Abstract
Understanding the industrial structure of a national or regional economy is one of the central issues in economics. The triangulation of an input–output table (IOT) can be employed to understand the production structure of an economy. Inter-temporal and inter-regional comparisons of multiple IOTs have addressed interesting and important issues pertaining to international trade, economic growth, and inter-industry relationships in the economy. Rank correlation coefficients between sector rankings obtained by solving optimization problems have been utilized to quantify similarities among production structures. However, it is well known that calculated rank correlations might be weak even if underlying structures are similar because the optimization problem inherently has multiple optimal solutions, thus leading to erroneous interpretations. This paper proposes a new method to triangulate IOTs based on mixed integer programs (MIPs) for comparing the production structures of multiple economies. The proposed new method does not suffer from non-uniqueness of optimal solutions and is consistent with maximization of the Kendall rank correlation coefficient. The application of the proposed method to the Japanese economy demonstrates stability of the Japanese production structure during 1995–2005. Comparisons of triangulated IOTs further reveal similarities in production structures of the Chinese, Japanese, and the U.S. economy for the year 2009. Electronic Supplementary Material The online version of this article (doi:10.1186/2193-2409-3-2) contains supplementary material. JEL Classification: C61, C67, L16.
Highlights
The entire production structure of a national or regional economy can be represented through its input–output table (IOT), consisting of extensive numerical data on different branches of national and regional economies
This paper proposes a new method to triangulate IOTs based on mixed integer programs (MIPs) for examining production structures of economies, and conducting inter-temporal and inter-regional comparisons
This paper proposes a new method for comparing the structures of multiple economies, which does not suffer from the non-uniqueness of optimal solutions and is consistent with the maximization of the Kendall rank correlation coefficient
Summary
The entire production structure of a national or regional economy can be represented through its input–output table (IOT), consisting of extensive numerical data on different branches of national and regional economies. Their associates in Project Scoop of the U.S Air Force during the late 1940s Their original motivation in rearranging sectors was to reduce computational burden for solving a system of linear equations. They found that a triangulated IOT reveals structural characteristics of the economy that it represents. With recent technological progress engendering factors such as promotion of industrial symbiosis, substitution of materials across sectors, and green product-service system, it is worth checking if these factors have caused a change in hierarchy among sectors With this background, this paper proposes an extension of the triangulation problem for comparing the production structures of multiple economies. Computer codes used for implementing the new method are provided in the supplementary material
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