The import content of Croatian economic sectors and final demand

Abstract

Production processes are becoming increasingly fragmented and dispersed for producers in different geographical areas as a result of international integration and trade liberalisation. The aim of this paper is to estimate direct and indirect import content of Croatian industries and final demand and to compare the results with previous studies for European economies. Direct and indirect import content of final demand is estimated by an input-output model. The updated 2013 input-output table based on the bi-proportional adjustment of the rows and columns of the base technology matrix A (RAS method) is applied in order to account for changes in technical coefficients for domestic output and imports after European Union (EU) accession. The highest import content is estimated for sectors applying production technology that requires raw materials which are not available in sufficient quantities domestically, and sectors that produce high-tech or medium high-tech goods. The import content of public and personal services is low. The highest import content of domestic final demand is recorded for exports and gross fixed capital formation. In comparison to other new member-states, the Croatian economy is less internationally integrated and import dependence is more similar to results found for larger self-sufficient economies. Empirical results on the import content of different economic sectors could enhance the effectiveness of macroeconomic policies.