Dundee Discussion Papers in Economics 270: The distribution dynamics of output multipliers in Scotland 1998–2007

In an input-output context the impact of any particular industrial sector is commonly measured in terms of the output multiplier for that industry. Although such measures are routinely calculated and often used to guide regional industrial policy the behaviour of such measures over time is an area that has attracted little academic study.
The output multipliers derived from any one table will have a distribution; for some industries the multiplier will be relatively high, for some it will be relatively low. The recent publication of consistent input-output tables for the Scottish economy makes it possible to examine trends in this distribution over the ten year period 1998 – 2007. This is done by comparing the means and other
summary measures of the distributions, the histograms and the cumulative densities. The results indicate a tendency for the multipliers to increase over the period. A Markov chain modelling approach suggests that this drift is a slow but long term phenomenon which appears not to tend to an equilibrium state.
The prime reason for the increase in the output multipliers is traced to a decline in the relative importance of imported (both from the rest of the UK and the rest of the world) intermediate inputs used by Scottish industries. This suggests that models calibrated on the set of tables might have to be interpreted with caution.