Inter-industry Linkages Research Articles

Inter-industry linkages, air pollution and human health in the European Union towards 2030

Inter-industry linkages, air pollution and human health in the European Union towards 2030

FDI technology spillovers in Chinese supplier-customer networks

This paper examines foreign direct investment (FDI) technology spillovers between firms in a supply chain and analyzes the mechanism behind their occurrence. Results using firm-level transaction data from China between 2009 and 2020 show that, unlike inter-industry linkage effects, in the Chinese market, FDI technology spillovers can directly occur through connections between suppliers and customers, demonstrating the existence of inter-firm technology spillover effects of FDI. Further analysis reveals that FDI technology spillovers between firms are generated through channels of knowledge transfer and optimized supply chain configurations, predominantly observed in state-owned firms, small and medium-sized firms, the manufacturing sector, and high-tech industries. Upon analyzing the detailed breakdown of FDI sources, it was found that FDI from developed countries exhibits inter-firm technology spillover effects. In contrast, FDI from Hong Kong, Macao, and Taiwan regions, developing countries, and tax havens such as the British Virgin Islands and the Cayman Islands show insignificant effects on inter-firm technology spillovers. These conclusions offer policy insights for China and other developing countries to better utilize FDI to promote the development of local firms in the context of the sustained global supply chain restructuring.

The impact of industrial intelligence on green development: research based on intra- and inter-industry linkage effect

The impact of industrial intelligence on green development: research based on intra- and inter-industry linkage effect

한국 사업서비스의 경제적 파급효과와 변동요인 분해 분석

Purpose - This paper aims to investigate the economic effects and structural changes of the business service sector in the Korean economy.
 Design/Methodology/Approach - We suggest the spillover effects of the business sectors of not only the Korean economy but also of OECD countries using an input-output model. We suggested production-induced spillovers, value-added spillovers, and labor-induced spillover effects in the business service sector to draw policy implications by comparing Korea and OECD countries.
 Findings - First, by the exogenous specification method for the business services sector, the effects of production inducement increased from 2015 to 2018, but the value-added inducing effects decreased since 2016. The labor-induced effects of the business service sector decreased. Second, the domestic price effects are larger than the import price effects when price rises by 10% in the business service sector. Third, as a result of the inter-industry linkage effects, the business services sector has a characteristic of comparatively larger forward linkage effects than backward linkage effects. Fourth, the growth of the business services sector was found to have driven the domestic final goods demand, final goods import substitution, exports, and technical changes. It was found that the domestic intermediate inputs of business services were replaced by imports.
 Research Implications - As the linkage between the service and manufacturing industries has been deepening, policy efforts are needed to expand R&D and introduce new technologies to strengthen the business services sector competitiveness.

Foreign Direct Investment and Technology Spillovers: An Analysis of Indian Manufacturing

Using a rich firm-level panel dataset of Indian manufacturing over 2010–2018, this study aims to identify the spillover effects associated with foreign direct investment (FDI). To this end, we distinguish spillover effects into horizontal (Intra-industry linkage) and vertical (backward or downstream and forward or upstream Inter-industry linkages) FDI channels. We employ various semi-parametric methods to tackle the endogeneity issues in productivity estimation. We find that backward spillover from the downstream multinational enterprises is the only source of total factor productivity gains. However, the magnitude of negative forward–vertical linkage is larger than the positive backward–vertical effect. The analysis also broadly compares technology spillovers for domestic and all firms in the sector. Finally, we investigate productivity spillover across industries based on their technology intensity. Our findings suggest that industry heterogeneity is a key driver of FDI spillover. JEL Codes: F23, D24, O33, L1

Analysis of Changes in Inter-Industrial Linkages and Economic Effects of Coal Industry in China Using Input–Output Model

This research quantifies the inter-industrial linkages (forward linkages and backward linkages) and economic effects (production-inducing effects and supply-shortage effects) and their changes through the input–output analysis of China’s coal industry in different time periods (2005, 2010, 2015, 2020). The results show that, from an overall point of view, the linkages (backward and forward) between the coal industry and other industries, as well as the economic effects of the coal sector, have tended to weaken in recent years, and both of these indicators for the coal sector in 2020 are weaker than the levels in 2005. However, individual sectors differ from the overall trend: the non-metal mineral products sector has shown an upward trend in recent years in the degree of total demand for coal sector products and the degree of influence by supply shortages in the coal sector, while these two indicators for the construction sector have been on an upward trend since 2005; the electricity, heat production, and supply sector has shown an upward trend in recent years in the degree of influence by supply shortages in the coal sector. Based on the analytical results of this study, some policy insights are provided for China’s low-carbon transition.

