Supply and Use Tables a New Data Base for Impact Analysis of the Structural Funds

Supply and use tables – A new data base for impact analysis of the Structural Funds1

FIFTH EUROPEAN CONFERENCE ONEVALUATION OF THE STRUCTURAL FUNDSBudapest26/27 June 2003”CHALLENGES FOR EVALUATION IN AN ENLARGED EUROPE”Workshop 4: Impact Evaluation

Supply and use tables – A new data base for impact analysis of the Structural Funds

by

Joerg Beutel

Abstract

Introduction

A. Objectives of supply and use tables

B. Input-output framework

C. Transmission programme

D. Sustainable development

E. Impact analysis system

References

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OREWORD

Joerg Beutel: Supply and use tables – A new data base for impact analysis of the Structural FundsAbstract

OREWORD

The objective of this paper is to propose a new impact analysis system for the acceding countries which is based on annual supply and use tables. The main benefits of the new data base are the disaggregation of 59 branches and the closer reflection of statistical sources. This new data base will allow a profounder assessment of Structural Funds interventions than in the past. The annual submission of supply and use tables will enlarge the potential for analysis and follow up of actual interventions.

The analytical approach has the potential to analyse the sustainable development of nations by including supplementary information on labour, capital and environment. It has been demonstrated in previous studies, that the impact of Structural Funds interventions can be assessed for larger regions like East Germany and the Mezzogiorno in a corresponding analytical approach. With a new set of annual supply and use tables and five yearly input-output tables Eurostat is in the future providing a promising data base for impact evaluation on the macroeconomic level. It is the intention of the paper to demonstrate how this refined data base can be used for the evaluation of Structural Funds interventions in acceding countries.

Supply and use tables provide a consistent framework for balancing supply and demand and, together with symmetric input-output tables, offer an appropriate basis for disaggregated economic analysis. They represent a key feature of the European System of National Accounts and are part of the transmission programme of national accounts data to be supplied to Eurostat on a regular basis. Since 2002 the member countries of the European Union are requested to submit annual supply and use tables and every five years symmetric input-output tables. The acceding countries and other candidate countries submit these table on a voluntary basis.

So far 13 member countries (Denmark, Germany, Greece, Spain, France, Italy, Netherlands, Austria, Portugal, Finland, Sweden, United Kingdom) and 5 acceding countries (Estonia, Hungary, Poland, Slovak Republic, Slovenia) have officially submitted the requested supply and use tables and input-output tables. Missing are the tables from 2 member countries (Ireland, Luxembourg) and 5 acceding countries (Cyprus, Czech Republic, Lithuania, Latvia, Malta).

Input-output data are conveniently integrated into macroeconomic models of various types. They provide valuable disaggregate information for economic analysis and enable new fields for impact analysis that can be carried out on the basis of satellite systems or other extensions to the systems (e.g. capital, labour, energy, environment). While supply and use tables are data-oriented in nature, the symmetric tables are constructed on the basis of certain analytical assumptions, usually from existing supply and use tables.

Introduction

Supply and use tables are an integral part of the new European System of Accounts (1995 ESA) and play an important role as an integration framework.[1] They constitute the centre piece of the internationally compatible accounting framework for a systematic and detailed description of the economy, its various components on the supply and demand side and its relations to other economies.

The 1995 ESA is fully consistent with the revised world-wide System of National Accounts (1993 SNA) which was published under the joint responsibility of the United Nations, the International Monetary Fund (IMF), the Commission of the European Communities, the Organisation for Economic Cooperation and Development (OECD) and the World Bank.[2] However, the ESA is focused more on the circumstances and data need in the European Union

Since 2002 all member countries of the European Union are requested to submit every year supply and use tables and every five years input-output tables. Since many years the acceding countries (Cyprus, Czech Republic, Estonia, Hungary, Lithuania, Latvia, Malta, Poland, Slovak Republic, Slovenia) and other candidate countries (Bulgaria, Romania, Turkey) establish their national accounts in close cooperation with Eurostat on the basis of the European System of National Accounts. On a voluntary basis they have started to submit annual supply and use tables and five-yearly input-output tables. So far results are available from Estonia, Hungary, Poland, Slovak Republic and Slovenia.

