The relationship between final consumption and economic sectors – a structural path analysis approach
Dang Thi Thu Trang/ MICA 2018 Proceedings
International Conference on Marketing in the Connected Age (MICA-2018), October 6th, 2018
Danang City, Vietnam
The Relationship Between Final Consumption and Economic
Sectors – A Structural Path Analysis Approach
Nguyen Huu Nguyen Xuana*
aUniversity of Economics – The University of Danang, 71 Ngu Hanh Son Street, Danang City, Vietnam
A B S T R A C T
There are many ways to measure the importance and the level of interdependent impact between
consumption and production, in which structural path analysis is considered as one of the most powerful
methods. Application of extended structural path method captures not only the linkages within the production
system but also the transfer of the induced effect into different layers of impacts. Final demand purchases
initiate production processes that ultimately lead to grow sectoral output into various channels. This evaluates
the role of consumers' decisions in determining the production scale. The previous findings show that it is
necessary to require two approaches for policy to focus on sustainable production in order to fully identify
important sectors in conditions of limited resources.
Keywords: structural path analysis; extended input-output model; final consumption; sectoral output.
1. Introduction
An economy is considered as a major set of interrelated economic production and consumption activities. If
the quality and the consumption model are determined by the size of the product structure, quality as well as the
nature of the product, speed of capital rotation, production rotation helping enterprises increase their
competitiveness and improve their position in the market will be intensified by consumption. It is highly
recommended that consumption plays an enormous role in the development of society, enterprises and
employees’ interest nowadays. In terms of social aspect, the consumption contributes to the balance between
supply and demand, ensure the stability of the economy. Any change resulting from the final consumer demand
for the products of industries can also lead to the process of social reproduction, which increases the productivity
of the enterprises. The expansion of production of enterprises raises the incomes of employees, hence improving
the living standard of the population. The change in income again affects the final consumer demand of the
household groups. This spread takes place in the economy through many rounds with less impact than previous
ones. The calculation of the overall effect of these turns helps to measure the relationship among the economic
components including production, distribution and consumption.
Utilizing robust methods such as structural path analysis (SPA) is able to dependably reflect the complexity of
connections in an economic system. This method not only reveals the linkage in the production system, but also
refers to the spread of influence into different channels of effects. Structural path analysis is used for both input-
output model (I/O model) and social accounting matrix (SAM) data frames. For conventional I/O models, this
* Corresponding author. E-mail address: [email protected]
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Dang Thi Thu Trang/ MICA 2018 Proceedings
method is limited to illustrate only the connections among production areas. The combination of SPA with
extended I/O model is more commonly applied in research drawing attention to the importance and impact of
final consumption in the economy. The advantage of the extended I/O model is the ability to consider
consumption accounts of household groups as endogenous variable instead of the exogenous one and the
traceability chains of intermediate purchases instigated by final demand through layers of the production system
the using SPA. Theoretically, a final demand purchase transfer an infinite number of supply chains as tree-like
structures through the economy. For this reason, studies using SPA are impossible to exhaustively quote SPA
results, only the most important paths by ranking (Peters, G. P., 2006; Acquaye, A. A.,2011). Almost all less
important supply chains expressing only a small fraction of total output, to the point of rendering them
individually negligible, can together represent a considerable share of total sectoral output (Wiedmann, T.;
Lenzen, 2007). Compared with the SAM model, extended I/O model would probably be a more economical
solution to research on the issues related to production and consumption, because the data served for
constructing SAM framework is collected to be quite complicated and expensive. Despite these strong points, the
I/O model has certain limitations including fixed technology and unrestricted supply. So, prices do not play an
important role in this model.
In Vietnam, since the transition from subsidy to market economy, the relationship between production and
consumption has been the subject of considerable research. Besides the quality of products, designs, types and
prices of goods, enterprises should assess the role of selling products from the results of market research. Based
on that, they are able to decide that will they produce to meet those needs in accordance with their production
ability? In addition, rely on final consumer demand economic sectors would probably predict and construct new
production strategies accounting to related factors, such as market, supply situation, sector development...in
order to make their business activities more effective. As differences in the obvious roles and responsibilities of
upstream and downstream when viewed through final production and consumption attributions of sectoral
outputs increasingly come to the attention of policy-makers, there is an ever greater need to understand how and
why such differences occur. Therefore, the study focusing on the role of final consumption on the production
activities of the economic sectors in an exhaustive manner is essential.
