Input-Output Multiplier Analysis for Major Industries in the Philippines.Pdf

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11th National Convention on Statistics (NCS) EDSA Shangri-La Hotel October 4-5, 2010

INPUT-OUTPUT MULTIPLIER ANALYSIS FOR MAJOR INDUSTRIES IN THE PHILIPPINES

by Madeline B. Dumaua

For additional information, please contact: Author’s name Designation Affiliation Address Tel. no. E-mail Madeline B. Dumaua Statistician III Statistical Research and Training Center Quezon City +632-4260620 mbdumaua@srtc.gov.ph

INPUT-OUTPUT MULTIPLIER ANALYSIS FOR MAJOR INDUSTRIES IN THE PHILIPPINES1 by Madeline B. Dumaua2 ABSTRACT The study aims to assess the impact of the different major industries of the Philippines using Input-Output Multiplier Analysis. It attempts to do this by using the 2000 Input-Output Accounts of the Philippines (I-O Accounts), the most recently published tables by the National Statistical Coordination Board (NSCB). As the economic importance of the 11 major industries is growing among the policy makers and researchers, this study applied input-output technique in determining economic effects to gauge the significance of these industries in generating output, income and employment. Key sectors are identified in term of multipliers; the higher the multiplier, the stronger is the ability of the corresponding sector to create multiple impacts in the economy. The obtained multipliers showed that among major industries, the Manufacturing Industry showed the highest final demand-to-output multiplier; the Construction Industry gained the highest output-to-output multiplier; and Private Services Industry is found to have the highest income and employment multipliers. KEY WORDS: Input-output, Multiplier

1. Introduction Sectors of an economy are naturally interdependent. An input stimulates production in a sector directly, but it may also stimulate production in other sectors as well, where the intensity can be downgraded. The residual effect of an input beyond the intended sector is called multiplier that describes interrelationships among sectors of the economy. The multiplier effect provides a quantification of the direct and indirect effect on growth of the sector, possibly measured in terms of production output. Different economic multipliers like those for output, income, and employment can be used to determine economic effect for an industry. The Leontieff model or the Input-Output model can be used to track the complex web of production linkages among industries in the country within the framework of interdependencies. This study will assess the impact of the different sectors of the economy in terms of output, income and employment. Thus, Input-Output multiplier analysis was performed to determine the effect of the different major industry groups. 2. Objectives of the Study The study aimed to measure the economic effects of the major industry groups using Input-Output Multiplier Analysis. Specifically, the study intended to: 1. measure the multiplier effect of changes in final demand on the output of individual industries and the whole economy (Final Demand-to-Output Impact Multiplier) 1

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One of the in-house research undertakings of the Research and Information Technology Division (RITD) of the Statistical Research and Training Center (SRTC) of the National Economic and Development Authority (NEDA) Statistician III, Research and Information Technology Division (RITD) of the Statistical Research and Training Center (SRTC) of the National Economic and Development Authority (NEDA)

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2. determine the impact of changes in each industry’s output on the total output (Outputto-Output Impact Multiplier) 3. find out the impact of changes in each industry’s output on household income (Household Income Multiplier) 4. determine the impact changes of output in an industry on employment (Employment Multiplier) 3. Significance of the Study In economics, the multiplier effect refers to the idea that the initial amount of money invested by government leads to an even greater increase in national income. In...
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