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|The input-output structure of the Canadian economy
Annual provincial Input-Output tables
With this publication, Statistics Canada is providing input-output (IO) accounts for all provinces and territories of Canada on an annual basis starting with the year 1997. Until recently, annual publication of input-output accounts was limited to the national economy. These accounts are the most comprehensive and detailed statistics on transactions involving production activity and intermediate as well as final consumption of goods and services in the economy. The accounts are prepared at the Worksheet level of detail, consisting of 300 industries, 727 groups of goods and services (commodities), and 170 categories of final users. There are three more compact versions of the tables that are usually available to the public: the Link, the Medium and the Small aggregation tables. The most compact presentation of IO accounts, the Small IO tables, are provided in this release.
A quick guide to the IO accounts
What are Input, Output and Final demand tables
The input-output accounts of Canada and its provinces and territories are presented in three main data tables (matrices) for each jurisdiction. These are the output table, input table, and the final demand table. In addition, provinces' and territories' tables are linked together through an interprovincial flows table that shows each jurisdiction's exports to, and imports from, other provinces and territories as well as abroad. These tables are compiled every year by Statistics Canada using newly instituted surveys and other improved sources that are designed to collect reliable statistics from each jurisdiction. The tables are part of the Canadian System of National Accounts (CSNA). The CSNA is a system of integrated statistical accounts consisting of four components: input-output tables, income and expenditure account (national and provincial), balance of payments and international position, and environment accounts. This system is "integrated" in the sense that all of the data belonging to this system are consistent with one another. IO tables cover all economic activities conducted in the market economies of each province and territory, encompassing persons, businesses, government and non-governmental (non-profit) organizations, and entities outside its jurisdiction that give rise to imports or exports (interprovincially or internationally).
To compile the IO accounts, Input-Output Division obtains source data from all relevant surveys as well as administrative sources such as tax records, professional and industry organizations, and non-government institutions every year for each province and territory. In the process of preparing statistical estimates, data from various sources are confronted, analysed by subject-matter experts, and used to compile estimates that are consistent with all other estimates in the System and provide a valid and coherent statistical picture of the subject matter. Consistency is a key feature of the statistics produced by the Accounts. It is highly valuable to the user because data taken from the Accounts do not disagree with each other or provide contradictory information. When various data bearing on the same subject do not provide a consistent picture, the user is left in the position of either reconciling inconsistencies without the benefit of necessary information, or discarding the data for lack of realism or credibility. A good example of how consistency is achieved through data integration is a process known as "commodity balancing". Because, logically, the supply of a good or service from all possible sources must equal its demand or disposition in a given jurisdiction, every good and service in the economy is scrutinized to make sure it obeys this rule before it is used for IO compilation. When supply does not add up to demand or disposition (demand plus inventory), as is often the case 1 , each data source is questioned, errors and omissions are corrected, and sometimes the data is re-estimated in light of more reliable information to achieve complete balance between supply and disposition.
What IO tables show
The tables are set up on a year-by-year basis, rather than in time series. Tables for Canada (the national tables) date back to 1961, while regular sub-national tables began with the 1996 reference year. The tables identify transactions in three ways:
The Final demand table
This table shows transactions in goods and services, in a province or territory, that are for final use. A transaction is for final use when the good or service is exported, when it is bought for final consumption (i.e., it is not used to produce other goods and services for the market), or as capital investment. While all purchases by households (persons) are considered final consumption in the System, businesses, governments, and other entities make purchases both as intermediate and as final expenditure. Their intermediate expenditures are shown in the Input (or Intermediate Use) table and their final expenditures are shown in the Final Demand table. For instance, when a retail store pays for electricity, it is shown as payment from Retail Trade industry (Input table) and as output for Electric Power industry (Output table). However, when the same store buys payment processing machinery, the payment is shown in the Final Demand table as investment by the Retail Trade industry and also either an output of the relevant Canadian industry, as an import, or as a withdrawal from inventories of the particular machinery. Imports are also shown in the Final Demand table.