Rural-Urban Linkages: Regional Financial Business Services’ Integration into Chilean Agri-Food Value Chains

The spatial structure of urban-related industries and agri-food value chains is important for promoting sustainable linkages. Using an interregional input-output framework, this study explores the geography of inter-industry linkages between financial business services and the Chilean agri-food related industries from a subnational perspective. This framework allows adding evidence on rural-related economic activities and financial business services, covering Chilean internal geography, which has a regional concentration of both the business services supply and the agriculturally engaged regions, potentially blocking territorial competitiveness. Our findings indicate that the relationship between value-added and trade is consistent with the vertical fragmentation of domestic production associated with returns to scale. Consequently, while the value-added financial services are more intense in trade for global value chains, this occurs in regions specialized in agri-food industries and services. Our findings also show that Southern Chilean regions engaged in primary agricultural production have lower levels of financial services directly and indirectly embedded in both domestic and global value chains trade, thus highlighting an uneven geography of vertical integration within the country.

Economic Recovery Strategy of Sectoral Industries Post-COVID-19: Input–Output Model Simulations

The global COVID-19 pandemic has suppressed the economy and people’s welfare, including in Indonesia and Central Java Province, as indicated by the weakening of the national economy by −2.06 percent and locally by −2.65 percent in 2020. Although the economy grew by 3.32 percent in 2021, societal welfare remains lower than in 2019, marked by an increase in unemployment and poverty throughout 2019–2021. Furthermore, the threat of COVID-19 including new variants of the virus continues to weigh on the economy, in 2022 and beyond. This study considered an industrial approach to production, based on inter-industrial linkages and policy simulations with input–output analysis. The objectives of this research are to analyze the impact of the COVID-19 pandemic on the economy of Central Java and to formulate an effective economic recovery policy for industry. The results show that the industries affected by the COVID-19 pandemic in Central Java can promote recovery of overall income in economic industry better than the leading industry and the industries with the highest output multipliers, expressed as a proportional increase in final demand for each industry. Meanwhile, the economic recovery strategy of increasing final demand in industries with high output multipliers results in a faster increase in economic output compared with increasing final demand in the affected industries or leading industries.

Structural change and industrial linkages: a perspective on China’s growth pattern, 1995-2009

ABSTRACT China has presented one of the most noticeable growth experiences in economic history. High growth rates in the post-1978 reform period have been marked by deep structural changes in the Chinese economy. This paper aims to discuss China’s long-term economic growth from a Kaldorian-Structuralist framework that emphasises the importance of a large, diversified and integrated industrial base as a central engine of economic growth that may prevent balance-of-payments constraints. This study applies input-output indicators to reveal key sectoral transformations of the Chinese productive structure and changes in interindustry linkages during the 1990s and 2000s. Results provide evidence that: (i) the Chinese sustained growth pattern has relied on a diversified and increasingly integrated domestic industrial production; and (ii) most sectors have been able to generate through exports enough foreign exchange to pay for import needs.

Impact of carbon tariffs on price competitiveness in the era of global value chain

