ISSN 2619-0591. Economics. Law. State. 2018. № 2 (2).

UDC 33

PROBLEMS IN USING THE INPUT-OUTPUT MODEL FOR PROJECTING

THE FUTURE DEVELOPMENT OF THE BULGARIAN ECONOMY

Kalinkova Sabrina Vasileva, PhD, Assistant Professor

University of National and World Economy
(1700 Sofia, Student Town, UNWE)
E-mail: [Link]@[Link]

Abstract. For a long time the input-output model (or so called the balance of interbranch connec-
tions) is used in multiple countries for not only forecasting their future development but for planning it. One
of these counties is Bulgaria. After a period of turbulence in the political and economic life, when this tool
was forgotten, today it is popular again. But unfortunately occurs the existence of problems with methodo-
logical and informational character which make it difficult to use the full capabilities of the model.
Keywords: input-output model; balance of interbranch connections; projecting future; problems.

ПРОБЛЕМЫ ИСПОЛЬЗОВАНИЯ МОДЕЛИ «ЗАТРАТЫ-ВЫПУСК»

ДЛЯ ПРОГНОЗИРОВАНИЯ БУДУЩЕГО РАЗВИТИЯ ЭКОНОМИКИ БОЛГАРИИ

Калинкова Сабрина Васильева, PhD, ассистент

Университет национального и мирового хозяйства
(1700 София, Студенческий комплекс)
E-mail: [Link]@[Link]

Аннотация. В течение длительного времени модель «затраты-выпуск» (или так называе-

мый баланс межотраслевых связей) используется во многих странах не только для прогнозирования
их будущего развития, но и для его планирования. Одной из таких стран является Болгария. После
периода нестабильности в политической и экономической жизни этот инструмент был забыт, се-
годня он снова набирает популярность. Но, к сожалению, возникают проблемы методологического и
информационного характера, затрудняющие использование всех возможностей модели.
Ключевые слова: модель «затраты-выпуск»; баланс межотраслевых связей; проектирова-
ние будущего; проблемы.

The problems associated with the use of the balance of interbranch connections (input-output mod-
el), on the one hand, can be divided into problems with methodological character and problems with in-
formative character on the other hand.
Choosing a model for constructing symmetric input-output tables
The existing conflict between the manufactured products and the industries that produce these prod-
ucts in the framework of the use of the input-output method stands out as methodological problems in two
directions. The first strand relates to the methodological problems concerning the size of the symmetrical
table. The second strand represents an even more complex methodological problem, which is related to the
choice of the model on the basis of which the symmetrical tables are constructed.
Information in product tables describes existing technological links between products, how these
products are produced. These tables do not take into account the sectors (industries) in which the products
concerned are created. In contrast, industry tables contain information that expresses the existing relation-
ships (relationships) between the different sectors (industries). And the basis for the characterization of these
relationships is the information on the mutual use of production, created in each industry.
Existing specific features clearly indicate that it is not possible to designate a model for constructing
symmetric input-output tables, which model should be valid for all cases and research purposes. It is for this
reason that the choice of model for the construction of symmetric tables is formed as one of the main problems

© Kalinkova Sabrina Vasileva, 2018

Калинкова Сабрина Васильева, 2018
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(one of the main challenges) in the process of using the symmetric input-output tables, on the one hand, in
relation to the study of the development in one economic system, on the other hand, to design the necessary
and desirable future development of the same system.
According to the methodology developed and provided by the European Statistical Office for the
construction of symmetric input-output tables, there are four models on the basis of which this transfor-
mation can be carried out. According to the Eurostat Manual four models can be used for this purpose. Mod-
el A – each product is produced in its own specific way, irrespective of the industry in which it is produced;
Model B – Each industry has its own way of production, regardless of its product range; Model C – Each
industry has its own sales structure, regardless of its product range; Model D - each product has its own sales
structure, regardless of the industry in which it is produced [1, p. 297]
At present, most countries construct and use product tables in the development of Model B to con-
struct symmetric input-output tables. This is the model that focuses on the specific technology used in the
production process and not on the finished product itself. The model is also known as The Stone method [6,
pp. 39-41]. The good results achieved using this model have been confirmed by recognized researchers such
as Pieter Kop Jansen and Thijs Ten Raa [2, pp. 213-227].

