The OECD InputOutput database and SupplyUse Tables in

The OECD Input-Output database and Supply-Use Tables in SNA 1993 Rev 1 OECD-NBS Workshop on National Accounts September 25 -28, 2007, Beijing Contact: nadim. ahmad@oecd. org

OECD Input-Output Database • • • History 2006 Edition Creating Symmetric Tables Data Sources Why Industry by Industry? Dissemination

History • 1995 Edition – – – 10 countries SNA 68 ISIC Rev 2 36 sectors Up to 1990 • 2002 Edition - 20 Countries (2 non member) SNA 93 ISIC Rev 3 42 Sectors Up to 1998

2006 Edition • 2006 Edition – 37 countries (9 non members) – SNA 93 – ISIC Rev 3 – 48 sectors – Up to 2003

2006 Edition - Country Coverage • Country coverage corresponds to over 90% of global GDP (80% in 2002 Ed and 70% in 1995). Population coverage (66% versus 40 and 10 respectively)

2006 Edition - Tables

2006 Edition – Industry Coverage

2006 Edition - Value-Added & Final Demand • VA • FD

Creating Symmetric Tables • Requests for Industry by Industry (Ix. I) (preferably 48 x 48 at BP) – Or: Supply-Use, or Commodity by Commodity (Cx. C) and Supply, or Cx. C • Conversion Steps: – S-U at purchasers’ prices – Convert use table to BP. – S-U at BP (total economy only) – Convert Use table into separate domestic and import use tables – Convert S and Domestic Use tables into Ix. I tables using ‘Fixed Product Sales Structures’ assumption. – Aggregate to 48 x 48 – Cx. C and Supply – (reverse engineer the Use table and follow steps above) – Cx. C - aggregate only (Japan, Korea. Chinese Taipei and Indonesia) – Other: e. g. FISIM, c. i. f/f. o. b

Transforming Supply Use into Input -Output Tables • SU tables are Cx. I not Cx. C or Ix. I • So for Cx. C, it’s necessary to convert output by industries into output by products • And for Ix. I, it’s necessary to convert demand by products into demand by industries. • If each industry produced only one product this would be trivial. • Unfortunately this is rarely the case.

(Cx. C) Input-Output Tables • Two assumptions prevail in constructing Cx. C tables, which can be used in isolation or often in combination: – Product technology - Each product is produced in its own specific way, irrespective of the industry where it is produced – Industry technology - Each industry has its own specific way of production, irrespective of its product mix.

Product technology This illustrates one of the biggest practical problems with the implementation of the product technology assumption – although it could of course be used to identify problems with the original SU balance Agriculture produces 20 units of manufacturing – we assume the same structure as in manufacturing, hence (minus) 80/200*20=-8 etc

Industry technology Note there are no negatives. A strength of the industry technology assumption. Agriculture produces 20 units of manufacturing – we assume the same structure as in agriculture, hence zero for agricultural products and (minus) 60/150*20=-8 etc

(Cx. C) Input-Output Tables • A third assumption is the hybrid technology which uses parts of the industry and product technology assumptions.

(Cx. C) Input-Output Tables • These transformations can be described algebraically as IO IC (C by C) Product Tech Industry Tech U(Make)-1 diag(q) U(diag(g))-1 Make' IO VA (VA by C) VA(Make)-1 diag(q) VA(diag(g))-1 Make' • Where U is the original SU IC Cx. I Table; VA is the VA vector (VA by I); q, the vector of domestically produced products and g, the vector of the output of industries

(Ix. I) Input-Output Tables • Like Cx. C two assumptions prevail in constructing Ix. I tables • Fixed Product Sales Structures – Each product has its own specific sales structure, irrespective of the industry where it’s produced. • Fixed Industry Sales Structures - Each industry has its own specific sales structure, irrespective of its product mix.

Fixed Product Sales Structures Agriculture produces 20 units of manufacturing – we assume that it produces 20/220 per cent of all products and that each consumer purchases this share of manufactured products from the agriculture industry, so, of the 60 purchased by agriculture 60*20/220 =5. 5 is from the agriculture industry.

