Page 26 - Special Topic Session (STS) - Volume 2

STS452 Joerg B.
1. Gross fixed capital formation (Million Saudi Riyals)
2. Capital stock (Million Saudi Riyals)
3. Employment (1.000 persons)
4. Energy use (1.000 tons of oil equivalent)
5. Air emissions (1.000 tons)
6. Global warming, acid deposition, tropospheric ozone formation (1.000
tons)
7. Water use (Million cubic meters)
The traditional input-output indicators comprise direct input coefficients,
cumulative input coefficients (Leontief inverse) and multipliers for output,
income, employment and capital. Inter-industrial linkage analysis studies the
interdependencies between industries by compiling forward and backward
linkages of industries
Direct input coefficients reflect the direct input requirements of products
for a specific industry, while cumulative input coefficients represent both direct
and indirect input requirements of products at all stages of production.
Cumulative input coefficients are often used to identify an industry’s backward
linkages. The column totals of the direct input coefficients and the Leontief
Inverse input coefficients reflect the intensity of backward linkages. The row
totals of the direct output coefficients and the Ghosh Inverse output
coefficients show the intensity of forward linkages.
Economic diversity has often been promoted as a means to achieve
economic stability and growth. Some empirical studies have related higher
levels of diversity to both economic stability and overall levels of economic
activity. Diversity measures used in these studies have tended to be narrow,
usually emphasizing the distribution of employment across industries. Such
measures are unsatisfactory because they do not capture inter-industrial
linkages.
An alternative approach to measuring diversity, based on the technical
coefficients matrix of an input-output model, was developed by Wagner and
Deller (1998), who showed that higher levels of diversification within the
theoretical construct of input-output are associated with higher levels of
stability. Their Primary Diversity Measure (PDM) emphasizes inter-industry
relations and provides the best way to evaluate economic diversification. It is
derived by multiplying values assigned to three variables:
 Relative size of the economy—number of indigenous industries
 Density of the economy—number of non-zero elements in the Leontief
matrix, indicating the diversity of transactions
 Condition number of the Leontief matrix—indicator of inter-industry
linkages.

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