Changes in the nomenclature of the represented sectors - basic methodological problem to use the
balance of inter-branch relations
The functioning of the single internal market within the European Union's Integration Community
requires the availability of the statistical standards to be used for the collection, transmission and publication
of national or Community data. Only in this way would individual businesses, financial institutions, admin-
istrations and all other actors involved in the internal market have reliable and comparable statistical infor-
mation. In this connection, it is necessary to interpret the different categories of classification of activities in
the Community in the same way in all the Member States of the European Union [5, p. 5].
One of the main methodological problems highlighted in the process of using the input-output model
balance is related to the classification of the sectors presented in the symmetric tables. This problem gets its
manifestation through changes in the sector nomenclature. The information on the functioning of the relevant
national economy collected, processed and provided to the statistical services – both national and European
(Eurostat) – required for the construction of symmetric input – output tables, presents a number of industries.
In 2000-2005, in Bulgaria, the information provided by Eurostat in the cross-sectoral version was
developed for 59 sectors. The principle of unification of economic activities in the industries is presented in
the NACE Rev.1 classifier, which is not up to date. Following the transition to the new classifier (NACE
Rev.2) in 2008, the information provided on the European Statistical Office website related to the implemen-
tation of the cross-sectoral balance sheet was developed for 65 sectors.
According to the new revision of the classifier of economic activities, one industry is defined as a set of all
production units performing similar economic activities. Criteria for the similarity of activities are considered by:
– Production technology;
– The raw materials used;
– The economic purpose of the created production;
– Possibilities of combining production in the vertical;
– The amount and quality of labor.
This methodological problem impedes working with the full nomenclature of represented sectors in
designing the necessary and desirable future of the national economic system. It is not possible, and it is not
correct, to collate information collected and processed by two different methodologies. This would lead to a
distortion of the results obtained, as well as to the creation of an incorrect basis for evolving the necessary
future development of the economic system.
The presented methodological problem poses the necessity of its overcoming in a way that allows the
continuation of the research but at the same time giving correct information, respectively, leading to ade-
quate and faithful results. This is a form of presentation of the information on the activities of each sector
allowing a comparison to be made of the information presented under the NACE Rev.1 classifier and the
information processed and presented under the new classifier (NACE Rev.2).
Overcoming the problem of the number of sectors represented in the balance of the cross-sectoral
balance (symmetric input-output tables) could be overcome in two ways.
The first direction for overcoming the existing problems is related to the use of the aggregate indica-
tors – total gross production volume and total output volume calculated over the whole surveyed period.

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The information obtained provides an opportunity to assess the quality of the development of the national
economy on the basis of aggregated indicators. The results of this type of study do not provide an opportuni-
ty to carry out a deeper study of the development process. Above all, the use of aggregated indicators does
not provide enough information needed to design the desired development of the national economy (the final
output vector).
The second direction of the study related to overcoming the methodological problem is the aggrega-
tion of the represented sectors of the national economy (59 to 19 and 65 to 19 respectively). Only in this way
is it possible to carry out an in-depth study and to obtain information that is a necessary basis for designing
the necessary future of a national economic system.
At the core of this aggregation lies the idea of similar activities carried out by the branches and their
unification. [3, pp. 119-126] Aggregation makes it possible to pool activities on the basis of an accepted
characteristic, which leads to the comparability of the information provided by Eurostat.

Introducing the import vector as a methodological issue

A problem that needs to be considered is import representation in the process of evolving the future
development of the economic system is how to correctly represent the import vector in the balance of inter-
sectoral relations. Vector – The gross (total) output column represents the volume of total output within the
economic system and the directions of its use. At the same time, it does not have information on the structure
and volume of imported production. This information is present as an element in the structure of the final
output vector.

Lack of information on direct capital gains ratios

The problem of the essence of the dynamic aspect of inter-branch relations and the development of a
model for their formalization arises when the task of describing, analyzing and forecasting the links between
producers and consumers in the adjacent production periods is set. Economic turnover is not a one-time act
carried out within one year. It is a combination of interconnected economic operations that are realized over
time.
In this sense, in order for operations related to production, consumption, accumulation and relations
with the rest of the world to be effective, they must be balanced not only within a certain period but also in
adjacent production periods. Moreover, the coordination of operations over time is an important condition
for balancing them in each separate year.
Based on the above, the lack of information provision regarding the gross inflows (b ij) coefficients,
also referred to as dynamic capital coefficients or capital growth rates per unit of growth, is the main infor-
mation problem of the balance of interconnections. Here, it is necessary to clarify that there is a difference
between direct capital intensity and direct capital inflow.
The direct capital ratios express the participation, the investments with the total physical and value
mass of the main means of production per unit of output. At the same time, the direct capital ratios character-
ize the direct relationship between the tangible assets used and the output produced. They express the imme-
diate link between assets and output. It is about the relationship between asset growth on the one hand and
output growth on the other, with both the assets and the output of the same period.
In turn, the direct incremental capital demand expresses the additional inputs made by the product
producing sector, which investments are needed to achieve a unit product j. The lack of information on these
coefficients is due to the fact that the European Statistical Office (Eurostat) itself does not require it from the
individual Member States of the Community.