Fixed Industry Sales Structures Agriculture produces 20 units of manufacturing – we assume that the shares are split equally between consumers of agricultural products, so 80/130*20=12. 3 goes to manufacturing, 50/130*20=7. 7 to final demand etc. This can also result in negatives.

(Ix. I) Input-Output Tables • These transformations can be described algebraically as FPSS FISS IO IC (I by I) Make'(diag(q)-1 U diag(g)(Make)-1 U IO FD (FD by I) Make'(diag(q)-1 U diag(g)(Make)-1 fd • Where U is the original SU IC Cx. I Table; fd is the final demand vector; q, the vector of domestically produced products and g, the vector of the output of industries

i. So why do the OECD choose Industry by Industry? Linkages to other OECD industrial database: – STAN, ANBERD, SDBS, IEA (emissions) etc ii. Policy focus – – Structure of businesses, Entrepreneurship etc iii. Statistical Quality – whether Cx. C or Ix. I, assumptions are needed: – – Information sources, typically, business (industry) based. Ix. I using Fixed Product Sales assumption (FPSA) preserves observed VA relationships. Cx. C does not. Equally the Cx. C assumption of heterogeneity in products is intrinsically linked to empirical facts – classification systems are too aggregate and businesses rarely have the same cost structures. iv. Simplicity – – Ix. I tables easily produced using FPSS (no negatives)

Sources

Dissemination • http: //www. oecd. org/std/io-tables/data – 2002 Edition available now (on request) from – 1995 Edition available on-line – 2006 Edition release imminent • See also Ahmad & Yamano, 2006 for more information.

Special Issues SNA 93 – Rev 1 implications • Although the SU tables are not in themselves subject to change in the SNA revision, a number of changes in other areas will have an effect.

Special Issues SNA 93 – Rev 1 implications Ancillary Units • The 1993 SNA specifies that units conducting only a specified list of activities designated as “ancillary” should not be treated as separate units but their costs should be consolidated with the units they serve. This means that when accounts for a region are compiled, head offices and other ancillary units located there are excluded if the units they serve are located outside the region. This results in a difference between ancillary units located abroad, which are treated as separate units, and those that are resident but distant from their related enterprises.

Special Issues SNA 93 – Rev 1 implications Ancillary Units • The AEG recommended that ancillary units can be establishments in their own right if they satisfy the normal requirements of an establishment – allocated to the main service classification provided by the unit.

Special Issues SNA 93 – Rev 1 implications Goods sent abroad for processing • The 1993 SNA and Bo. P treat goods sent abroad for processing differently. The SNA records gross flows only in the case of substantial processing (reclassification of the good at three-digit CPC). The Balance of Payments Manual, as a practical matter, suggests a convention that all processing be assumed substantial and therefore gross flows are recorded. • Further, the position is that when goods are sent abroad for processing, no change in ownership takes place and thus there are no actual transactions. • Does the advent of globalization and the increasing amount of goods processed abroad suggest a change in practice would be appropriate?

Special Issues SNA 93 – Rev 1 implications Goods sent abroad for processing • The AEG has decided to resolve this issue by never imputing a change of ownership, and, so, not recording gross flows. Further the AEG also recommended that the same approach should be used in dealing with goods processed domestically even if between related enterprises,

Special Issues SNA 93 – Rev 1 implications Merchanting • Merchanting is defined in Bo. P as the purchase of a good by a resident of country A from a resident of country B which is then sold to a resident of country C, without the good entering the merchant’s economy. The SNA does not cover this topic. • There is a need for a clear and precise definition of merchanting; arising out of this there needs to be clear guidance on whether merchanting (when redefined) should be recorded on a net or a gross basis and under goods or services.

Special Issues SNA 93 – Rev 1 implications Merchanting • The AEG has recommended that, the acquisition of goods by the merchanter should be recorded as an import, identified as a negative export, of the merchanter. The resale of these goods is then shown as an export with the difference in values (exclusive of holding gains/losses) allocated to wholesale/retail exports.