.

This is shown in the table below where the industry output of the goods-producing industry is
600, and the product output is only 500

G Ma S T
o rgi e o
o ns. r t
d v a
s s l

Go 5 5
od 0 0
s 0 0
 Ma 5 200 2
rgi 0 5
ns 0

Ser 5 8 8
vic 0 0 5
es 0 0

Tot 6 200 8 1
al 0 0 6
0 0 0
0

A solution to converting the relation

q=B.g + f
to a form which can be solved for an output measure, is to express ether product outputs as a
function of industry outputs, or industry outputs as a function of product outputs.

We define the matrix D as the transpose of the production matrix, so that the industries are in
the rows and commodities in the columns.

So G Ma S T
th o rgi e o
e o ns. r t
pr d v a
od s s l
uc
tio
n
ma
tri
xP
(p
art
of
th
e
su
pp
ly
ta
ble
)
isX
in
d's

produc
ts
 Go 5 5
od 0 0
s 0 0
M 5 20 2
ar 0 0 5
gin 0
s
Se 5 8 8
rvi 0 0 5
ce 0 0
s
Tot 6 20 8 1
al 0 0 0 6
0 0 0
0

And the transpose D in flow form is

pro G Ma S T
du o rgi e o
cts o ns. r t
d v a
ind’s s s l
Go 5 6
od 0 50 5 0
s 0 0 0
Ma 20 2
rgi 0 0
ns 0
Ser 8 8
vic 0 0
es 0 0
Tot 5 25 8
al 0 0 5 1600
0 0

In coefficient form, D shows how each product is sourced from industry and is called the market
shares matrix.

product Good Margins Serv

s s . s

ind’s
Goods 1 0.2 0.06
Margins 0.8
Services 0.94
Total 1 1 1
 In matrix form then,

G = D . q and so in q = B . g + f, substituting we get

q = B . D.q +f so f = (I – BD).q and q = (I – BD)-1 . f
This gives A = B . D, and the Leontief inverse is (I – BD)-1
So we obtain a product by product version of the use coefficient matrix B by post- multiplying B by
the market shares matrix D to give A. This then satisfies the relationship

q=A.q+f
B is the coefficient form of the use matrix ( each column divided by total industry output).

It can also be shown that if A is calculated as DB, this gives an industry by industry version of the
symmetric table A.

PLEASE NOTE

There are other ways of deriving symmetric tables, but which are more difficult to calculate and can
produce negative entries. In this presentation, we are following one of the approaches advocated in
the ESA Manual on SUIO.
When the matrices are square and there is no secondary production, g is equivalent to q, and the
form of the relation is the first one

q=A.q + f
This can be solved for q in terms of f, as
(I – A).q = f, and so

q = (I-A) -1. f
This equation is the most usual form of the Leontief inverse used in input-
output analysis. It enables projection and hypotheses about the behaviour
of final demand (such as HH spending) to be examined in terms of their
direct and indirect effect on industry output. This in turn can be used to
deduce impact on primary inputs such as imports or compensation of
employees.
It is possible to use the structure of the production matrix together with
assumptions about whether the secondary production is similar to other
production in the industry, or whether it is typical of the products, no
matter which industry produces them, to transform the