AnM.4: Input-Output Analysis

AnM.4: Input-Output Analysis

Relevance:
Input-output (I/O) analysis enables to assess the quantitative effect of an agent's activity on the economy in a simple way. In FenRIAM this macro-economic method is used to capture the direct and indirect effect of a (new) facility on the economy of its host region or country.

Description:
The Input-Output analysis models the inter-industry connections within an economy. Its macro-economic view permits to make scenarios about the effect of a change in aggregate demand for goods and services in a given region. Technically, the economy is represented by a matrix where the rows and columns are sectors. The values in the matrix cells represent the size of the exchange between one sector and another, the output of a sector being an input for another sector. This tool can be used to simulate the effect of the RI on the economic sectors during the construction, operation and decommissioning phases.
Although practical, this tool should be taken with care, since strong underlying assumptions affect the reliability of the results. Coefficients are assumed as time-invariant and do not account for the evolution of industry interactions over time. It is also assumed that the aggregate demand is always satisfied (no restrictions on the supply-side).
For an easy application of I/O analysis in FenRIAM it is suggested to use national I/O tables, which are available from Eurostat and the OECD. The national I/O tables reflect the exchange between the economic actors in a given nation. They may be biased from the non-inclusion of regional characteristics and international trade. In the future the use of regional I/O tables - currently not available yet - may be considered, if most purchases occur with regional suppliers.

Yet, the aim of applying I/O analysis in FenRIAM is to highlight the order of magnitude of the achieved economic effect and not to quantify the economic effect in a scientifically exact manner!

Procedure:

  • Collect the national I/O tables for the host country (Eurostat/OECD). If recommended and feasible, consider the use of regional I/O tables.
  • Collect the requested financial data, using the template for Jobs.1.1.
  • Perform the calculations to obtain the Leontieff coefficients.
  • Estimate the effect of the RI activity on the various sectors of the economy for the different project phases, using the Excel template on IOTemplate RR-MP IO explained

Data sources:

Definitions:
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References:
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