The purpose of this article is to introduce the possibility of applying SPA into Leontief model to determine
the link between consumption and production in the economy that has not been investigated clearly in Vietnam
before. This relationship, in particular, is represented in the extended I/O model in an attempt to underline the
final consumption role of household groups in improving the output of the economy. Apart from the direct and
indirect effects on sectors revealed in common SPA, this extension also indicates the induced effects of
consumption. These latest effects come from the raise of income in production expansion caused by new
demand, which generates new demand, and so on. The addition of ones overcomes the restrictive input–output
assumption relied on the idea that the income creation chain. Our extension of the SPA method provides a more
precise understanding about which sectors are most affected by consumption factors, not only directly and
indirectly but also inductively, is extremely helpful at making management policies more effective.
The rest of the paper is organized as follows. Section 2 describes the extended input–output model of
consumption as a basis for the structural path analysis. The results of the empirical investigation are in section 3.
Finally, a conclusion section ends the paper.
2. Methodology
2.1. Extended input-output model
Conventional I/O model only considers production for all the income creation mechanisms. Correspondingly,
exogenous shocks affecting sectoral output involve all the possible alterations in consumer demand, while the
subsequent transmission from new output to new income and new consumption and so on is overlooked. For
extended I/O model, the key point of the interactions among the various parts of the macroeconomic system
reflect that the increase in the size of production of the sectors requires increased demands for labor in addition
to other intermediate inputs and thus create additional employment and income for workers. These extra incomes
are able to be used for household consumption and this additional consumption in turn will stimulate production.
All of which can be taken into account constructing the extended I/O model by moving households' decisions
from the final (exogenous) demand to the input–output matrix.
Thus, the expanded I / O model is completion of a simple I / O model adding one line and one column as
shown in the table 1. In which, households consume products and services purchased from the economic and
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own household sectors to reproduction of labor power, represented in n+1 column. Labor is provided for
industries in the economy and for household groups themselves, expressed in the n+1 line.
Table 1. Extended input – output model
Intermediate consume
Final consume
GO
X11 X12
X21 X22
...
Xi1 Xi2
...
X13
X23
…
…
X1n
X2n
C1
C2
…
Ci
...
G1 I1
G2 I2
X1 - M1
X2- M2
X1
X2
…
Xi
…
Xi3
…
…
Xin
Gi
Ii
Xi- Mi
Xn1 Xn2
X13
Xnn
Cn
Gn In
Xn- Mn
Xn
L1
K1
P1
T1
L2
K2
P2
T2
L3
K3
P3
T3
…
…
…
…
Ln
Kn
Pn
Tn
X
1,n1
X2,n1
...
X
n,n1
GI
X1
X2
X3
…
Xn
Xn1,1, Xn1,2,...,Xn1,n
Xn1,1, Xn1,2,...,Xn1,n
Then matrix of direct technology coefficients of extended I/O model (
representing the cost coefficient of labor by sectors ( R ), a column vector representing the household final
consumption coefficient for the products of the sectors ( C ), the cost coefficient of the services provided by
the households themselves (h) despite of the matrix of technical coefficients A of typical I/O model.
A
) consists of a line vector
H
H
A
H
C
A
(1)
HR
h
The linear relationship among the production value, the direct technology coefficients and the final
consumption in our used extended input–output model can be expressed as follows:
I A X F
(2)
Or:
X I A 1 F
(3)
The elements of the matrix (I - Ᾱ)-1 are called the multipliers of the extended I/O matrix, which capture the
overall effects on both the sectoral production and consumption from unitary and exogenous changes in final
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Dang Thi Thu Trang/ MICA 2018 Proceedings
demand. Aside from Type I income multipliers showing direct and indirect effects, the extended model also
provides Type II ones (Miller, R.E., 1980) indicating induced effects.
2.2. Extension of the SPA Method
SPA was introduced into economics and regional science by Defourny and Thorbecke and Crama et al.
(1984) and gradually becomes useful tool in researching economic issues related to energy (Treloar et al., 1997,
2001a, 2001b), carbon (Wood, 2008), water (Maria, L.L., 2014) and other physical quantities through industrial
networks. Compared to the traditional multiplier decomposition proposed by Stone (1978) and Pyatt and Round
(1979), SPA is more detailed and more apparently represents explicit the direction of spillover effects in addition
to their magnitude.
The inverse in Eq. (3) can be written as its Taylor expansion (Waugh FV., 1950) leading to deeper knowledge
into the analysis of the preceding multipliers:
(I − Ᾱ)−1 = I + A + A2 + A3 + · · ·
(4)
Matrix of direct technology coefficients of extended I/O model (Ᾱ) in Eq. (4) can be split into two parts,
which reflect different economic relationships, related to production (matrix A - this is also a matrix of technical coefficients A of
typical I/O model) and consumption (matrix B -including vectors representing the cost coefficient of labor by sectors (
H
R ), the household final consumption coefficient for the products of the sectors (
provided by the households themselves (h), as follows:
H
C ), and the services
A
0
0
0
0
H
C
A A B
(5)
HR
h
By taking this distinction into account of Eq. (4), we can write:
(I − Ᾱ)−1 = I + (A + B) + (A + B)2 + (A + B)3 + …..
