Input-output structural decomposition analysis for Austria

Abstract

The structural transformation of an economy, as represented, for example, by changes in the level and composition of net output value and of employment, raises questions about the sources of the shifts in the position of individual industries. Input-output structural decomposition analysis can ascribe the source of these shifts to changes in technology, domestic final demand, foreign trade, and labor productivity. This method is explained in the first part of the paper, and is applied to the analysis of changes in the Austrian economy between 1964 and 1976 in the second part. The analysis transforms the input-output table for the base year into the table for the terminal year on a step by step basis, i.e., through a set of cumulative comparative static adjustments in key parameters. The application indicates that shifts in net output values were caused mainly by foreign trade and by changes in intermediate demand. Changes in employment were caused mainly by changes in domestic final demand and by changes in intermediate demand as well. Thus, the structure of net output value changed because of the international competitiveness of particular industries. The structure of employment changed because of differential productivity growth in finished goods industries. Changes in technology mattered in both cases.