Hypothetical Extraction Method Research Articles

The Growth Model of the Automotive Industry in Türkiye: An Input-Output Analysis via the Hypothetical Extraction Method

Purpose: The objective of this research was to ascertain if the portion of the automotive industry that engages in non-tradable goods or export goods is the principal driving force behind the industry's expansion. The purpose of this paper is to fill the gap by focusing on the automotive industry as its principal area of investigation. Methodology: Productivity growth in the automotive industry was estimated utilizing an innovative hypothetical extraction method (HEM) for both the non-tradable goods sector and the export goods sector. Following that, the weighted multipliers approach is employed to allocate the productivity across the non-tradable goods and export goods of the automotive industry. Findings: The findings indicate that the automotive industry maintains a strategy of development driven by exports. Production targeted for the domestic market is subject to significant limitations. Multinational automobile corporations tend to employ the strategy of exporting. The growth model of the automotive industry is significantly influenced by various institutional elements, including the Customs Union, taxes, and vertical integration. Originality: Although the automotive industry is an essential industry for exports, its growth model has not been comprehensively scrutinized. This study primarily focuses on investigating the growth model of the Turkish automotive industry and the institutional factors that influenced its strategic decisions.

Economic Impact of the Drought in Spain: Measurement for the Adoption of Measures

This paper aims to evaluate the economic implications of meteorological drought in Spain. The study seeks to provide decision-makers with crucial insights into the macroeconomic effects of drought, enabling them to devise mitigation strategies and minimize its impact on economic activity. The Partial Hypothetical Extraction Method (HEM) is employed within the Input-Output analysis framework extended to a Social Accounting Matrix (SAM) of Spain to achieve this goal. The database utilized for this analysis is the FNAM for Spain in 2017, in millions of euros, obtained from the Full International and Global Accounts for Research in Input-Output Analysis (FIGARO) project, a collaboration between Eurostat and the European Commission. The study aims to estimate the economic impact of drought on the productive sectors of the Spanish economy in terms of sectoral production and GDP. This involves simulating the partial reduction in value-added resulting from variations in average water productivity per gross value added, based on the drought indicator SPI-24. Three scenarios are generated: (1) drought, (2) moderate drought and (3) severe drought. In quantitative terms, the simulated drought scenarios could lead to a drop in GDP of 0.88% for the drought scenario, 1.61% for the moderate drought scenario, and 1.76% for the severe drought scenario. Additionally, it is important to recognize that water scarcity hampers the social and economic development of cities and regions beyond the results in quantitative terms.

Linking hypothetical extraction, the accumulation of production factors, and the addition of value

AbstractIn industrial ecology, approaches have been developed to analyze the contribution of specific sectors to environmental impacts within supply chains. In economics, a range of methods addresses the forward linkage (use of output) and backward linkage (dependency on inputs) of sectors, and the analysis of key sectors. This article offers a formal investigation of the relationship between these. It shows that both the analysis of supply chain impacts and of intersectoral linkages can be seen as special cases of a more general hypothetical extraction method (HEM). In HEM, sectors' role is assessed as the effect of their removal on the input–output model's solution. HEM also allows for the (partial) extraction of individual transactions. HEM thus offers a flexible approach to assessing the contribution of one or several sectors, or transactions, or parts thereof, to value added or footprint of any final demand. It can be applied to study the environmental footprints of companies or intermediate products, the contribution of certain inputs to sectors, or the potential impact of disruptions of supply chains on producers and consumers. In this article, the price model for HEM is introduced to identify the contribution of the extracted (target) sectors to the price or unit footprint of a commodity.

An “Extended method” for measuring intersectoral linkages: The case of the Greek tourism sector

This paper assesses the intersectoral linkages of the tourism sector of the Greek economy using an extended version of the hypothetical extraction method, which allows the intersectoral effects of the labor force reproduction process to be taken into account, and data from the symmetric input-output table for the year 2015. The findings of our analysis show that the role of tourism in the Greek economy is more as a seller of inputs in other sectors than as a buyer of inputs, a finding that can be reduced to the high participation of the tourism product in the labor force reproduction process. In other words, an increase in demand for the tourism product cannot bring about a strong growth in the economy, since the sector's dependence on inputs from other sectors for its operation is low and, therefore, the increase in the tourism product does not lead to a large increase in the production of the other sectors. On the contrary, an increase in demand for the products of other sectors will lead to a strong growth of the tourism sector, since the dependence of other sectors on inputs of the tourism sector is high. The interdependencies in the production structure of the Greek economy show that the tourism sector cannot be the basis of a growth policy (i.e. by stimulating tourism demand), but, conversely, the growth of the Greek economy will lead to a significant increase in its tourism sector.