= I + (A1 + A2) + (A2 + 2AB + B2) + (A3+ 3A2B +3AB2 + B3) + …
(6)
This expression irons-out interdependencies between sectors into linear supply chains, that are activated when exogenous shocks to
production and consumption appear and is an extension of the traditional SPA decomposition. On the right-hand side of Eq. (4),
each element in the expansion denotes a different production layer (PL) or tier. We define a production layer
(PL) as each term in the power series expansion, PLt = (A)t. Each additional layer, PLt+1 = PLtA, represents the
production of intermediate products in (t + 1)th production tier used as inputs into the preceding layer.
Because of aggregation of many industries, factories, and processes in each sector, so some sectors may be
more aggregated than others. Our representation is able to become more realistic for lowly aggregated IO models
or
less
realistic
for
number
of
sectors
decreases.
Note
that
the
difference
between
the proposed SPA approach and the traditional one responds to:
(I – (A+B))−1 - (I − A)−1 = I + (A + B) + (A + B)2 + (A + B)3 + ….. – (I + A + A2 + A3 + · · ·)
(5)
= B + 2AB + B2 + 3A2B +3AB2 + B3
This indicates the added impacts in according with each of the infinite layers by the extended SPA. These
new impacts involve those transferred from private consumption decisions (B, B2 , B3…) and the connections
between sectors and private consumption (2AB, 3A2B, 3AB2…). The sum of all these terms in Eq. (5) in fact,
measures the induced effects that obtain the new income flows added by the expanded SPA method.
3. Analysis of results
To empirically implement the model, an input – output table for Vietnam economy with data for the year
2012 was used to calculate matrix A. For computational convenience, the author has added up 164 sectors listed
in the 2012 I/O table into 14 basic ones, including: Agriculture (code1), Forestry (code 2), Fisheries (code 3),
Mining (code 4), Processing and Manufacturing (code 5), Electricity and Water (code 6), Building (code 7),
Wholesale, Retail trade and Repair of motor vehicles and motorcycles (code 8), Warehouse and Transportation
Services (code 9), Accommodation and Catering services (code 10), Information and Communication services
(code 11), Financial, Banking and Real estate services (code 12), Public service (code 13), Other services (code
14).
3.1.
Output multipliers of conventional and extended I/O model
Leontief Inverse Matrix of two models are defined in Appendix A.1 and A.2. The empirical results show that
the output multipliers measured by the expanded I/O model are significantly larger ones measured by the
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conventional I/O model and achieved about 145% increase. Consequently, household expenditures are
considered as component, joining into the spread of the impacts in Vietnamese economy. The analysis indicates
that although Fisheries (7,58), Building (7,55), Processing and Manufacturing (7,4), Warehouse and
Transportation Services (6,87), Agriculture (6,8) lead in terms of output multipliers in extended I/O model,
consumption of household groups makes the greatest impact based on increased output on other industries
(figure1) encompassing Public service (233,6%), Retail trade and Repair of motor vehicles and motorcycles
(205,3%), Other services (203%), Forestry (176,6%), Banking and Real estate services (172,4%). It can be said
that, the linkage between final consumption and later industries is appreciated higher than the rest of the
economy.
250.00
200.00
150.00
100.00
50.00
0.00
1
2
3
4
5
6
7
8
9
10 11 12 13 14
Sector
Fig.1. Output, generated in extended I/O model (%)
Diffusion effect of sectoral output
3.2.
Diffusion effect of sectoral output is defined as the column sums in the matrices of output multipliers in each
channel of impacts. These values imply the amount of output, generated in an attempt to satisfy a unitary
increase in the exogenous shock of the corresponding field. The differences between both model in terms of
sectoral outputs throughout the layers and its importance in the different chains are represented in tables 2,3 and
4. It can be seen that in the traditional model, almost all multiplier effects are activated from the first stages and
sharply down in the next stages, while ones are activated from the second and subsequent stages in the extended
model except Processing and Manufacturing industry and Information and Communication services. This is
obviously reveals an interesting role of different layers between the two frameworks. Specifically, early layers
played less important role in relation to ones away from the initial shock when consumption is taken into account
in the multiplier process, and impacts propagated from later layers are greater than the conventional SPA. These
values illustrate an opposite role of layers in the induced effects of final consumption as an element of the
multiplier process to the general results relied on the rule that early layers have higher influence in terms of the
impacts involved.
