Statistical Approach to the Problem of Negatives in Input-Output Analysis

摘要

The purest and theoretically superior method for the construction of input-output coefficients is given by the commodity technology model. The commodity technology-based input-output coefficients have one shortcoming, however. Some of them turn out negative, which is economically not meaningful. The paper presents a methodology to deal with the problem of negatives in input-output analysis. It allows a statistical assessment of the problem. The paper reviews the commodity technology model and shows how it may generate negative input-output coefficients. It presents a diagnosis of the negatives for United Kingdom data in order to provide some intuition, and 4 applies a reestimation procedure to eliminate the negatives. Results are presented and discussed, confirming the established practice of dealing with negatives by simply setting them zero, but must, nonetheless, reject the model that underlies the construction of coefficients.