Input-Output

Input-Output (I-O) Analysis

I-O matrices, which were developed by
Wassily W. Leontief, indicate the supply
and demand interrelationships that exist
between the various sectors of an economy
during some time period.
The phrase I-O is used because the matrices
show the values of outputs of each industry
that are sold as inputs to each industry and
for final use by consumers.
Input-Output ...
An oversimplified three sectors economy
(Agriculture, Industry and Service) is given
by the I-O matrix
The other production factors (value added)
sector consist of cost to the respective
sectors, such as labor, profits and so on
The final demand sector could be
consumption by households, government,
and so on
Input-Output ...
I-O analysis allows us to estimate the total
production of each sector if there is a
change in final demand, as long as the basic
structure of the economy remains the same
Input-Output Table
Final
Producers (Output) Agriculture Industry Service Demand
Agriculture 240 180 144 36 600
Industry 120 36 48 156 360
Service 120 72 48 240 480
Value Added 120 72 240
Totals 600 360 480
Consumers (Input)
Totals


Transaction Matrix
(
(
(

=
48 72 120
48 36 120
144 180 240
T
Input-Output Coefficients
| | 5 , 0 2 , 0 2 , 0
1 , 0 2 , 0 2 , 0
1 , 0 1 , 0 2 , 0
3 , 0 5 , 0 4 , 0
=
(
(
(

=
V
A
Leontief Matrix
X = AX + C
where, X = output matrix
A = coefficient matrix
C = final demand matrix
X - AX = C
(I - A) X = C
X = (I - A)
-1
C
where, (I - A) = Leontief matrix
Final Demand Changes
Find the Leontief matrix and invers Leontief
matrix
Suppose final demand changes to 77; 154
and 231 for respective sectors, find the
output matrix for the economy and I-O table
Final Demand ...
Leontief Matrix
(
(
(

=
9 , 0 2 , 0 2 , 0
1 , 0 9 , 0 2 , 0
3 , 0 5 , 0 6 , 0
) ( A I
Final Demand ...
Invers Leontief Matrix
(
(
(

=

43 , 1 71 , 0 71 , 0
39 , 0 56 , 1 65 , 0
04 , 1 66 , 1 56 , 2
) (
1
A I
Final Demand ...
Output Matrix
(
(
(

=
(
(
(

(
(
(

=
495
380
5 , 692
231
154
77
43 , 1 71 , 0 71 , 0
39 , 0 56 , 1 65 , 0
04 , 1 66 , 1 56 , 2
X
Final Demand ...
Input-Output Table
Final
Producers (Output) Agriculture Industry Service Demand
Agriculture 277 190 148,5 77 692,5
Industry 138,5 38 49,5 154 380
Service 138,5 76 49,5 231 495
Value Added 138,5 76 247,5
Totals 692,5 380 495
Consumers (Input)
Totals
Forward/Backward Linkage
Forward Linkage (FL)



Backward Linkage (BL)
rows of number n
A I
A I n
FL
ij
i
i
=

,
) (
) (
1
1
columns of number n
A I
A I n
BL
ij
j
j
=

,
) (
) (
1
1
Agriculture Industry Service FL
Agriculture 2.56 1.66 1.04 5.26 15.78 1.47
Industry 0.65 1.56 0.39 2.60 7.80 0.73
Service 0.71 0.71 1.43 2.85 8.55 0.80
3.92 3.93 2.86 10.71
11.76 11.79 8.58
BL 1.10 1.10 0.80
( )
1
3

i
A I
( )
1
3

j
A I
( )
1

j
A I
( )
1

i
A I
Forward/Backward ...
Jenis Industri
FL BL
Industri Antara >1 >1
Industri Hulu >1 <1
Industri Hilir <1 >1
Industri Konsumsi <1 <1
Angka Keterkaitan
Forward/Backward ...
Tentukan keterkaitan ke depan dan ke
belakang dari contoh soal dan jenis sektor
ekonomi!
Exercise
1. Given the input output matrix




a. Find the output matrix for the economy if the
final demand changes to 300, 350 and 450 for
respective industries and I-O table
b. Calculate FL and BL and define the types of
industry
Final
Producers (Output) Industry A Industry B Industry C Demand
Industry A 400 200 200 200
Industry B 200 400 100 300
Industry C 200 100 300 400
Value Added 200 300 400
Consumers (Input)