Input–Output Structural Decomposition Analysis: A Critical Appraisal

TLDR

Input–output structural decomposition analysis has become a major analytical tool over the past decade. The study reviews SDA’s development, compares it to other methods, presents alternative derivation principles, explores IO table decompositions, and identifies complications and unresolved issues. The authors review SDA’s development and its relation to other methods, present alternative derivation principles for SDA estimating equations, and explore various decompositions of changes in IO tables. They find that SDA lacks rigorous economic theory grounding but propose suggestions for establishing it.

Abstract

Over the past decade, input–output structural decomposition analysis (SDA) has developed into a major analytical tool. We review the development of SDA and its relationship to other methodologies. We present the fundamental principles of alternative approaches to deriving SDA estimating equations and explore the various decompositions of changes in IO tables. We also identify several complications and unresolved issues. Most importantly, we find that a rigorous grounding in economic theory is lacking for SDA, but we are able to offer some suggestions as to how it might be established.