In this publication, the Final Demand table is shown with a breakdown of 16 categories, but at the most detailed level, IO tables are compiled with a breakdown of 170 categories. Regardless of the level of detail, Final Demand tables always distinguish the following broad categories:
In the most detailed table these categories are presented with the 727 commodity detail, but are only shown with the more compact 59 commodity detail in this release. Some of these expenditures are presented with a useful breakdown. For instance, Personal Expenditure presented in this release is broken down into durable goods, semi-durable goods, non-durable goods, and services. In the most detailed table, final demand is presented with 170 categories, of which personal expenditure is shown for 52 categories.
The Input table
The input table, also known as the Intermediate Use table, is where purchases that relate to production (current expenses) are presented for groups of producing units (industries). It was noted earlier that, in the context of input-output accounts, "industry" also refers to entities such as governments, non-profit organizations, professions, and so on. In these cases, inputs refer to their current (i.e., non-capital) expenditure on goods and services. The input table includes a few other entries that businesses would report on the expense side of their income statement. These are: Indirect Taxes on Production (e.g., property taxes), Indirect Taxes on Products (e.g., sales taxes), Subsidies on Products, Subsidies on Production (e.g., manpower training subsidies), Wages and Salaries, Supplementary Labour Income (e.g., employers' contribution to employment insurance), Mixed Income (e.g., income of unincorporated businesses), and Other Operating Surplus. The latter item is the income or loss that is left over after accounting for the cost of all intermediate inputs and the items just discussed. This ensures that the subtotal of inputs for a given industry is equal to its "outputs" (discussed below) and an accounting identity is maintained between inputs and outputs of industries. The most detailed input table for a province shows up to 727 goods and services used for each of 300 industries. The current release shows a more compact table with 25 industries and 59 goods and services.
Gross Domestic Product
The eight cost entries found in the input table (see previous paragraph) contain all the data one needs to calculate the Gross Domestic Product (GDP) of each industry in Canada or in a province. GDP at basic prices-the statistic officially published by Statistics Canada-is obtained by adding the last six components. GDP at market prices is the sum of all eight cost components. Using this data, we one can calculate the GDP of a province or territory, GDP of the whole Canadian economy, showing either the provincial or the industrial composition of GDP across Canada.
The Output table
The Output table, also known as the Make table, is where the values of production of good and services are recorded for each producing industry in a given jurisdiction (e.g., a province). Once again, the term "industry" is comprehensive, covering all entities except households (persons). In most cases, production or output of an industry is simply their sales or shipments 3. Production, of course, excludes used goods, because they were already counted as production in an earlier period. For retailers and wholesalers, production is considered to be the value they add to (or the margin they earn from) the products they sell, rather than the total receipt from their sales. For owners of real property, production is gross rent receipts, except for residential properties occupied by their owners where an imputation is made for the equivalent rental value of living in the property.
For banking and similar services, the net interest income of the institutions is considered production. Where they charge fees for their services, they are also considered output. The production of insurance carriers consists of premiums net of claims and adjustment expenses, plus incomes earned on invested reserves as well as rental income, plus changes in actuarial reserves. For construction, the value of work that has been put in place in a particular jurisdiction is considered output, whether this is done by hired contractors or by the industry (e.g. electric power) on its own account 4. For holding companies, non-profit institutions (e.g., churches, clubs), the central bank and general government, the value of their output is computed as the sum of operating expenses, labour compensation and depreciation of fixed capital. Hospitals, schools, universities and other institutions that are funded by governments but also earn operating revenues have an additional output equal to their revenues from sales of goods and services. The output table (Small) included in this release shows 25 industries producing 59 commodities. At the most detailed level, the output table shows 300 industries and 727 goods and services for a province, territory, or the Canadian economy.
The Input-Output multiplier
The tables that make up the IO accounts contain a quantitative description of the flows of goods and services between economic entities during the reference year. The tables contain intricate statistics compiled at a very detailed level on transactions between industries, governments and non-profit institutions in different provinces and territories, as well as interprovincial and international trade in goods and services. Because these statistics are cast in an input-output framework, they hold information about production technology and market conditions of each industry, how they depend on upstream (supplying) industries and how they are linked to downstream (purchasing) industries. These inter-industry relationships are used by input-output models for simulation and forecasting purposes. The most widely used input-output model with a long history of use in Canada is the Open Output Determination Model. Every year, this model is applied to the latest set of input-output data to calculate a new set of numerical results known as IO multipliers. These multipliers are used to measure how a change in spending on goods and services may affect the levels of key industry variables such as production, GDP, or employment.
