Other IO Applications with Complications

What is it about?

This chapter deals with two other applications of IO analysis that regularly appear in the literature without consideration of their limitations. Regional and interregional, forward and backward linkage analysis, also known as key sector analysis, only looks at the benefits while ignoring the policy cost of stimulating the sector chosen. Structural decomposition analysis (SDA) of national and interregional economic growth only looks at demand-side explanations of growth, while ignoring the supply side. Growth accounting does the opposite, but has the advantage of allowing an econometric estimation of its residual component, which is absent in a SDA. Hence, in both type of studies, policy makers are presented only half of the truth.

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