Table 2. Diffusion effect of sectoral output using traditional SPA method (Vietnamese dong)
1st
layer
2nd
layer
3rd
layer
4th
layer
5th
layer
6th
layer
7th
layer
8th
layer
9th
layer
10th
layer
Others
layers
Industry
Total
0.58
0.49
0.71
0.39
0.27
0.53
0.27
0.16
0.37
0.18
0.10
0.26
0.12
0.07
0.17
0.09
0.04
0.12
0.06
0.03
0.08
0.04
0.02
0.06
0.03
0.01
0.04
0.02
0.01
0.03
0.04
0.02
0.06
2.82
2.23
3.41
1
2
3
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Dang Thi Thu Trang/ MICA 2018 Proceedings
0.55
0.79
0.28
0.70
0.35
0.63
0.61
0.66
0.35
0.34
0.35
0.38
0.56
0.17
0.50
0.20
0.45
0.40
0.45
0.16
0.20
0.23
0.26
0.38
0.11
0.35
0.13
0.31
0.27
0.31
0.09
0.14
0.16
0.18
0.26
0.08
0.24
0.08
0.21
0.19
0.21
0.06
0.09
0.11
0.12
0.18
0.05
0.16
0.06
0.15
0.13
0.15
0.04
0.06
0.07
0.08
0.12
0.04
0.11
0.04
0.10
0.09
0.10
0.03
0.04
0.05
0.06
0.08
0.02
0.08
0.03
0.07
0.06
0.07
0.02
0.03
0.03
0.04
0.06
0.02
0.05
0.02
0.05
0.04
0.05
0.01
0.02
0.02
0.03
0.04
0.01
0.04
0.01
0.03
0.03
0.03
0.01
0.01
0.02
0.02
0.03
0.01
0.02
0.01
0.02
0.02
0.02
0.01
0.01
0.01
0.04
0.06
0.02
0.05
0.02
0.05
0.04
0.05
0.01
0.02
0.02
2.74
3.56
1.81
3.31
1.94
3.06
2.87
3.10
1.79
1.98
2.08
4
5
6
7
8
9
10
11
12
13
14
Total
7.396 4.887 3.308 2.252 1.537 1.050 0.717 0.490 0.335 0.229 0.494 22.70
Source: results are calculated from data of the 2012 I / O table for Vietnam economy
According to results in table 4, while the diffusion effects in the other sectors increase slightly, Public, Other
services and Wholesale, Retail trade and Repair of motor vehicles and motorcycles express exert high growth on
sectoral output (13%, 11,5%, 10,7% of total from the second layer, corresponding), caused by the induced
effects of consumption that cannot be reflected in the traditional method. This applies useful information about
the connections captured by the SPA methodology because of the distinction between direct, indirect and
induced effects. Channels to Public, other services, Wholesale, Retail trade and Repair of motor vehicles and
motorcycles transfer an enormous impact in extended SPA because of the induced effects despite of inflows to
ones generate low effects in traditional SPA because of their direct and indirect. Conversely, the rest of economy
generate a significantly impact effects in traditional SPA because of its direct and indirect effects while the
induced effects caused by consumption in their product are relatively low in extended SPA, for example the
Processing and Manufacturing. These sectoral differences must be taken into account in the definition of a
sustainable production system.
Table 3. Diffusion effect of sectoral output using extended SPA method (Vietnamese dong)
1st
layer
2nd
layer
3rd
layer
4th
layer
5th
6th
7th
8th
9th
10th
Others
layers
Industry
Total
layer layer layer layer layer layer
1
2
0.58
0.49
0.71
0.55
0.79
0.28
0.70
0.35
0.63
0.61
0.66
0.35
0.34
0.35
7.40
0.65
0.57
0.74
0.58
0.67
0.37
0.73
0.60
0.66
0.64
0.63
0.44
0.69
0.66
8.64
0.53
0.47
0.60
0.48
0.59
0.29
0.60
0.45
0.54
0.53
0.53
0.35
0.51
0.48
6.96
0.49
0.43
0.54
0.43
0.52
