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William B. Beyers Department of Geography University of Washington Dr. Ta-Win Lin

Structural Change in the Induced Effects Model of the Washington State Economy: Evidence from Seven Input-Output Models. William B. Beyers Department of Geography University of Washington Dr. Ta-Win Lin Office of Financial Management State of Washington. I. Introduction

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William B. Beyers Department of Geography University of Washington Dr. Ta-Win Lin

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  1. Structural Change in the Induced Effects Model of the Washington State Economy: Evidence from Seven Input-Output Models William B. Beyers Department of Geography University of Washington Dr. Ta-Win Lin Office of Financial Management State of Washington

  2. I. Introduction II. Background Literature Data Base – History of the Washington Models & Standardization Procedures Results A. Change in Output B. Change in Interindustry Structure, in the induced effects linkage system, and output distribution due to final demand C. Change in Employment Requirements D. Changing Components of Final Demand V. Concluding Comments Outline of Paper

  3. Background • Leontief and Carter’s pioneering research • Early national tests • Early regional tests • The presumption of instability • Early data from Washington State • Early data from other region • Challenges—getting data into a consistent sectoring scheme with constant prices

  4. History of the Washington I/O models • Models benchmarked against 1963, 1967, 1972, 1982, 1987, 1997, and 2002 • Each of these are Economic Census years • Sectoring scheme has changed not only due to changes in SIC and NAICS, but also due to changes in the importance of industries in the state economy, especially the changing relative importance of goods versus services production

  5. The models were first converted to a common sectoring scheme Price indices were developed from BLS national producer price series, and were applied to sales distributions of sectors Excluded from this are estimates for value added and imports, but we will make these estimates soon The roughly 50 sectors in each of the models were found to be comparable at the level of 25 sectors. Standardizing Prices

  6. Sectoring Scheme

  7. Deflator Series

  8. IV. Analyses of Change A. Change in Output B. Change in Interindustry Structure, in the induced effects linkage system, and output distribution due to final demand C. Change in Employment Requirements D. Changing Components of Final Demand

  9. Trends in Output In Broad Sectors 1963-2002

  10. Shares of Output By Broad Sector

  11. Change in Interindustry Structure and Output Distribution due to Final Demand

  12. Share of Intermediate Sales by Broad Sector

  13. Elements of the Induced Matrix$ from 2002 model P.C.E $102.9 Billion 67% of Total earnings Interindustry Transactions $95.1 billion 24% of total purchases Earnings $127.3 billion 32% of total purchases 0

  14. Shares of Intermediate and Personal Consumption Expenditures $1972 Billions

  15. Composition of Inputs

  16. PCE / Earnings Ratios

  17. Mix of Overall PCE

  18. Composition of Personal Consumption Expenditures – Share of total declined from 24% in in 1963 to 11% in 2002

  19. PCE except Services, Trade, FIRE, and Communications

  20. Induced Effects Output Multipliers

  21. Correlations Induced Output Multipliers N=26 for each pair of correlations All are significant at the .01 level Correlations weaken with time

  22. Scattergram of 1963 & 2002 Type II Output Multipliers R2 = .57

  23. Earnings Ratios Induced Effects Models

  24. Correlations of Induced Earnings Multipliers N = 26 for each pair of correlations All are significant at the .01 level As with Output Multipliers, values weaken with time

  25. Output with constant 2002 Final demand

  26. Change in Employment Requirements

  27. Jobs Required to Meet 2002 Final Demands and Output Per Job

  28. Employment Related To 2002 Final Demand

  29. Share of Output Among Major Categories of Demand Tables 6 and 7- Sales in Constant $, and Percentages in this figure

  30. Share of Regional Final Demand

  31. Composition of Regional Final Demand by Aggregate Sector

  32. Share of Export Base

  33. Sectoral Composition of Exports

  34. Conclusions and Future Analysis (1) • This paper provides an unparalleled view of structural change in a region of the U.S. economy • The data reported here may be quite different in other states • Output has had a major realignment since the 1963 Washington Input-Output Model, labor productivity has shown major changes, and the level of exports has risen, particularly to foreign countries

  35. Conclusions and Future Analysis (2) • We need to extend the analysis of non-earnings components of value added • We also need to include estimates of changing imports • We look forward to comments on this paper. • We realize that there are major statistical issues associated with the analyses reported here, but we believe that this paper provides a sound perspective on structural change in a growing regional economy in the United States

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