An input-output analysis: linkages vs leakages

Abstract

Resorting to input-output analysis, intersectoral linkages are investigated. For such assessment, the distinction between imported and domestically supplied inputs, which has been disregarded so far in empirical analysis, is crucial. Besides improving the measurement of domestic linkages, it also allows to evaluate the importance of international trade in the production process. Moreover, the interaction between domestic linkages and leakages resulting from international trade can also be analysed. Using as case study a small open economy, the Portuguese one, we assess sectoral interdependence and trade effects for individual sectors as well as for the economy as a whole.