0.27
0.54
0.43
0.49
0.48
0.47
0.33
0.49
0.46
6.37
0.42
0.38
0.47
0.37
0.46
0.23
0.47
0.37
0.42
0.42
0.41
0.29
0.42
0.40
5.53
0.37
0.34
0.42
0.33
0.40
0.20
0.42
0.33
0.37
0.37
0.36
0.25
0.38
0.35
4.90
0.33
0.30
0.37
0.29
0.35
0.18
0.37
0.29
0.33
0.32
0.32
0.22
0.33
0.31
4.31
0.29
0.26
0.32
0.26
0.31
0.16
0.32
0.25
0.29
0.29
0.28
0.20
0.29
0.27
3.80
0.25
0.23
0.29
0.23
0.27
0.14
0.29
0.22
0.26
0.25
0.25
0.17
0.26
0.24
3.34
0.22
0.20
0.25
0.20
0.24
0.12
0.25
0.20
0.23
0.22
0.22
0.15
0.23
0.21
2.94
1.66
1.50
1.86
1.47
1.78
0.91
1.85
1.44
1.66
1.64
1.61
1.12
1.66
1.56
21.73
5.80
5.17
6.58
5.19
6.40
3.15
6.55
4.92
5.87
5.77
5.75
3.88
5.60
5.29
75.92
3
4
5
6
7
8
9
10
11
12
13
14
Total
Source: results calculated from data of the 2012 I / O table for Vietnam economy
Table 4. Induced effect generated in diffusion process (% of total)
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Dang Thi Thu Trang/ MICA 2018 Proceedings
1st
layer
2nd
layer
3rd
layer
4th
layer
5th
layer
6th
layer
7th
layer
8th
layer
9th
layer
10th
layer
Others
layers
Industry
1
2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
6.8
8.0
7.3
8.5
6.4
6.0
5.7
4.8
6.9
8.8
6.3
7.0
6.0
7.2
10.3
8.9
7.3
8.1
7.0
6.2
6.2
4.6
7.4
8.3
6.7
7.1
6.3
6.5
9.7
8.6
7.4
7.8
7.5
6.3
6.9
4.4
7.7
7.7
7.0
7.3
6.7
6.1
8.9
8.0
7.5
7.6
7.8
6.5
7.2
4.4
8.0
7.5
7.2
7.3
6.9
5.9
8.6
7.8
7.5
7.4
8.0
6.5
7.5
4.3
8.1
7.2
7.3
7.4
7.0
5.7
8.3
7.6
7.6
7.3
8.1
6.6
7.7
4.3
8.2
7.1
7.4
7.4
7.1
5.6
8.2
7.5
7.6
7.2
8.2
6.6
7.8
4.3
8.3
7.0
7.4
7.5
7.2
5.5
8.0
7.4
7.6
7.1
8.3
6.7
7.9
4.2
8.4
6.9
7.5
7.5
7.2
5.4
7.9
7.4
7.6
6.9
8.5
6.7
8.1
4.2
8.5
6.7
7.6
7.5
7.4
5.2
7.7
7.2
3
5.6
4
5.6
5
3.1
6
5.4
7
6.1
8
10.7
5.6
9
10
11
12
13
14
Total
6.4
4.6
7.4
13.0
11.5
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source: results calculated from data of the 2012 I / O table for Vietnam economy
3.3.
Absorption effect of sectoral output
Table 5,6 and 7 show the absorption effects, calculated by summing up each row in the output multiplier
matrices, reflects the increase in the sectoral output used by the corresponding sector when the final demand
rises by 1 monetary unit in all sectors. The total amount of output consumed indicated in table 5,6, and 7 give
more different outcomes than in the diffusion effects. It is noticeable that, in the traditional model multiplier
effects are especially remarkable in Agricultural because they are activated from the second stages while others
are activated from first ones. It can be said that, the indirect linkage play a more important role than direct one in
effect spread, generated by exogenous shocks. The role of layers removed from the initial impact, are more
important in the induced effects of final consumption as an element of the multiplier process to sectors involving
Agriculture, Fisheries, Processing and Manufacturing, Mining, Wholesale, Retail trade and Repair of motor
vehicles and motorcycles, Warehouse and Transportation Services, Accommodation and Catering services, and
Other services. Meanwhile, early layers have higher influence to others.