The quality of the input information for feeding the input-output model as a problem with the de-
sign of the final output vector
A study on the functioning and development of the national economic system cannot ignore the im-
pact of the global economic crisis. Its impact on every economy is reflected in the results achieved by the
various economic sectors and in the aggregated economic indicators of the national economy.
When using the input-output model, a major challenge is the assessment of the quality of the input
for the model. In other words, the statistical data provided by the statistical offices are real and allow their
use in connection with obtaining correct information for future periods.
The up-to-date information published by the Statistical Office of the European Union is questiona-
ble. The data in the supply and use tables, based on which the symmetrical input-output table is constructed,

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is delayed publication. According to the methodology provided by Eurostat, the publication deadline is t + 3
years, t being the year to which the information relates.
In the European Union's flagship paper on the construction of symmetric input-output tables and the
overall content of the model, it is stated that the published information can be considered as up-to-date as it
reflects most of the changes in structure and trends of the economic system caused by the global economic
crisis. For this reason, it can be assumed that the structure of the economic system (vector X) and the output
(Y) vector reflect the correct changes and are valid for a period of several years.
On the other hand, when it comes to the quality of incoming information for powering the model, the
question remains about the correctness of data provided by enterprises for each branch of national statistics.
The data sources in the Bulgarian statistics [4] are:
• Income statement, including statistical annexes;
• Report on production and sales of industrial products;
• Report on the production and sales of energy products;
• Income of construction enterprises by type of construction;
• Revenues from sales of commercial sites by groups of goods;
• National energy balance;
• Natural value balances for main product groups consumed in the process of production activity of
enterprises and divisions;
• Economic accounts of agriculture and natural value balances of agricultural production;
• Annual Statistical Report on Employees and Wages;
• Sampling observations for a statistical description of the economic behavior of specific entities in
the institutional framework of the economic system:
o Surveys on household budgets;
o Surveys of structural business statistics;
o Observations of private farms;

• Annual Accounts:
o Annual report of non-financial enterprises;
o Annual report of non-profit organizations;
o Annual Report of Bank Institutions;
o Annual report of insurance companies and pension funds;
o Annual report of other financial intermediaries;

• Administrative data and balance sheet developments:

o Consolidated State Budget Statement;
o Customs information;
o Tax information;
o Balance of payments.

Data reporting is annual, and the correctness of the content can only be based on the good faith of the
organization to which the data relates and which publishes them. This problem, however, is far beyond the
impact of the researchers. For this reason, the study of the development of a national economic system as
well as the design of the desired future state of the system can only be carried out within the framework of
the information provided by the statistical offices.

***
The disclosure of methodological and informational problems to the use of the balance of inter-
sectoral relations gives rise to the formulation of two important conclusions. The first conclusion focuses on
the existence of critical assessments of the survey model. Exploring the essence of his criticism is the basis
for the in-depth disclosure of the unique capabilities of the cross-industry option. The presentation of the es-
sential characteristics is a kind of "response" to and protection of the instrument from the criticism made.
The second conclusion is that there are problems of methodological and informational nature in the
practice of applying the input-output model balance. Overcoming these problems is a necessary step in the
process of designing future developments through a research tool.

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REFERENCES
1. Eurostat Manual of Supply, Use and Input-Output Tables, 2008, p. 297. (In English).
2. Kop J. P., and T. ten Raa (1990) The Choice of Model in the Construction of Input-Output Coefficients Ma-
trices, International Economic Review, 31, pp. 213-227. (In English).
3. Morimoto Y. On Aggregation Problems in Input-Output Analysis, The Review of Economic Studies, Ox-
ford University Press, 1970, pp. 119–126. (In English).
4. National Statistical Institute of Bulgaria: [Link]. (In English).
5. Regulation (EC) No 1893/2006 of the European Parliament and of the Council of 20 December 2006 estab-
lishing the statistical classification of economic activities NACE Rev.2 and amending Council Regulation (EC) No
3037/90 as well as certain Regulations (EC) on specific statistical domains, p. 5. (In English).
6. Stone R. Input-Output and National Accounts, P., O.E.C.D., 1961, pp. 39-41. (In English).

СПИСОК ЛИТЕРАТУРЫ
1. Eurostat Manual of Supply, Use and Input-Output Tables. – 2008. – p. 297.
2. Kop J. P. The Choice of Model in the Construction of Input-Output Coefficients Matrices / J. P. Kop, T. ten
Raa // International Economic Review, 1990. – 31. – pp. 213-227.
3. Morimoto, Y. On Aggregation Problems in Input-Output Analysis / Y. Morimoto // The Review of Eco-
nomic Studies, Oxford University Press. – 1970. – pp. 119–126.
4. National Statistical Institute of Bulgaria. URL: [Link].
5. Regulation (EC) No 1893/2006 of the European Parliament and of the Council of 20 December 2006 estab-
lishing the statistical classification of economic activities NACE Rev.2 and amending Council Regulation (EC) No
3037/90 as well as certain Regulations (EC) on specific statistical domains, p. 5.
6. Stone, R. Input-Output and National Accounts / R. Stone. – P., O.E.C.D., 1961. – pp. 39-41.

Материал поступил в редакцию 23.10.18.

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