Constant price input-output and productivity surplus

Abstract

In this paper we showed that the results of input-output impact analyses can vary significantly depending on whether current prices or constant prices are used, particularly when the deflation method differed from the conventional double deflation approach. We quantified the transfer of productivity surplus from constant price input-output tables obtained by applying appropriate price indices through a single deflation method. Focusing on the Spanish economy during the period 2010–2019, we analyzed the redistribution of this surplus among sectors. We algebraically defined the rule for distributing productivity gains across sectors in response to an exogenous demand shock. Due to the presence of forward and backward productivity linkages, sectors may experience productivity gains or losses, irrespective of where the demand shock originates.

In this paper we showed that the results of input-output impact analyses can vary significantly depending on whether current prices or constant prices are used, particularly when the deflation method differed from the conventional double deflation approach. We quantified the transfer of productivity surplus from constant price input-output tables obtained by applying appropriate price indices through a single deflation method. Focusing on the Spanish economy during the period 2010–2019, we analyzed the redistribution of this surplus among sectors. We algebraically defined the rule for distributing productivity gains across sectors in response to an exogenous demand shock. Due to the presence of forward and backward productivity linkages, sectors may experience productivity gains or losses, irrespective of where the demand shock originates.