Table 5. Absorption effect of sectoral output using traditional SPA method (Vietnamese dong)
1st
layer
2nd
layer
3rd
layer
4th
layer
5th
layer
6th
layer
7th
layer
8th
layer
9th
layer
10th
layer
Others
layers
Industry
Total
1
2
0.40
0.39
0.16
0.28
4.03
0.20
0.13
0.27
0.27
0.09
0.36
0.55
0.52
0.23
0.14
0.23
2.83
0.09
0.04
0.20
0.13
0.03
0.13
0.23
0.42
0.15
0.10
0.16
1.95
0.06
0.02
0.14
0.08
0.02
0.05
0.12
0.30
0.10
0.07
0.11
1.33
0.04
0.01
0.10
0.06
0.01
0.02
0.08
0.21
0.07
0.05
0.08
0.91
0.03
0.01
0.07
0.04
0.01
0.01
0.05
0.14
0.04
0.03
0.05
0.62
0.02
0.00
0.05
0.03
0.00
0.01
0.10
0.03
0.02
0.04
0.43
0.01
0.00
0.03
0.02
0.00
0.00
0.02
0.07
0.02
0.01
0.02
0.29
0.01
0.00
0.02
0.01
0.00
0.00
0.02
0.05
0.01
0.01
0.02
0.20
0.01
0.00
0.01
0.01
0.00
0.00
0.01
0.03
0.01
0.01
0.01
0.14
0.00
0.00
0.01
0.01
0.00
0.00
0.01
0.07
0.02
0.01
0.03
0.29
0.01
0.00
0.02
0.01
0.00
0.00
0.02
3.29
2.07
1.61
2.04
14.02
1.48
1.22
1.92
1.66
1.17
1.60
2.14
3
4
5
6
7
8
9
10
11
12
0.03
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13
14
0.20
0.06
7.40
0.07
0.01
4.89
0.04
0.01
3.31
0.03
0.00
2.25
0.02
0.00
1.54
0.01
0.00
1.05
0.01
0.00
0.72
0.01
0.00
0.49
0.00
0.00
0.33
0.00
0.00
0.23
0.01
0.00
0.49
1.40
1.09
Total
22.70
Source: results calculated from data of the 2012 I / O table for Vietnam economy
Table 6. Absorption effect of sectoral output using extended SPA method (Vietnamese dong)
1st
layer
2nd
layer
3rd
layer
4th
layer
5th
layer
6th
layer
7th
layer
8th
layer
9th
layer
10th
layer
Others
layers
Industry
Total
1
2
0.40
0.39
0.16
0.28
4.03
0.20
0.13
0.27
0.27
0.09
0.36
0.55
0.20
0.06
7.40
0.90
0.25
0.30
0.29
4.25
0.16
0.11
0.39
0.30
0.26
0.24
0.53
0.16
0.49
8.64
0.80
0.20
0.22
0.27
3.81
0.13
0.07
0.30
0.21
0.12
0.14
0.38
0.12
0.20
6.96
0.76
0.17
0.21
0.25
3.40
0.12
0.06
0.29
0.20
0.13
0.11
0.34
0.10
0.23
6.37
0.67
0.15
0.18
0.22
3.00
0.10
0.05
0.25
0.17
0.10
0.09
0.29
0.09
0.18
5.53
0.59
0.13
0.16
0.19
2.64
0.09
0.05
0.22
0.15
0.10
0.08
0.25
0.08
0.17
4.90
0.52
0.11
0.14
0.17
2.33
0.08
0.04
0.19
0.13
0.08
0.07
0.22
0.07
0.14
4.31
0.46
0.10
0.13
0.15
2.05
0.07
0.04
0.17
0.12
0.07
0.06
0.20
0.06
0.13
3.80
0.41
0.09
0.11
0.13
1.81
0.06
0.03
0.15
0.10
0.06
0.05
0.17
0.05
0.11
3.34
0.36
0.08
0.10
0.12
1.59
0.05
0.03
0.13
0.09
0.06
0.05
0.15
0.05
0.10
2.94
2.64
0.57
0.72
0.85
11.74
0.40
0.20
0.97
0.66
0.42
0.35
1.12
0.35
0.73
21.73
9.51
3.23
3.44
3.91
41.65
2.46
1.81
4.33
3.39
2.50
2.62
5.19
2.33
3.54
75.92
3
4
5
6
7
8
9
10
11
12
13
14
Total
Source: results calculated from data of the 2012 I / O table for Vietnam economy
A comparison of the two models reveals that consumption–income channel has more significant impact on
the Processing and Manufacturing, and Agricultural sector (table 7) than the rest of economy. In which, the
importance of Processing and Manufacturing in the induced effects is highest in all layers. This suggests that the
product of Processing and Manufacturing sector is needed for consumption of the economy but its output
generated from demand of other economic sectors than itself. The differences of sectoral output in the absorption
effects indicate the necessary of completing the circular flow of income by adding final consumption.
As a whole, the comparison the results between the two SPA methods give both obviously quantitative and
qualitative differences. Multiplier effects of the extended SPA, which is higher compared with the traditional
one, emphasize the role of final consumption to the spread of the influence of exogenous effects throughout the
economy. On the other hand, the outcome also indicates the relative importance of sectors and layers change
significantly when consumption accounting is added to a SPA approach. This also clarifies the degree of
linkages among economic entities, including final consume of household groups and sectors as well as the nature
of ones (direct, indirect, induced) spread in the economic system. In addition, the measurement of the impact
magnitude of diffusion and adsorption processes circulated in different pathways serves as the basis for policy
formulation and implementation supporting the production process or regulating consumer behavior to meet the
objective of economic development in each period.