Applying the Hypothetical Extraction Method to Investigate Intersectoral Carbon Emission Linkages of China’s Transportation Sector

The transportation sector is an indispensable link in the industrial chain of an economic system. Considering the current push to comprehensively construct new patterns of development, the transportation sector is under huge pressure to achieve the goal of “carbon peak and carbon neutral”. Therefore, to develop low-carbon transportation in China, it is important to study the carbon emission linkages in its transportation sector in order to understand its potential and the factors affecting carbon mitigation. In this study, sectoral carbon emission linkages and dynamic changes during the period of 2002–2020 for the transportation sector in China were quantitatively investigated based on the input–output analysis and hypothetical extraction method (HEM). The results showed that the total carbon emission linkages for the transportation sector mainly experienced growth, increasing by 848.63 Mt from 2002 to 2020, with consistently stronger supply-side than demand-side carbon emission linkages. This indicates that the potential of the transportation sector for carbon reduction lies upstream in the chain of carbon emission linkages. Furthermore, the transportation sector was consistently a net export sector of carbon emissions, and net carbon transfer decreased with fluctuations. Regarding carbon emissions from the transportation sector, the construction sector was found to be main destination for the majority of these emissions, while the power supply sector was the largest source. The policy implications derived from this research can serve as a crucial lever for the low-carbon development of China’s transportation sector.

Productive interdependence of tourist activities in Brazil

This paper examines the production linkages of Tourism Characteristic Activities in the Brazilian economy and breaks down the output variation of these activities into technological change and final demand effects. To do so, we use the hypothetical extraction and structural decomposition methods based on the Brazilian input-output matrices of 2010 and 2015. The main results show that the absence of tourist activities would cause a 0.83% reduction in the total output in Brazilian economy, and the impacts caused by the absence of the purchasing and selling structures of these activities were relatively low, which can be partially explained by the fact that tourist activities are oriented towards final demand. Furthermore, variations in the output of tourist activities are predominantly explained by the behavior of final demand, with a reduced impact of technical progress. Household consumption and exports are the ones that contributed the most to the variations in output.

A linkage analysis of the mining sector in the top five carbon emitter economies

This article conducts an environmental and economic impact evaluation of the mining and quarrying sector in the top five carbon‐emitting nations. By applying the hypothetical extraction method, we investigate both the demand and the supply side of the carbon dioxide emission of each industry in China, the United States, India, Russia, and Japan. The results show that inter‐sector linkages are similar between countries. We identify the priority sectors associated with the mining industry, which deserve more consideration in formulating mitigation policies to reduce the carbon footprint. Among these sectors, electricity, gas, steam and air conditioning supply, and manufacture of coke and refined petroleum products hold special responsibility toward the environment.

Gauging Effects of Hypothetical Extraction Method on Transport Linkages in India

Transport infrastructure is imperative for sectoral growth and economic progress. To gauge the impact of reduced contributions by the Railway and Other Transport sectors on other sectors in India, we use the Hypothetical Extraction (HE) based methodology to analyse the impact of such changes on outcomes of different sectors. Five Input-Output Transaction Tables (IOTT), between the years 1993-2014, are aggregated into 22 sectors. Methodologically, sector pair-wise correlations and sectoral groupings are identified in the transport sector. Induced elimination of Railway and Other Transport sector contributions are used to capture sectoral dependencies. Changing patterns in ‘Key’ sector compositions are further identified. Manufacturing, Mining and Quarrying, Construction, Storage and Warehousing and Electricity appear significantly correlated with Transport. Extraction causes sizeable output loss (around 60 perent) for the Manufacturing sector. ‘Self-extraction’ results in declining loss of output for transport sectors, whereas, Electricity and Storage and Warehousing remain ‘Key sectors’ in the post-extraction economy. An important implication emerging from our analysis is that dynamic relational dependencies across other sectors must be considered for future investments in transport infrastructure.

