The Determinants of Structural Change in the European Union: A New Application of RAS

Abstract

In economic theory and practice, technological developments and changes in relative prices lead to changes in the input mix of one or more industries. Via intersectoral and interregional relations, this affects the entire production structure. In analysing the structural changes in an economy, changes in the input coefficients are a major determinant. Typically, however, this determinant is not unravelled further into its underlying sources. In the present paper we apply the RAS method to decompose the input coefficient changes into column-specific, row-specific, and cell-specific changes. They indicate the change in the intermediate input intensity of a sector, the average substitution of the intermediate goods and services provided by a sector, and the sector-specific substitutions, respectively. The method is applied to input–output tables of European Union member states, as issued every five years between 1965 and 1985. The usefulness of the RAS method as a descriptive tool is established.