Input-Output Analysis

The input-output analysis, initiated by Wassily Leontief in 1936, can be regarded as a first application of the principles of general equilibrium theory to the empirical analysis. Its goal is the study and quantification of the structural relations between the economic sectors that constitute the economy of a country. The methodological approach consists of representing the structural relations between industries by means of linear equations, whose coefficients are obtained empirically. When these coefficients are stable (eg when constant returns to scale prevail), equilibrium relations appear as the solutions to linear equation systems. The key tool for the computation of these coefficients is the input-output table, that is briefly presented below.1