More and more countries are joining the discussion on climate mitigation through a range of emissions reduction policies such as carbon pricing. However, differences in carbon prices and policy intensity have led countries to worry about issues such as unilateral competitiveness loss and carbon leakage, and carbon border adjustment mechanisms have emerged. This paper analyzes the impact of carbon border adjustment on price competitiveness with the carbon tariff system to be implemented by the EU and the US. First, we obtain the cost pass-through rates of 14 regions-3 sectors through the panel regression of error correction model, and corrects the input–output price model for incomplete cost transmission. Combined with global inter-industry linkages, the impact of carbon tariff levy on the real effective exchange rate, the main indicator of price competitiveness of each region and industry, is examined for the EU CBAM and the US Clean Competition Act. On this basis, we use the effective rate of protection which is adjusted with global value chain, to analyze the positive effect of carbon tariff policy on domestic producers. Finally, the welfare effects of residential households are estimated, after quantity adjustment using the real effective exchange rate. The results show that when only direct carbon tariffs are analyzed, the impact of the US Clean Competition Act is greater than that of the EU CBAM for Australia and Canada, and for Japan and other regions, the sanctioning effect of the EU CBAM is more significant. When considering the impact of cumulative tariffs in the upstream, the output prices of countries further increase, and the cumulative carbon tariffs of the US under the two scenarios are as high as 0.61 % and 0.81 %. According to the results of the real effective exchange rate, the price competitiveness of the US and Russia decreases. The effective rate of carbon tariff protection is negative in all countries except for the implementers of carbon tariffs - the US and the EU, which means that the producers lose value added due to carbon tariffs. Finally, the welfare effects analysis shows that the two largest causes of welfare losses are the increase in domestic prices and the prices of imported goods from the US.

Economic Connectiveness and Pro-Poor Growth in Sub-Saharan Africa: The Role of Agriculture

In Sub-Saharan Africa, economic growth is essential for poverty reduction, and pro-poor growth is the renewed focus of today’s political debate. The present paper adds to the literature on the growth–inequality relationship. It provides an in-depth analysis of the potential role of agriculture in promoting pro-poor growth in rural and urban areas compared with that of other activities. This aspect still lacks rigorous empirical support. Using the Nexus project SAMs by the International Food Policy Research Institute, this study identifies the level of ‘keyness’ of 36 activities (12 are agricultural) in nine Eastern, Western, and Central African countries using the inter-industry linkages analysis. Afterwards, it investigates the income distribution multipliers effects of activities growth across households classified in quantiles in rural and urban areas. Therefore, the paper adds to the literature, mainly focused on rural poverty and information on the growth effect on urban poverty, which is important in the context of rapid urbanization and the growing number of poor people in African cities. Apart from country-specific factors, the results confirm the strong integration of agriculture with the economy. The growth of key agricultural activities presents the most pronounced multiplicative effect on the income of rural households in the lowest quantiles. Poor urban households also benefit from their growth, but not to the same extent as rural households with an increase in the rural–urban income gap.

Economic Sectors Impact Household Income in Vietnam: A Structural Path Analysis

Despite the remarkable achievements in poverty reduction, income inequality in Vietnam still tends to increase, consequently having negative impacts on the sustainable growth of the country. The goals of this research are to identify and measure the impact of propagation channels of economic sectors on the income of the household groups, which is of great importance to poverty reduction efforts in Vietnam. The study aims to unravel the critical supply chain paths that drive changes in household income. To this end, the structural path analysis methodology is used based on the 2016 Vietnam Social Accounting Matrix model, which has not been extensively studied in Vietnam. Compared with previous studies, this research was conducted at the national level instead of the regional level and detailed the factors involved in income distribution such as economic sectors, labour, and household groups. The analysis finds 513 higher-order paths of 25 sectors that lead to an income increase for the household groups. When economic sectors expand under policy changes, household income improvements are mainly affected by labour skill, capital, and the magnitude of inter-industry linkages. It is noteworthy that high-skilled labour has a significant impact on the income of urban households, while the income of rural households is considerably affected by the capital. The analysis also demonstrates 32 selected paths having the greatest influence on household income. The importance of forestry, wood and wood products, fisheries, coal, crude oil and natural gas, footwear, distribution of electricity, gas, water, and utilities, and retail and wholesale for poverty alleviation is underlined for their distributional impact. Based on the research findings, relevant policy implications are also recommended.

Tertiary industries’ value-added as a linkage’s engine: An interstate input-output application for Brazilian regions

Tertiary industries’ value-added have been considered an essential input for any production chain, as they have the potential to connect regions and services activities across networks. Moreover, spatially, services move more straightforward than the manufacturing of resource-based industries. This study estimates the interregional and inter-industry linkages regarding a set of services-related economic sectors and accounts for the trade in value-added (TiVA) measures, considering intraregional and interregional trade based on an interstate input-output application for Brazil. The main findings reveal that the poorest Brazilian states tend to lose linkages opportunities in services activities, remaining hostages to supply natural resources to production networks for subnational and foreign demand. On the other hand, the potential for gains from connections in the services’ networks reveals greater spatial dispersion across regional hierarchies, increasing the concentration in large urban agglomerations. In this regard, the paper concludes that the connectivity potential of services at the intraregional level can be an essential starting point to promote innovative systems away from large urban areas in the wealthiest regions inside Brazil, potentially reducing value-added imbalances in internal geography trade flows.