Inter‐sectoral economic linkages in the Australian mining industry: Analysis using partial hypothetical extraction method

AbstractThe mining industry is not only one of Australia's main economic sectors but also one that the country is considered to have managed well. However, little is known about the industry's potential to contribute to the structural change of Australia's economy. We use the national input–output (IO) tables and apply the partial hypothetical extraction method (P‐HEM) within both the Leontief and Gosh IO frameworks to examine the inter‐sectoral linkages of the Australian mining and quarrying sector. Ee find that this sector demonstrates strong backward linkages (BL), but forward linkages (FL) appear to be weak, and they mainly involve non‐metallic materials. The mining and quarrying sector appears to generate linkages with the business services sector and the construction sector, which can potentially contribute to diversifying the economy. Such linkages may be realised via skilling and reallocating skilled labour and technical supplier capacity as well as via developing physical infrastructure that supports existing and new economic sectors. We find that the identified linkage pathways via the construction sector are tied to energy‐intensive but coal‐dependent sectors. Thus, these pathways are vulnerable because of the climate‐related need to move away from combusting coal and invest in cleaner sources of energy.

Ecological utility analysis of the Australian economic sectors based on embodied energy

The uncontrolled socioeconomic development through substantial consumptions and transfers of materials, energy and other natural resources plays a significant effect on the deterioration of the ecological environment. How to quantify these consumptions and transfers has been a difficult issue and attracted many researchers from various disciplines. The purpose of this research aims to reveal the ecological utility of the Australian economic sectors based on embodied energy. The research commences with the development of embodied energy input–output tables of Australia and then adopts the ecological network analysis (ENA) principles combined with the hypothetical extraction method (HEM) to investigate the interaction of sectoral embodied energy the economic system. A utility value matrix is used to determine the ecological relationship from one sector to another, the degree of mutualism of the entire economic system and its synergism, and the importance of a sector in the economic system. The ecological relationships of all pairs of economic sectors revealed from this research can be used to describe the Australian economic system from the perspective of embodied energy. The long-term development interests of various industries in Australia can be balanced and adjusted according to the positive and negative ecological relationship. The influence of the specific structure on the industry is measured by the connectivity and diversity of the energy network.

Identifying critical sectors in the restructuring of low-carbon global supply chains

Based on recent events in the world, global supply chain (GSC) restructuring has become an important issue for industries worldwide. To develop an effective CO2 reduction strategy through GSC restructuring, this study investigated the impacts of GSC restructuring in a specific sector on the industrial global carbon footprint. Through this process, this study developed a scenario-based hypothetical extraction method (HEM) into a practical and flexible framework with a focus on the reasonable scale of relevant GSC restructuring. As a case study, this study applied the practical HEM framework to a global multi-regional input output database in 2014 and estimated the impacts of restructuring major automotive GSCs on CO2 emissions. Based on the results, this study identified the Chinese electrical equipment sector and the Russian basic metals sector, both included in the automotive GSCs as key sectors (i.e., key suppliers) for low-carbon GSC restructuring. These sectors exhibited the largest CO2 reduction effects when targeted for relevant GSC restructuring. Additionally, this study highlighted the practical potential for CO2 reduction based on a reasonable scale of relevant GSC restructuring. Finally, based on the findings, this study discusses how policymakers should formulate trade policies that prioritize intermediate products to promote GSC restructuring toward low-carbon practices and proposes an effective approach to utilize the results as benchmarks for setting CO2 reduction targets or incentives in the context of GSC restructuring.

Inter-industrial embodied carbon transfers in a developed subnational region: a case study of Guangdong Province, China

The close production and consumption relationship between industries leads to the embodied CO2 transfer among industrial sectors along with the exchange of products. Thus, grasping the situation of embodied carbon transfers from the demand side is of great significance for better reducing a country or region’s CO2 emissions. This study investigates the embodied carbon transfers in Guangdong Province from 2002 to 2017 from the industrial dimension by applying a hypothetical extraction method. An enhanced generalized RAS method was utilized to predict the intersectoral carbon transfers in 2025 and 2030. The results show that, from 2002 to 2017, the average proportion of carbon emission output of 72.11% made the production and supply of electricity and heat sector the main CO2 emission transfer exporter, while the other service and construction sectors were the leading importers. Moreover, the embodied carbon transfers between these three sectors are the main carbon transfer paths. By 2025, the other service sectors will become the largest embodied carbon importers, surpassing the construction sector. Therefore, it is necessary to control the consumption demand of other service and construction sectors on the demand side to reduce carbon emissions driven by demand.

