The Input-Output table of Saudi Arabia

Dr. Imtithal AL-Thumairi

purpose

provide an overview onData sources

Methodology

Used/ will be used for modeling Saudi economic using I/O table.

The Input-Output table of Saudi Arabia

Background

Schematic Diagram for the I/O table for SA

I/O partial matrices and equations

The data used for the updating procedure

The main data sources

The RAS approach to I/O updating

RAS 1997

I/O table for 1997: comments

Updating and estimating a new I-O table/ SAM for Saudi Arabia 2002

A Cross- Entropy Model

Types of information

RAS & CE

Background

Saudi’s first I/O table published by the ministry of planning in 1976 which used as a ten by ten matrix by (Aljiffory, 1983).

Dean Schreiner updated the table of 1976 to the year of 1981 and extended it into an eleven by eleven matrix, this table was used by (Tawi, 1989).

Imtithal Althumairi updated the table of 1981 to the year of 1997. The table used to find out the economic impact of the accession of the kingdom of Saudi Arabia to the World Trade Organization (Althumairi,2000).

The updated table of 1997 by (Althumairi,2000) has been used by later academic researchers such as ( Albqami, 2001).

Schematic Diagram for the Input-Output table for Saudi Arabia (1997)

OutputInput

1 2 …j…n Total Intermediate

Demand

C G I CHS E I

Total final demand

Total output

12..i..n

   Interindustry Transactions

    +

   

Structure of Final

Demand

    =

   

Total Receipts

Total Intermediate

cost

 +

       

Labor Capital

Indirect Tax

 Value added

  Other final demand

   

Total value added

=        

Total cost of production(total input)

        Gross output

 

Input-output partial matrices and equations

Transaction matrix

The most important part of the I/O tableSquare matrix, Rows=Columns Rows

Final demandIntermediate demand

ColumnsIntermediate requirementsPrimary inputs or requirements

Wi=Σxij…(1)Uj= Σxij…(2)

Wi: intermediate demand (i)Uj: intermediate requirements(j)Xij:value of goods and services of sector (i) used by sector (j)

Final demand matrix

Final consumption

Private consumption Cp

Government consumption Cg

Final demand for capital accumulation

Final demand for private capital accumulation Ip

Change in stocks Ch

Final demand for government capital formation Ig

Final demand for Exports E

Fi= Xi- Σxij…(3)

Fi= Cip + Cig +Chi +Iip +Iig +Ei …(4)

Value Added Matrix

Total value added = Total production – intermediate inputs

Vi = Xj – Uj …(5)

Taking imports into account:

Vi = Xj – (Uj + Mj) …(6)

Vi = Mj + Wj + Pj + Tj – Sj …(7)

Wj: wages

Tj: indirect taxes

Sj: subsidies

Gross output = intermediate demand + final demandXi = ΣX ij + Fi …(8)

Gross output = intermediate requirements + primary requirementsXj = Σxij + Vj …(9)

From (8) & (9)Xi = Xj Total Row = Total Column

∑Vj = ∑Fi 

X = AX + F …(10)A: technical coefficients matrix

A = aij aij = Xij/ Xj X – AX = F

( I – A ) X = F X = ( I – A ) –1 F … (11)

( I – A ) –1 : Leontief Inverse Total Technical Coefficients Matrix   

Leontife I/O Model

The data used for the updating procedure

I/O table 1981National Accounts Aggregates(1997)

Private consumptionGovernment consumptionGross Fixed capital formationStock changes ExportsImportsGDP at market prices

Sectoral value added and Intermediate consumption

The main data sources

Saudi Arabia Monetary Agency (SAMA). Annual report http://www.sama.gov.sa/indexe.htmMinistry of Finance and National Economy. National Accounts of Saudi Arabia

http://www.mof.gov.sa/index_e.htmlMinistry of planning. Development plans and achievements of the development plans.

http://www.planning.gov.sa/indexe.htmOther sources

The RAS approach to I/O updating

Updating an I/O matrix when we have new information on the row & column sums, but do not have new information on the input-output flows.

The problem is to find a new I/O coefficient matrix A*, that is in some sense ( close) to an existing coefficient matrix A`, but yield a I/O transactions matrix with the new row and column sums.

