Creating an Input-Output Table from BEA Data: A How-to Guide
(See this article at Chamberlain Economics, L.L.C. also.)
One of the hard parts about building Leontief input-output models is that the source data are hard to use.
Instead of producing a real input-output table, the Bureau of Economic Analysis (BEA) produces what they call “use” and “make” tables. The make table shows products produced by each industry, while the use table shows how products get used by industries, consumers and government. However, what we need for Leontief models is a table that shows only the industry-by-industry relationships.
In this post I’ll explain how to create an input-output table from BEA’s make and use tables. At the bottom, I’ve posted a spreadsheet with an I-O table I developed from the new 2002 BEA Benchmark Input-Output Data.
Building the I-O Table
The first step is to download the BEA’s use and make tables. The easiest ones to work with are the “Standard Make and Use Tables at the summary level,” which you’ll find at http://www.bea.gov/industry/xls/2002summary_makeuse.xls. These have 133 industry groups, which is enough detail for most research.
Once you’ve downloaded them, open the use table. Delete the two rows labeled “Noncomparable Imports” and “ROW adjustment”. There’s no domestic industry that produces these things, so you won’t need them in your industry-by-industry table. Next, label the intermediate-uses portion of the Use table “U”—you can label ranges in Excel by typing names in the upper-left box in the toolbar.
Next, open the make table. This is a 133×134 table showing industries down the rows and the products they make across the columns. Below the make table, create a new 133×134 matrix where each element is equal to the corresponding make table element divided by the column total. Label this matrix “M”.
Now we’re ready to build the I-O table. The classic table has three sections, which we’ll build one at a time: intermediate uses, final demands, and industry value added.
First, let’s build the intermediate-uses section. Call this “S”. You’ll calculate the “S” matrix by multiplying M*U, which we’ve defined above. This will create a 133×133 matrix that’s the intermediate-uses part of the table. Set this aside for now.
Next let’s calculate the final demands part of the table. That’s the right-hand section showing how much output from each industry is used by consumers, government and the rest of the world. In the use table, label the final demands portion of the table “D”. Create a new matrix labeled “Di” by multiplying M*D. This gives us a 133×13 matrix of final demands for the I-O table. This Di matrix will sit to the right of the intermediate portion of the input-output table (“S”) we calculated above. As a final step, add a column on the far right of the table that sums the intermediate uses and final demand for each row. This is total output for each industry.
Finally, let’s fill in the value-added section at the bottom of the table. To do this, first copy the total industry output we added to the far right column and transpose it into the bottom row of the table. This forces the row output of each industry to equal their column output, which is a fundamental equality in I-O tables.
Once you’ve pasted in the total output line, you’ll need to use the entries in the “Gross Operating Surplus” row in the table as balancing items to get the column totals for each industry to equal the row totals.
Once the row and column totals are equal—that is, output used for intermediate uses + final demands = inputs purchased + value added for all 133 industries—we’re done with our I-O table.
Bottom Line: 2002 Input-Output Table for the U.S.
Following the process above, you should end up with an I-O table that looks something like this. Here’s my own table built from the 2002 BEA Benchmark tables, which you’re free to use:
Once you’ve got an I-O table like this, it’s pretty easy to turn it into a Leontief model. This will let you model the distributional impact of carbon taxes, measure tax pyramiding of gross receipts taxes, and more.
In a future post, I’ll share a couple of these models I’ve put together over the last year or so.
Posted by Andrew on Saturday August 9, 2008 | Feedback?
