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Competences
> Impact Studies
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Measuring a sector’s economic importance
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The sector impact analysis in brief |
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A sector’s economic importance is about much more than just that sector’s value added. An impact analysis seeks to depict a sector’s overall importance, within the complex structure of a national economy. |
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Measuring direct and indirect effects |
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There are two types of effect associated with a particular sector's economic activity: firstly, the directly measurable effects such as value added, income and employment, and secondly, the indirect effects brought about by demand triggered in other sectors, which also creates value added in the sector in question. When they are reintroduced into the economic cycle, the income, profits and taxes generated by a sector's activities give rise to further indirect effects, which are often termed induced effects. Therefore, in order to make properly informed statements about a sector’s actual overall importance to an economy, we must take account of both the direct and indirect effects. |
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Illustrating effective importance |
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Indirect economic effects are quantified with the aid of input-output models which depict the complex relationships within an economy, from resources (labour, capital and imports) and industrial structures to appropriation (consumption, investments and exports), to ascertain how much gross value added, employment and income can be actually, i.e. directly and indirectly, attributed to a sector's economic activity. Depending on the nature of the entire value added chain and the inter-industry relations, the actual economic effect may be significantly greater than a purely partial consideration of the sector would immediately suggest.
Impact analyses can be conducted to quantify the economic importance of both sectors and of specific demand triggers. As the example below shows, if the indirect effects are overlooked, this may greatly distort the perception of a sector’s importance.
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Contact:
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Michael Grass
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+41 61 279 97 23
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michael.grass@bakbasel.com
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