Sectoral productivity gains in two regional economies: key sectors from a supply-side perspective

The traditional literature to identify key sectors, based on an input–output demand-side approach, evaluates the impact on sectoral production of the exogenous inflows to activities. This approach has been the centre of an important debate, based on the lack of robustness of the results provided, that questions their usefulness for planning decisions. In this paper, we propose a novel method to analyse the key sectors of an economy that differs from the traditional approach in two aspects. First, we use a supply-side approach comprising exogenous increases in sectoral productivity. Second, we use a computable general equilibrium model that captures the complete relations between the economic agents and their optimisation behaviour. The computable general equilibrium model, which assumes perfect competition and cleared markets of goods and factors, allows to identify those sectors with the greatest impact on consumer’s welfare, which will be considered the key sectors of the economy. In particular, we apply our method to detect key sectors in two regional Spanish economies (Catalonia and Extremadura).