In the past, the author has evaluated the economic impacts of the Structural Funds for the European Commission several times. The purpose of the last study was to quantify the economic impacts ofb objective 1 interventions of the Structural Funds for the period 2000 – 2006 on the basis of the latest input-output tables and macroeconomic data which are available at Eurostat and the Directorate-General for Economic and Financial Affairs of the European Commission.[3] Presently, the author is a member of an international task force which was asked by Eurostat to draft the Eurostat Input-Output Manual.[4] The key issue of this manual is to describe how supply and use tables can be compiled.

A. Objectives of supply and use tables

The input-output tables and in particular the supply and use tables serve statistical and analytical purposes. They provide a framework for checking the consistency of statistics on flows of goods and services obtained from quite different kinds of statistical sources - industrial surveys, household expenditure inquiries, investment surveys, foreign trade statistics and other statistics.

As an analytical tool input-output data are conveniently integrated into macroeconomic models in order to analyse the links between demand and supply, in particular between final demand components and industrial output levels. Input-output data also serve a number of other analytical purposes by linking other major statistics (employment, capital, energy, environment) to the system of national accounts.

Supply and use tables and input-output tables provide the basis for many analyses within the Commission of the European Communities, which need to have detailed and reliable data on interdependent production for all the Member States and the integration process, which is not the case at present.

B. Input-output framework

The input-output framework of the European System of Accounts (ESA 1995) consists of three types of tables:

supply and use tables;
tables linking the supply and use tables to the sector accounts;
symmetric input-output tables.

Supply and use tables are matrices by industry and by product describing the domestic production processes and the transactions in products of the national economy in great detail. These tables show the structure of the costs of production and income generated in the production process, the flow of goods and services produced within the national economy, and the flows of goods and services with the rest of the world.

The supply and use tables and input-output tables of the European Union comprise 60 products and 60 industries (Table 1). The classification used for the industries is the ‘General Industrial Classification of Economic Activities within the European Communities (NACE rev. 1)’ and the classification employed for products is the ‘Classification of Products by Activity (CPA)’. These classifications are fully aligned to each other. At each level of aggregation, the CPA shows the principal products of the industries according to the NACE rev. 1.

A supply table shows the supply of goods and services by product and by type of supplier, distinguishing output by domestic industries and imports. In the transmission programme of data for the Members of the European Union the supply table is given at basic prices (Table 2) including a transformation into purchasers’ prices. The supply table contains three important matrices: the production matrix (make matrix), the import matrix and the valuation adjustment matrix. On the diagonal of the production matrix the primary activities of industries are reported.

A use table shows the use of goods and services by product and by type of use, i.e. as intermediate consumption by industry, final consumption, gross capital formation or exports. Furthermore the table shows the components of value added, i.e. compensation of employees, other taxes less subsidies on production, consumption of fixed capital and net operating surplus. In Table 3 the corresponding transmission programme of the required data for the use table is given.

Table 1: Classification of industries and products

Table 2: Supply table at basic prices, including transformation into purchasers’ prices

Table 3: Use table at purchasers’ prices

Between supply and use tables, two types of identities hold. In Table 1 and Table 2 the column totals of industries (output at basic prices) and the row totals for products for total supply (supply at purchasers’ prices) are equal. The balancing process should not be limited to the supply and use tables at current prices. The compilation of supply and use tables at current and constant prices for two or more years will help to balance the changes in volumes, values and prices. Compared to the integration of supply and use tables for a single year, this is a major improvement of the effectiveness of the input-output framework for the integration of the European System of Accounts (ESA 1995).

A symmetric input-output table (Table 4) is a product by product or industry by industry matrix describing the domestic production processes and the transactions in products of the national economy in great detail. A symmetric input-output table rearranges both supply and use in a single table. The derivation of symmetric input-output tables from the system of supply and use tables will reveal inconsistencies and weaknesses in the supply and use tables. In this respect, there is also a feedback from the symmetric input-output tables to the supply and use tables and vice versa.

Table 4: Symmetric input-output table at basic prices

As Hungary has submitted the most complete data set among the acceding countries, the numerical examples in Tables 2-4 refer to this splendid submission. Unfortunately no supplementary information on gross fixed capital formation, fixed capital stock and labour inputs was given. Among the acceding countries, this information was provided by Poland.

