TEL  Vol.5 No.2 , April 2015
Unveiling Cost Burden Interdependencies with the Use of the Hypothetical Extraction Method
ABSTRACT
Networked economies constitute an interlocked mechanism of direct effects and indirect feedbacks. Each piece of the mechanism plays a specific role influencing the overall performance of the system. In the setup of an interindustry economy, the interlocked pieces are typical economic sectors. Any sector influences other sectors and is in turn being influenced by them. We propose a new methodology to unveil the underlying cost linkage effects being exerted by sectors and affecting the complete price system. The methodology reformulates the Hypothetical Extraction Method, usually applied to the quantity side of the economy, and extends it to the cost side of the economy. The derived cost linkage indicators reveal valuable information that may be used in the design of tax reforms or efficiency policies. We present a practical example of the capacities of this new proposal using US data.

Cite this paper
Guerra, A. and Sancho, F. (2015) Unveiling Cost Burden Interdependencies with the Use of the Hypothetical Extraction Method. Theoretical Economics Letters, 5, 212-216. doi: 10.4236/tel.2015.52025.
References
[1]   Paelinck, J., de Caevel, J. and Degueldre, J. (1965) Analyse Quantitative de Certaines Phénomènes du Développement Régional Polarisé: Essai de Simulation Statique d’Itinéraires de Propagation. In: Bibliothèque de l’Institut de Science économique. No. 7. Problémes de Conversion économique: Analyses Théoriques et études Appliquées, M.-Th. Génin, Paris, 341-387.

[2]   Strassert, G. (1968) Zur Bestimmung Strategischer Sektoren mit hilfe von Input-Output modellen. Jahrbucher fur Nationalokonomie und Statistick, 182, 211-215.

[3]   Schultz, S. (1977) Approaches to Identifying Key Sectors Empirically by Means of Input-Output Analysis. Journal of Development Studies, 14, 77-96.

[4]   Leontief, W.W. (1941) The Structure of the American Economy. Oxford University Press, New York.

[5]   Miller, R.E. and Blair, P.D. (2009) Input-Output Analysis: Foundations and Extensions. 2nd Edition, Cambridge University Press, Cambridge.

[6]   Miller, R.E. and Lahr, M.L. (2001) A Taxonomy of Extractions. In: Lahr, M.L. and Miller, R.E., Eds., Regional Science Perspectives in Economic Analysis: A Festschrift in Memory of Benjamin H. Stevens, Elsevier Science, Amsterdam, 407-441.

[7]   Timmer, M., Erumban, A.A., Francois, J., Genty, A., Gouma, R., Los, B., Neuwahl, F., Pindyuk, O., Poeschl, J., Rueda-Cantuche, J.M., Stehrer, R., Streicher, G., Temurshoev, U., Villanueva, A. and de Vries, G.J. (2012) The World Input-Output Database (WIOD): Contents, Sources and Methods. http://www.wiod.org

 
 
Top