CO2 emissions embodied in bilateral trade in China: An input-output analysis

The effects of export goods on CO2 emissions in China were calculated using input-output analysis via the hypothetical extraction method (HEM). The seven largest export partners of China were taken into account for the analysis: the US, Japan, South Korea, Germany, India, the UK and the Netherlands. First, using input-output analysis, the effects of CO2 emissions were allocated between the non-tradable goods, total export goods, exported final goods and exported intermediate goods sectors. Then, using a weighted multipliers approach, efficiency in CO2 emissions was allocated among the sectors. It was found that although non-tradable goods caused the highest CO2 emissions, export goods, especially intermediate goods showed the largest growth in emissions. In addition, export goods contributed more to emissions efficiency. Second, the HEM was implemented to explore which countries had significant effects on both emissions and emissions efficiency. The US was the largest source of CO2 emissions in China in terms of final goods. Nevertheless, the US also increased the role of exported intermediate goods on emissions. It was also an important country in stimulating efficiency in CO2 emissions. Hence, China does not have a chance to decrease its export performance against the countries such as the US, as their demand is the source of efficiency in CO2 emissions. However, it can focus on exported intermediate goods to mitigate emissions, and take the US into account for new policies.

Estimating the Importance of Civil Construction for the Brazilian Economy Through Hypothetical Extraction of the Input-Output Matrix

This paper aims to undertake a systemic analysis of civil construction to verify whether public investments made from 2007 onwards were able to increase the sector's productive linkages in the Brazilian economy. For this, the hypothetical extraction method of the input-output matrix and the official matrices of the country from 2005 and 2015 are used. The results show that the importance of the productive structure of the construction sector - total extraction - exceeds 7.42% of GDP in 2005 to 10.06% in 2015. This fact reveals that the civil construction sector in 2005 was the seventh most important moving to the fourth in 2015 in a total of twelve sectors considered. Another important finding lies in the fact that despite the construction sector presenting an increase in the complexity of its productive structure, it showed strong backward linkage, but low forward linkage, in both analyzed periods. Through these results, it is possible to conclude that the tax exemption of some inputs, reduction of real estate interest, expansion of credit for housing through public housing and infrastructure policies may have been essential for the increase in the complexity of the sector's productive chains between the years' from 2005 and 2015. Such findings are useful for the scientific literature that investigates the sector by bringing evidence to Brazil and to policymakers given that possibly the construction sector can be used as a strategy to promote and stimulate economic activity in times of crisis.

Inter-Sectoral Economic Linkages in the Mining Industries of Botswana and Tanzania: Analysis Using Partial Hypothetical Extraction Method

Fiscal and local content policies aimed at promoting linkages between mining and other economic sectors have been informed by theories built on historical observations dating back to the 1950s. This paper contends that there is a need to rethink theories about mining-based economic linkages and the prospects for structural change based on an improved understanding of existing and potential inter-sectoral linkages. Using the input–output tables for Tanzania and Botswana, we apply the Partial Hypothetical Extraction Method within the Leontief and Gosh input–output frameworks to examine the linkages between the mining and quarrying sector and other economic sectors within these two economies. We find that, for Botswana, possible linkage pathways lie in scaling-up coal, soda ash and salt mining and investing in glass, polymer, and chemicals manufacturing. For Tanzania, opportunities for linkage pathways lie with the mining and manufacturing of non-metallic and construction materials as well as metallic minerals and natural gas. For both countries, the prospects for transforming their economies away from a heavy reliance on mineral extraction hinges on leveraging extractives for infrastructure, innovative technology, and technical skills, as well as capturing business opportunities, knowledge, and financial returns to invest in more diversified economic activities.

Applying the hypothetical extraction method to investigate the interindustry greenhouse gas emissions linkages in the Greek economy

ABSTRACT This paper examines the interindustry greenhouse gas (GHG) emissions linkages within the Greek economy for the year 2018, using a symmetric I-O table and air emissions accounts data. The GHG linkages among industries are analyzed both from a demand and supply perspective by applying an environmental modification of the Dietzenbacher and van der Linden’s Hypothetical Extraction Method (1997), as introduced and discussed in Tsirimokos (2022). The findings reveal that: (i) the ‘Electricity, gas, steam, and air conditioning supply’ industry exhibits the highest total absolute backward and forward linkages; (ii) the ‘Real estate activities’ industry demonstrates the highest relative backward and forward linkages; (iii) industries with low (high) relative linkages generally, exhibit high (low) internal linkages; and (iv) the ‘Electricity, gas, steam, and air conditioning supply’ and ‘Transportation and storage’ industries are the primary GHG emissions contributors within the Greek economy. These empirical results can inform the development of effective environmental policies, supporting Greece in achieving its climate action plan objectives.