The concept of an IO multiplier
An IO multiplier is a quantitative measure created by a particular IO-based economic model. It is an analytical answer to a hypothetical question about how a certain expenditure is expected to impact the economy. A typical question would be of the form:
Published input-output multipliers 5 provide one answer to this kind of question. They show how a certain target variable-such as GDP of a province-would respond to changes in a certain control variable--such as additional spending on products of an industry. This allows a user to get a simple and speedy assessment of how two or more kinds of expenditure would differ in terms of their desirable effects on the economy. For instance, how would wages and salaries within a province be affected if businesses received a new order for $100 million in lumber? The question that is hypothetically selected for analysis-the control variable-is in this case a $100 million of new spending on lumber, and the target variable is wages and salaries within the province where the spending occurs. The values for target variables are shown in multiplier tables as fractions, or multiples, of the same denomination that is chosen for the control variable. For instance, if the question is posed in terms of $100 million, then the value of the wages and salaries will also be in hundreds of millions of dollars 6. In fact, IO multipliers are mathematically linear, so that doubling spending on the control variable will simply double the target amount, and so on.
Multiplier tables published here are set up to show control variables—i.e., where new spending is supposed to take place—along the first column of each table. For instance, the Small Aggregation multiplier tables show 25 rows to choose from in the first column. Larger aggregations show a more detailed list that permits much more exact questions. For instance, using a Small Aggregation table one could ask how a $100 million of new spending on Manufacturing industries would affect wages and salaries in British Columbia, whereas the larger Worksheet Aggregation allows one to zero in on a specific manufacturing industry such as Sawmills and Wood Preservation Industry 7. The tables provide multipliers for up to 14 target variables, arranged in columns. A more precise definition of target variables is provided in the Glossary of Terms.
Answers to hypothetical impact questions can be divided into three useful parts:
These multipliers are cumulative such that the direct and indirect impact (the second set of tables) includes the direct impact (the first set of tables), and the third table includes the effects shown in the first two sets of tables. The indirect effects of the initial spending begin when businesses receiving the initial order purchase additional materials and supplies from other businesses who, having received their own new orders, similarly expand their productive activities.
Multipliers are calculated and published for the latest year for which input-output tables are available, typically three years after the reference year. Since structural parameters used to calculate multipliers change relatively slowly, input-output multipliers are widely used beyond the reference year to measure impacts on target variables for future periods.
The direct effect
The most straightforward impact of new spending on a given industry or economy is the direct effect. The direct effect is simply the impact on the receiving industry itself, without assuming that any consequences will follow from the new additional spending. It only assumes that businesses who receive the order will expand their production plan to meet the new demand. As we might expect, the additional activity leads to increases in an array of variables in response to the work associated with the new sales. Wages and salaries paid will rise as more labour input will be used, as will supplementary labour income that is usually tied to wages and salaries. Incorporated businesses will see a higher operating surplus as their profits increase, and mixed incomes will rise for unincorporated businesses such as lawyers and consultants affected by the increased level of activity. As businesses operate on a larger scale, they pay more indirect taxes on their materials and supplies, receive more subsidies from governments (applicable to some but not all businesses), and there will be more international imports. The table also shows the number of full-time equivalent employees that will be required to fulfil each million dollars of additional new orders. Since these effects are confined to the industry immediately affected by the expenditure, they also represent the effect on the province or territory in which the expenditure is assumed to occur.