Assessing the “negative effect” and “positive effect” of COVID-19 in China

The COVID-19 pandemic lockdowns led to a sharp drop in socio-economic activities in China in 2020, including reductions in fossil fuel use, industry productions, and traffic volumes. China's economy suffered a serious negative effect from COVID-19. However, there is a “positive effect” on CO2 emissions reduction. Here, for the first time, this paper constructs a new model named “Weighted Multi-regional Hypothetical Extraction Method (WMHEM)” based on a multiregional input-output model. It not only solves the problems of traditional HEM methods such as improper use of assumptions, excessive reliance on industry intermediate input, but also accurately reflects the impact of external shocks on the inter-industry linkages. By using the monthly economic data of each provinces in China during COVID-19 (except Hong Kong，Macao and Taiwan) an the latest Multi-regional input-output tables, the “economic negative effect” and “CO2 emission positive effect” under COVID-19 in China are measured. Results show that COVID-19 lockdown was estimated to have reduced China's CO2 emissions substantially between January and March in 2020, with the largest reductions in February. With the spread of coronavirus controlled, China's CO2 emissions rebounded in April. In addition, key emission reduction sectors and key development encouraged sectors are selected by combining “economic negative effect” and “CO2 emission positive effect” during COVID-19. Therefore, policies recommendations are put forward based on forward and backward linkages respectively which are from two ends of the supply chain to turn pandemic-related CO2 emissions declines into firm climate action.

The role of different transportation modes in China's national economy: An input–output analysis

This study aims to analyse the role of different transportation modes in China's national economy and provide a reference for transportation policy. To this end, we use input–output analysis to evaluate the inter-industry linkage effect, production-inducing effect, supply shortage effect, and employment-inducing effect of five transportation modes (rail, road, water, air, and pipeline) in China from 2007 to 2020. The contributions of these different transportation modes to China's economy and their evolution are quantitatively investigated. The results reveal that the forward linkage effect of road transportation in China is the highest and shows an upward trend. The backward linkage effect of air transportation is the highest but shows a declining trend while the supply shortage effect of pipeline transportation is the highest. COVID-19 had a significant effect on transportation in 2020, with only rail and water maintaining growth in their production-inducing and supply shortage effects on the economy. Meanwhile, road, air, and pipeline transportation all showed varying degrees of decline in their contributions to the economy in 2020. Regarding employment, the employment-inducing effect multipliers of the five transportation modes are all gradually decreasing, showing that the transportation industry is shifting from a labour-intensive orientation toward a technology-intensive one. These results have significance for understanding the economic contribution and evolution of China's transportation industries. They can provide a reference for related policy formulation and for improving transportation management.

Global Value Chains and Local Inter-Industry Linkages: South Africa’s Participation in the Automotive GVC

International trade in the 21st century operates through global value chains (GVCs). There is a growing literature on how the emergence of GVCs has changed the playing field for catch-up industrialization of developing countries. Inter-industry linkages have historically been a central aspect of catch-up industrialization. How such linkages on the country level are affected by the reality that trade is conducted via GVCs is an important research question. This paper synthesizes the theoretical elaborations on inter-industry linkages from the classic development economics literature with secondary empirical data from the East Asian industrialization experience to illustrate the importance of inter-industry linkages for the industrialization process. Using primary data from the South African automotive industry, the paper shows how the dynamics of the automotive GVC have affected domestic inter-industry linkage building in the country. The backward linkages to the domestic component manufacturing industry and to the domestic materials industries from South Africa’s successful integration into the automotive GVC have been disappointing. Both local policy decisions as well as GVC-specific dynamics of follow sourcing and the proliferation of manufacturing technologies and material standards have undermined more substantial backward linkages from exports of automobiles.