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Dang Thi Thu Trang/ MICA 2018 Proceedings
Table 7. Induced effect generated in absorption process (% of total)
1st
2nd
3rd
4th
5th
6th
7th
8th
9th
10th Others
Industry
layer layer layer layer layer layer layer layer layer layer layers
1
2
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
10.1
0.6
4.3
1.6
38.0
1.7
1.9
5.0
4.5
6.2
3.1
8.0
2.4
12.7
10.6
1.4
3.4
2.8
50.9
1.9
1.4
4.5
3.5
2.8
2.5
7.0
2.0
5.3
11.3
1.7
3.5
3.2
50.2
1.8
1.2
4.6
3.4
3.0
2.2
6.3
1.9
5.6
11.6
2.0
3.4
3.5
52.2
1.9
1.1
4.5
3.3
2.4
2.0
5.9
1.8
4.5
11.7
2.2
3.4
3.6
52.5
1.8
1.1
4.5
3.2
2.4
1.9
5.7
1.7
4.3
11.9
2.3
3.4
3.7
53.0
1.8
1.0
4.5
3.2
2.2
1.8
5.5
1.7
4.0
11.9
2.4
3.4
3.8
53.2
1.8
1.0
4.5
3.1
2.2
1.8
5.4
1.7
3.8
12.0
2.5
3.3
3.8
53.4
1.8
1.0
4.5
3.1
2.1
1.7
5.3
1.7
3.7
12.0
2.5
3.3
3.8
53.6
1.8
1.0
4.5
3.1
2.1
1.7
5.3
1.6
3.6
12.1
2.6
3.3
3.9
53.9
1.8
0.9
4.5
3.1
2.0
1.7
5.2
1.6
3.4
3
4
5
6
7
8
9
10
11
12
13
14
Total
0.0
100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source: results calculated from data of the 2012 I / O table for Vietnam economy
4. Discussion and Policy relevance
We applied structural path analysis to the national production chains instigated by the Vietnam economy. By
comparing the traditional and extended models separately we were able to highlight the description of the
transmission channels of the exogenous impacts. Through the SPA we identified the production paths, provides a
deeper knowledge of inter-sectoral linkage and interdependencies among sectors and final consumption.
Analyzing production perspectives adding final consumption, we can determine the accumulated impacts for
sectoral output. Accordingly, this information is of extreme essential when demand - pull and supply - push
policies are to be individually applied to the different sectors of production. We found that an absorption effect
in which the Processing and Manufacturing and Agricultural are supplying the greatest input for whole economy
and further reinforced with the addition of the induced effects. It should be pointed out that Vietnam develops
modernization technology in Processing and Manufacturing, and Agricultural processes in order to improve their
business efficiency. However, the rebound effects can mitigate the results expected by these policies based on
technological improvements in above sectors. So, the policy maker is able to propose tax in order to keep the
cost of use the same. Furthermore, the strong point of our expanded SPA model expressed in which it captures
not only the direct and indirect effects but also induced effects, so it illustrates a better quantification of total
output from improved efficiency in sectoral output in Processing and Manufacturing, and Agricultural in
different channels. In addition to, this method is able to identify which sector has the greatest implicit influence
on overall output of Processing and Manufacturing, and Agricultural sectors.
However, mechanism behide diffusion and adsorption processes in both processes under assumptions of the
model and in the context of Vietnam I/O data 2012 encompass some limitations that should be kept in mind. The
extension of the SPA method compared with the traditional ones, increases the total output of economy,
generated by induced effect in both diffusion and adsorption processes. Obviously, the source of input to the
server for the response output in order to meet the final demand thus is not limit. On the other hand, the price
doesn't play an important role in the model as said above, so the application of the proposed SPA to the quantity-
oriented input–output is suitable in the short-run.
Interestingly, the induced effect, derived from the use of the extended SPA method in two diffusion and
adsorption processes shows the different roles of final consumption decisions to the production of industries. If,
during the diffusion process the change in the consumer decision of one sector influences the output performance
of other sectors, the adsorption process indicates how the output of a particular industry effected by the
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Dang Thi Thu Trang/ MICA 2018 Proceedings
consumption decision of the entire economy. This is useful when policy makers regulate consumer behavior to
ensure that the output of the any sector or of the economy, corresponding to the most appropriate strategy.
5. Conclusion
In summary, our research applied two different SPA approaches in elucidating the reasons behind sectoral
output in an economy. To this end, the SPA is a useful tool to illustrate the linkages between consumption and
production by considering final consumption of household groups as endogenous account of the I/O. The
findings of comparison the two models suggest that extended SPA method capture not only the direct and
indirect effects, but also induced ones. The analysis drawn by the traditional and the proposed (extended)
approach evaluate the importance of various pathways since multiplier process effects are displaced into layers
that are more remote from the initial impact. Our results add to the research literature on relationships among
entities in the Vietnamese economy by acquiring SPA method and offers additional scientific basic to policy
development.