Text table 1
Using Small Aggregation multipliers, the preceding table shows how $100 million of new spending is expected to affect target variables for Newfoundland and Labrador if it were spent on the outputs of one of the industries shown in the first column. For instance, if the hypothetical $100 million purchased the products of Crop and Animal Production industry, it would raise the industry's (and therefore the province's ) wages and salaries by $17 million plus an additional $2 million in supplementary labour income, mixed income would rise by $6 million, operating surplus would increase by $10 million, the industry would pay an additional $1 million in indirect taxes on products, receive about the same amount in subsidies, and pay $1 million in indirect taxes on production. The impact on the GDP of the industry, and province, will be $35 million while imports will rise by $5 million, and 1,170 new full-time equivalent jobs will be created in Newfoundland. The table allows us to compare these impacts with what would occur if the new spending were instead used to purchase the products of forestry and logging industry or other industries shown in this excerpt from the Small Aggregation table. For instance, while spending on the products of Support Activities for Agriculture and Forestry leads to the largest impact on wages and salaries ($36 million) and create the largest number of jobs among the five industries in the table, it does not lead to the largest GDP impact. The latter would follow if the spending were used to purchase the outputs of mining and oil and gas extraction, leading to a $75 increase in GDP of the industry.
The direct and indirect effects, within provinces
These tables show how new spending on products of a given industry will affect target variables for the province where the spending occurs, both directly and indirectly. The indirect effect is a consequence of actions that businesses take to adapt to the additional demand beyond those actions taken as part of the direct effect. In the above example, the indirect effect follows the decisions of all businesses who supply the goods and services needed by Crop and Animal Production industry to meet the additional $100 million demand for their products. As these businesses plan to produce more of what they sell to Crop and Animal Production, they in turn send signals to their own suppliers of goods and services (including those located abroad) to increase their production to the required levels. After these impacts ripple though all industries in the domestic economy and to foreign producers, all businesses that are directly or indirectly affected reach new levels of production 8, GDP, wages, profits, etc., that are consistent with the new levels of production for all affected industries. The tables named "within-province" show only those increases in target variables that are predicted to occur within the province in question. Increases in target variables that will occur in other provinces as a result of indirect effects of the initial spending are excluded from this table.
Text table 2
The preceding table shows the total of the direct effects and the indirect effects that $100 million of new spending is expected to have on target variables for Newfoundland. For instance, it shows that if the new spending were on the outputs of Crop and Animal Production industry, it would raise the industry's (and the province's ) wages and salaries by $29 million, whereas the same target variable in the earlier table showed a direct effect of $17 million. The difference of $12 million is strictly the indirect effect that the hypothetical spending is expected to have in Newfoundland. Similarly, Newfoundland's GDP is expected to rise by $55 million when the direct and indirect impacts are taken together, whereas the direct effect in the province was only $35. Indirect effects on businesses that are in other provinces and territories are not show in this table.
The direct and indirect effects, all provinces
These tables show the full (direct and indirect) effects of the initial spending increase on target variables for all provinces and territories or for the Canada total. They contrast with the within-province tables discussed above in only one respect: they show the increase in target variables not only for the province in which the initial spending
Text table 3
increase occurs, but also the increases in all other provinces and territories. For instance, an increase of $100 million in the demand for products of Crop and Animal Production industry will increase Newfoundland's wages and salaries by $29 million, as shown in the previous table, due to both direct and indirect effects. However, additional increases in wages and salaries are expected in other provinces and territories because the increase in demand is transmitted to all related industries in the economy. As a result, wages and salaries are expected to rise, directly and indirectly, by $39 million nation wide. Comparison with the earlier table shows that about ($39 - $29 =) $10 million of this increase is expected in other provinces and territories outside of Newfoundland.
Availability of data
a) Input-Output Tables
The Input-Output Tables of this publication are stored in CANSIM at the Small (S) level, Medium (M) level and Link (L) level of aggregation.
L Level C $
M Level C $
S Level C $
b) Gross Domestic Product at basic price
The time series of Gross Domestic Product (GDP) at basic price from 1961 to 2001 are also available on CANSIM at S, M, and L levels of aggregation.
Time series: 1961-2001
Type: hierarchical (S,M,L), current dollars (C$)
The GDP data are presented in CANSIM hierarchical format in the order of S, M and L aggregations. The two digits NAICS code represents the S level, the three digits NAICS code denotes the M level and the four digits NAICS code indicates the L level of aggregation.
Text table 4
2. Input-output division
For the period 1961-2001, the following data in current dollars are available from the Input-Output Division on request: