Missing Links in Key Sector Analysis

Abstract

In general terms key sectors analysis aims at identifying the impact that a productive sector has in the economy. Quite a few measures and methodologies of varied complexity have been proposed in the literature, from multiplier sums to extraction methods, but not without debate about their properties and information content. All of them, to our knowledge, focus exclusively on the interdependence effects that result from the inputoutput structure of the economy. By so doing the approach misses critical links beyond the interindustry ones. A productive sector’s role is that of producing but also that of generating and distributing income among primary factors and households as a result of production. Thus when measuring a sector’s role, the income generating process should not be omitted if we want to elucidate the sector’ economic role. A simple way to make the missing income link explicit is to use the SAM (Social Accounting Matrix) facility. Using a standard extraction methodology we compare lost output with and without the missing link and observe the substantial differences in sectoral lost gross output associated as well as the implied shifting in the rank ordering within a sector.