Disaggregated Monetary Input-Output Tables as an alternative to Physical Input-Output Tables

Disaggregated monetary IOT as an alternative to physical IOT This contribution discusses the possible use of disaggregated monetary flows as an alternative approach to mixed unit (physical / monetary) flows in input-output tables. One of the several benefits of physical unit tables is that they deal with the issue of price inhomogeneity between sectors (within the limits of the aggregation applied). Often, physical unit tables are combined with monetary ones to form a mixed unit table such that the effects of non-physical flows (e.g. from services) are also captured. An alternative format is suggested in which a selected sector in a purely monetary table is disaggregated into two. The first of these sectors is arranged to track a subset of the flows associated with the original sector (e.g. a physical flow) while the second is used to track the other flows relating to the original sector. The methods and considerations for this approach are explained and illustrated through a case study relating to the UK steel industry. As with mixed-unit methods, there are several potential sources of information which can be used to calculate or guide estimates of the flows tracked by the first sector. These include first stage process analysis, price data and physical flows data. If certain conditions (e.g. the treatment of waste and upstream impacts) are the same then the suggested approach can be shown to be equivalent to a mixed-unit approach covering the same flow. Physical balancing is implicitly achieved through the selection of appropriate nominal commodity prices. Although mathematically equivalent to the mixed-unit table under these assumptions, it is suggested that the presentation of data in this format has some context-dependent advantages. As it maintains all monetary transactions, it is easy to confirm that the table remains consistent with national accounts. It may be easier to interpret results when users are unfamiliar with multi unit approaches or when decomposition or path analyses are used to investigate particular aspects of the impacts. Finally, it is suggested that this approach could encourage the adoption of alternative disaggregation criteria. For example, the sector may be split according to flows that vary in proportion to a marginal change in output and those which don't, rather than according to the flows which are related to a physical process and those which are not. By helping practitioners to conceive of similar adaptations, the approach could help them to produce more meaningful analysis.