Assessing contribution of a sector to GDP: Input-Output approach
Dmitry Polzikov, IEF RAS, Russia
Main idea: How to assess impact of agriculture and food production on GPD?
Summary: Direct contribution of agriculture and food production to GDP in Russia is estimated at 7-8%. But this estimate does not account for indirect and induced effects of output and investment in the considered sectors. The presented research provides methodology of assessing these effects with the use of National Input-Output tables. Our calculations show that (1) total impact of agriculture and food production on GDP in Russia is much higher than the direct one and (2) it was reducing — from 20.7% in 2000 to 15.5% in 2015 — due to growing efficiency of primary resources use in these sectors and the Russian economy as a whole.
For reference: D. Polzikov. Assessing contribution of a sector to GDP: Input-Output approach. 5 September 2019. Russia, Sochi, 27th Inforum Conference, URL: https:// ecfor.ru/publication/assessing-contribution-of-a-sector-to-gdp/
This presentation happened 5 September 2019, Russia, Sochi at 27th Inforum Conference.
The conference & materials: https://ecfor.ru/27th-inforum-world-conference/
Playlist with the other videos from the conference: https://www.youtube.com/playlist?list=PLJBJFs8UgQgpmWWFzqw87jdwOBQXQmLfu
Inforum’s site: http://www.inforum.umd.edu/
Inforum, or Interindustry Forecasting at the University of Maryland, was founded nearly 50 years ago by Dr. Clopper Almon, now Professor Emeritus of the University. It is dedicated to improving business planning, government policy analysis, and the general understanding of the economic environment.
The host side was the Institute of Economic Forecasting of the Russian Academy of Sciences. IEF RAS specializes in fundamental, applied and exploratory scientific research in the field of analysis and forecasting of the socio-economic prospects of Russia and its regions, and the development of recommendations and proposals with a goal to improve the quality of economic policy in Russia. The site is https://ecfor.ru.
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Notes:
Methodology: some issues
1. Need to normalize multipliers since data on total output in agriculture and food production are only available
For example: 1 ruble of output in food industry in 2000 resulted in 2.4 rubles of total output, including 1.4 rubles of output in food industry →impact of output in food industry on total output is ( 2.4 / 1.4 ) = 1.7
2. Need to avoid double counting when assessing multipliers for agriculture and food production separately
Since agriculture output impact on GDP is estimated with the help of multipliers for agriculture, it is necessary to exclude this sector when assessing multipliers for food production. For this, the matrix of technical coefficients is adjusted (the row of coefficients for agriculture is set to zero). Similarly, food production is excluded when assessing multipliers for agriculture.
Total impact of agricultural and food production on GDP
Main points:
1. Indirect and induced effects of output and investment in agriculture and food production influence significantly.
2. Total impact of agriculture and food production on Russian GDP has decreased from 20,7% in 2000 to 15.5% in 2015.
3. The bulk of this decline is due to reducing indirect and induced effects of output in agriculture (which is a result of growing productivity in the sector and in the economy).
Main points:
1. Trends of changing technical coefficients for agriculture reflect shifts both in its production structure and in technologies.
2. Intermediate consumption of such inputs as feeds, seeds, petroleum products and electricity has decreased significantly.
3. Consumption of financial and insurance services was increasing due to using loans to fund investment projects in the sector.
Summary
1. Input-Output approach can be used not only to assess macroeconomic impact of future projects, but also for various purposes of retrospective analysis.
2. Agriculture and food production remain an important part of the Russian economy.
Direct impact of these sectors on GDP is estimated at 7-8%.
Total impact on GDP is much higher, but decreasing (from 20.7% in 2000 to 15.5% in 2015).
3. The main factors of reducing total impact of agriculture and food production on GDP are:
-technological modernization and growing productivity in these sectors;
-growing productivity and structural shifts in the Russian economy;
-increasing import shares (integration of the Russian economy into the global economy).