That is, RAS approach to solving this problem is to generate a new matrix A* from the old matrix A` by means of (biproportional) row and column operations: aij* = ri aij`sj

Or, in matrix terms:

A* = r^ A` s^

Where the hat indicates a diagonal matrix of elements ri and sj

RAS 1997

X1997=(I- A1981) -1. F1997 …(1)

X1997: Gross Output 1997

(I-A1981) –1: Leonetif Inverse 1981

F1997: Final Demand Column 1997

X1997 – F1997 = S1997 …(2)X1997 – V1997 = R1997 …(3)

S1997 : Intermediate Demand Column 1997R1997 : Intermediate requirement Row 1997

V1997 : Sectoral Value Added 1997By (2) and (3):

R1997 . A1981. S1997 = A1997 …(4)

I/O table for 1997

A look at the coefficient matrix and its inverse reveals the lack of strong linkage except in few cases.The most important sector, of course, is Mining and Quarrying, the bulk of which is exported and serves as the engine of growth of the economy as a whole.

48%linkage with Manufacturing SectorManufacturing Sector has strong linkage with most of sectors.

19.9%with Agriculture Sector36%with Construction Sector15%with Trade and Services Sectors14%with Electricity, Gas and Water Sector13% with Transport Sector

Apart from these two, the rest of the economy, linkage is quite poor.Zero. (Column 1, Row 9)

Agricultural Sector not buying any Services, or Services Sector not selling to Agricultural. Not realistic. This depends on the procedure of building I/O by Planning Ministry.

INDUSTRY. INDUSTRYCOMMODITY. COMMODITYINDUSTRY. COMMODITY which in this case can be justify.

Updating and Estimating a new I-O table/ SAM for Saudi Arabia

2002

Current work

Updating of the I/O table with the most recent national accounts (2002)

Building of the Social Accounting Matrix (SAM)

The updating and estimating methods

A Cross-Entropy Model for Matrix BalancingWhen the information for 2002 is imposed on the 1997 I/O table, all sector accounts are out of balance( as would be expected).An estimation approach is needed to generate a balanced I/O tableThe underlying philosophy of entropy estimation is to use all, and only the information available for the problem at hand.It is technique for solving undetermined estimation problems, that has been applied to the estimation of I/O tables and SAMOur I/O table balancing problem is undetermined because the number of cells in the table( the unknowns which are to be estimated) far exceed the number of constraints that can be imposed.

Types of information

Priors. I/O table from an earlier year provides information about the new coefficients. The approach is to estimate a new set of coefficients (close) to the prior, using new information to update the priors.Moment constraints. The most common kind of information to have is data on some or all of the row and column sums of the new I/O. while the RAS procedure is based on knowing all row and column sums, it is only one of several possible sources of information in CE estimation.Economic aggregates. In addition to row and column sums, one often has additional knowledge about the new I-O/SAM. For example, aggregate national accounts data may be available for various macro aggregates such as value added, consumption, investment, government, exports, and imports. There also may be information about some of the SAM accounts, such as government receipts and expenditures. This information can be summarized as additional linear adding-up constraints on various elements of the I-O/SAM. Inequality constraints. While one may not have exact knowledge about values for various aggregates, including row and column sums, it may be possible to put bounds on some of these aggregates. Zeros. In the RAS method, the row and column operations guarantee that the updated I-O/SAM will contain zeros wherever the original SAM had zeros, and non-zero elements otherwise. Such constraints are also easily incorporated in the CE approach by constraining I-O/SAM entries to be zero in the estimation problem. However, it is also straightforward in the CE approach to allow zero elements in the prior to become non-zero in the estimated I-O/SAM and vice versa.

Updating: RAS and CEThe CE approach provides a flexible and powerful method for estimating I-O/ SAM when dealing with inconsistent data. Inconsistent can arise from

Measurement errorsIncompatible data sourcesOr lack of data

The method represents a considerable extension and generalization of the standard RAS method, which assumes that one start from a consistent prior I-O/SAM and has knowledge only about new row and column totals. The CE framework allows a wide range of prior information to be used efficiently in estimation. Drawing on information theory, CE approach is efficient in that it uses all available information, but only that information-no assumed information is injected into the estimation procedure.The prior information can be in a variety of forms, including linear and nonlinear inequalities, errors in equations, and measurement error.