There is one major conceptual difference between a symmetric input-output table and a combined supply and use table, the statistics relate products to industries, while in the symmetric input-output table the statistics relate products to products (production activities) or industries to industries. So, in a symmetric input-output table either a product or an industry classification is employed for both rows and columns.

Table 5: Extended input-output table at basic prices with satellite systems

In the ESA, the product by product input-output table is the most important symmetric input-output table. Therefore, it has been decided that in the transmission programme of data for the European Union the member countries are requested to submit every five years symmetric product by product input-output tables with 60 products. Imports and exports should be subdivided into intra-EU deliveries and imports and exports with other countries.

Another new element is the fact that the input-output tables contain supplementary information for each sector on gross fixed capital formation, capital stock (buildings, machinery, transport equipment) and labour inputs (wage and salary earners, self-employed). Consequently the columns of the input-output table reflect for each sector all inputs of the production function for intermediates and primary inputs (capital, labour, land).

Among the member countries of the European Union, Germany is very advanced in integrating satellite systems into the input-output data base. The first part of the extended input-output table for Germany (Table 5) comprises the traditional part. It includes domestic production of goods and services (rows 1-6), imports of goods and services (rows 8-13), and value added (rows 17-20) with compensation of employees, other net taxes on production, consumption of fixed capital, operating surplus.

The matrices below the input-output table are satellite systems which have been integrated into the input-output framework. They provide useful information on investment (machinery, buildings), Capital (machinery, buildings), employment (wage and salary earners, self-employed), primary energy (coal, lignite, crude oil, natural gas, nuclear fuels, water power), secondary energy (briquettes, coke, petroleum products, electricity, produced gas, steam and hot water) and the corresponding emissions (carbon dioxide CO2, methane CH4, nitrous oxide N2O, sulphur dioxide SO2, Nitrogen oxides (NOx, Carbon monoxide CO, non-methane volatile organic compounds NMVOC, black smoke) and other residuals of the various production and consumption activities (waste, sewage). It should be noted that some of the matrices are given in values (input-output table, investment, capital), values and quantities (energy) and quantities (labour, emissions, waste).

The classifications in the symmetric input-output tables coincide with those in the supply and use tables, as the former is a transformation of the latter. The symmetric product-by product input-output table will be accompanied by a symmetric input-output table for domestic output and a matrix showing the use of imports.

C. Transmission programme

The Council Regulation of 1996 defined the program of National accounts data delivery within the framework of the new European system of regional and national accounts in the Community. The transmission program lays out for each table, aggregate and variable, the deadlines and frequency of transmission as well as the date of first data delivery (Table 6).

The classifications are totally compatible with those used within the framework of the United Nations. During the transition period, which will run up to January 2005, derogations from the base program have been accepted for certain Member states concerning the details and forms of transmissions. Certain exemptions were made for the submission of tables and single variables and individual branches. It can be said that in 2005 the full programme will be implemented in all 15 member countries at the latest. The new acceding countries and the other candidate countries will submit the tables on a voluntary basis.

Table 6: Transmission programme for the input-output framework of the European Union

The actual submissions of supply and use tables (Table 7) are well under way. Presently 13 of the 15 member countries have submitted the requested supply and use tables for 1995-1999 according to the time schedule. Nine member countries have compiled the harmonised symmetric input-output table for 1995.

From the 10 acceding countries so far 5 countries (Estonia, Hungary, Poland, Slovak Republic, Slovenia) have submitted supply and use tables and harmonised input-output tables.

Estonia submitted a complete set of supply and use tables and input-output tables for 1997. Missing are the verifications of intra EU and extra imports and exports and the requested information on consumption of fixed capital.

Hungary compiled a complete set of supply and use tables and input-output tables for 1998-1999. Missing are the verifications of intra EU and extra imports and exports and the requested information on consumption of fixed capital. For 1995-1999 Hungary submitted aggregate supply and use tables and input-output tables for 21 branches. A special feature is that Hungary submitted a dual set of symmetric input-output tables in a product by product classification and in a industry by industry classification of branches.