What caused the wage changes in tourism-related industries? A demand-side analysis based on an extended input-output model

ABSTRACT Previous studies that have explored the factors influencing wage changes in tourism have generally been confined to supply-side analysis, ignoring the impact of final demand on wage changes through the mechanism of inter-industry linkages. To this end, this study proposes a novel framework that combines input-output analysis with the logarithmic mean Divisia index method to examine wage levels and their changes in tourism-related industries and to clarify how final demand affects wage changes. The empirical results for China reveal significant wage differences among tourism-related industries, with accommodation and catering sectors consistently exhibiting a low-wage profile. In addition, the decomposition results show that the wage changes from 2002 to 2017 were mainly caused by the positive role of the total final demand effect and the negative role of the labour compensation coefficient effect. The final demand structure effect and Leontief structural effect are potential drivers of wage growth.

How financial geo-density mitigates carbon emission intensity: Transmission mechanisms in spatial insights

Controlling carbon emissions and sustaining growth constitute essential concerns in the post-financial crisis era combined with low-carbon sustainable development. However, the impact of financial development on carbon emissions remains controversial and lacks mechanisms investigation covering finance spatial attributes. Relying on China province's data during 2005–2019, this paper contributes to the literature by constructing multi-spatial models to investigate how financial geo-density mitigates carbon emission intensity and explore the spatial transmission mechanisms. The results reveal that there is a balance between financial geo-density and carbon emission intensity. The intrinsic mechanisms include: (1) raising financial geo-density is accompanied by the law of marginal diminishing carbon emission intensity tendency; (2) high financial geo-density accelerates technological innovation and industrial structure upgrading, thereby decreasing carbon emission intensity, but drives industrial-scale expansion, thereby increasing carbon emission intensity; and (3) financial institution competition and inter-industry linkage notably influence the relationship between financial geo-density and carbon emission intensity, promoting the emission reduction effect of financial geo-density in accelerating technological innovation and industrial structure upgrading, and suppressing the emission increase effect of financial geo-density in driving industrial expansion. Our findings provide new insights for developing systemic emission reduction policies for employing financial sectors as catch-all and integrating industries and competition.

Forecasting the economic impact of a vacuum tube high-speed transport system in Poland: An input-output approach

The aim of this paper is to specify the multiplier effects that are induced in the national economy in reference to the construction of Hyperloop lines in Poland using tunnel and trestle technology. In particular, we calculate the added value and employment growth for several industries that will contribute to the construction process. We use an input-output analysis that enables us to take the detailed structure of inter-industry linkages in Poland into account. According to our results, constructing a Hyperloop infrastructure in Poland would have the greatest stimulating impact on several sectors of the Polish economy, including crude oil and natural gas, metal ores, other mining products, building objects and construction work, products from other non-metallic raw materials, finished metal products, land and pipeline transport, and wholesale trade. However, this impact will be affected by the choice of construction technology (tunnel versus trestle). In addition, our calculations relate to particular routes of the potential Hyperloop network. This study contributes to the body of literature on transport infrastructures and public investments as well as Hyperloop technology development. Additionally, it contributes to the econometric methodology by employing an input-output analysis for forecasting the multiplier effects of constructing a Hyperloop system. This study has practical implications for the decision-making process on Hyperloop network development in the future.

Regional environmental-economic assessment of building materials to promote circular economy: comparison of three Swiss cantons

National policies are increasingly being introduced worldwide to establish a sustainable economy that includes principles of a circular economy (CE). The construction industry is particularly in focus with such policies, as it is responsible for almost 50% of the worldwide annual resource consumption and waste production. The Implementation of CE policies remains with local actors, and it is important to better understand the regional context of this transition to support policy- and decision-makers.This paper aims to contribute to the understanding of regional aspects of a CE and identify regional differences in the building materials industry. To identify these different boundary conditions, we formulate hypotheses, which we then test based on various regional case studies. We use an integrated assessment model to assess a regional industry in terms of environmental and economic indicators and combine Material-Flow-Analysis and Life-Cycle-Assessment using an input-output approach.The results suggest that imports and exports, especially in smaller regions, can hinder the implementation of CE. CE policies should therefore be developed for functional areas rather than political boundaries to effectively manage material flows. This is also in the light of environmental impacts. Consideration of inter-industry linkages in the industry shows that policies should be formulated specifically for the construction processes, as they have the greatest leverage for policy-induced changes within the industry. The financial analysis shows that incentives should be created to minimize the extraction of primary raw materials and to avoid the landfilling of demolition and excavation material.