Simple Keynesian input–output structural decomposition analysis using weighted Shapley value resolution

Abstract

This study proposes a method of input–output structural decomposition analysis (I–O SDA) incorporating simple Keynesian modeling and a two-tier KLEM production function framework. The derived model is based on a well-established macro-economic theory and the well-accepted production function form, which presupposes that I–O SDA not only compares I–O table coefficients but also employs well established economic theory. Additionally, weighted Shapley value is introduced to construct a generalized equation for deriving a set of I–O SDA solutions and to verify that, because this set of solutions satisfies efficiency and aggregation axioms, arbitrary use of ad hoc decomposition forms can be avoided, and residuals can be eliminated.