An extension of the hypothetical extraction method: endogenous consumption and the armington treatment of imports

The hypothetical extraction method (HEM) is the tool of choice for identifying underlying economic interdependencies. It provides critical information to policymakers regarding the strategic role of different sectors. However, the standard implementation of the HEM does not include the impact that falls on the price structure as a result of the substitution between domestic and imported products that takes place after the extraction of a sector or industry, in this case. We propose to overcome this limitation by extending the HEM using an Armington-Leontief model with endogenous consumption. Unlike the perfect substitution assumption typical of the standard HEM, the Armington assumption with endogenous consumption implies that the shift from domestic inputs to imports affects the cost functions. Therefore, both quantities and prices become endogenous in the ‘post-extraction' equilibrium. We also argue that HEM indicators should be expanded beyond the typical output-related indicators, i.e. value-added, employment, or pollutant levels, so that summary indices of the type more commonly used in economics, such as welfare indicators, are used. We implement this novel approach using the latest input–output data for Spain in 2016.

Decomposition Analysis of the Carbon Footprint of Primary Metals.

This study investigates how different technological and socioeconomic drivers have impacted the carbon footprint of primary metals. It analyzes the historical evidence from 1995 to 2018 using new metal production, energy use, and greenhouse gas (GHG) emission extensions made for the multiregional input-output model EXIOBASE. A combination of established input-output methods (index decomposition analysis, hypothetical extraction method, and footprint analysis) is used to dissect the drivers of the change in the upstream emissions occurring due to the production of metals demanded by other (downstream) economic activities. On a global level, GHG emissions from metal production have increased at a similar pace as the GDP but have decreased in high-income countries in the most recent 6 year period studied. This absolute decoupling in industrialized countries is mainly driven by reduced metal consumption intensity and improved energy efficiency. However, in emerging economies increasing metal consumption intensity and affluency have driven up emissions, more than offsetting any reductions due to improved energy efficiency.

Development of a Factorial Hypothetical Extraction Model for Analyzing Socioeconomic Environmental Effects of Carbon Emission Intensity Reduction

China has pledged to peak its carbon emissions before 2030 and achieve the net-zero ambition in the 2060s. Reducing the national carbon emission intensity can help achieve these ambitions effectively. To explore the tradeoff between emission reduction and system health, a factorial hypothetical extraction method has been proposed. It was applied to identify key carbon emission sectors, and further help formulate countermeasures on reducing the national emission intensity. A seven-factor factorial analysis was developed to evaluate the effects of factors (i.e., 7 countermeasures) and the combinations (i.e., 128 scenarios) on responsive variables (i.e., system health). Main effects and interactions for response variables were also detected between these factors. Results show that the most effective combination, i.e., simultaneously enlarging the production scales of agriculture and other services, and lessening those of metallurgy sectors, can help reduce emission intensity by −19.2%. Lessening the production scales of electricity-generation/metallurgy, and enlarging those of wholesale and retailing sectors, can help reduce national emission intensity, while these factors negatively impacted system sustainability and robustness. The mitigation effects of these countermeasures will be weakened if these countermeasures are implemented simultaneously. Enlarging the production scales of leasing and commercial services and other services sectors can help achieve a win-win outcome.

Identification of key carbon emitters from the perspective of network analysis

Climate risks are sharpened and adaptation actions are urgent. However, the economic system is a whole composed of numerous interrelated and interactive economic elements and poses a challenge for carbon mitigation. To explore the carbon emission effects of producers in complex economic systems and formulate targeted carbon mitigation policies, this study constructs three indicators to assess the carbon emission effect embodied in the economy through network analysis. More specifically, the total emission effect of each producer is measured by the push-type effect and pull-type effect and tested by comparing with the hypothetical extraction method. Taking China as an example, the results show that the effect of different sectors on carbon emissions varies greatly. The production and distribution of electric power and heat power is a key sector dominated by the push-type effect. This is, its carbon emissions are mainly triggered by the demands of its downstream sectors. The total emission effects of Construction and Smelting and processing of metals are also strong, but their pull-type effect is dominant. According to the dominant effect in the total emission effect, we can draft targeted emission reduction strategies.