Appendix A: Leontief Inverse Matrix of conventional I/O models
Sector
1
2
3
4
5
6
7
8
9
10
11
12
13
14
1.41
0.04
0.03
0.06
1.02
0.03
0.01
0.08
0.04
0.01
0.01
0.05
0.02
0.00
0.06
1.58
0.01
0.02
0.43
0.01
0.01
0.03
0.02
0.01
0.01
0.02
0.01
0.00
0.22
0.06
1.18
0.09
1.58
0.04
0.01
0.11
0.05
0.01
0.01
0.05
0.02
0.00
0.15
0.04
0.03
1.20
1.07
0.03
0.01
0.06
0.04
0.01
0.01
0.06
0.03
0.01
0.35
0.09
0.08
0.14
2.57
0.04
0.01
0.11
0.06
0.01
0.01
0.06
0.03
0.00
0.06
0.02
0.01
0.11
0.44
1.07
0.00
0.04
0.02
0.00
0.00
0.02
0.01
0.00
0.20
0.06
0.05
0.10
1.50
0.03
1.07
0.11
0.05
0.01
0.01
0.07
0.04
0.00
0.07
0.02
0.02
0.03
0.45
0.03
0.01
1.03
0.04
0.02
0.02
0.15
0.04
0.00
0.18
0.05
0.04
0.07
1.31
0.03
0.01
0.08
1.15
0.01
0.01
0.08
0.04
0.00
0.24
0.04
0.05
0.07
1.12
0.05
0.01
0.08
0.04
1.01
0.01
0.12
0.03
0.00
0.15
0.04
0.04
0.06
1.11
0.04
0.01
0.08
0.05
0.01
1.39
0.06
0.04
0.01
0.04
0.01
0.01
0.02
0.27
0.02
0.04
0.02
0.02
0.01
0.02
1.29
0.03
0.00
0.08
0.02
0.02
0.03
0.51
0.02
0.01
0.04
0.04
0.03
0.06
0.05
1.06
0.02
0.09
0.02
0.02
0.04
0.66
0.02
0.01
0.04
0.03
0.01
0.02
0.05
0.02
1.03
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Source: results calculated from data of the 2012 I / O table for Vietnam economy
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Dang Thi Thu Trang/ MICA 2018 Proceedings
Appendix B. Leontief Inverse Matrix of extended I/O models
Household
groups
Sector
1
2
3
4
5
6
7
8
9
10
11
12
13
14
1.88 0.52 0.70 0.55 0.80 0.33 0.70 0.53 0.62 0.69 0.58 0.40 0.62 0.59
0.12 1.66 0.15 0.11 0.18 0.07 0.15 0.10 0.13 0.13 0.12 0.08 0.12 0.12
0.17 0.15 1.32 0.15 0.22 0.09 0.19 0.15 0.17 0.19 0.16 0.12 0.18 0.17
0.20 0.16 0.23 1.33 0.27 0.19 0.25 0.17 0.20 0.21 0.19 0.13 0.19 0.19
3.09 2.47 3.74 2.86 4.56 1.65 3.70 2.52 3.29 3.14 3.00 1.87 2.90 2.85
0.11 0.09 0.11 0.10 0.11 1.11 0.11 0.11 0.10 0.12 0.11 0.08 0.11 0.10
0.05 0.06 0.05 0.05 0.05 0.03 1.11 0.06 0.05 0.05 0.05 0.07 0.06 0.06
0.26 0.21 0.30 0.22 0.29 0.14 0.30 1.21 0.25 0.26 0.25 0.16 0.25 0.24
0.17 0.15 0.19 0.16 0.18 0.10 0.19 0.17 1.27 0.17 0.17 0.12 0.19 0.16
0.11 0.11 0.11 0.09 0.11 0.06 0.12 0.12 0.11 1.11 0.11 0.09 0.15 0.12
0.09 0.09 0.09 0.08 0.08 0.05 0.09 0.10 0.09 0.09 1.46 0.08 0.14 0.10
0.28 0.24 0.29 0.26 0.28 0.16 0.32 0.38 0.30 0.35 0.27 1.47 0.32 0.29
0.09 0.08 0.09 0.09 0.09 0.05 0.11 0.11 0.10 0.09 0.10 0.09 1.15 0.09
0.19 0.18 0.19 0.16 0.18 0.11 0.20 0.19 0.18 0.18 0.18 0.15 0.23 1.22
0.74
0.14
0.22
0.22
3.27
0.12
0.07
0.29
0.21
0.16
0.12
0.36
0.11
0.29
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Labour
Income
1.48 1.46 1.54 1.28 1.42 0.87 1.57 1.48 1.41 1.44 1.35 1.15 1.71 1.56
2.33
Source: results calculated from data of the 2012 I / O table for Vietnam economy
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