Entropy estimation and interpretation of the inter‐sectoral linkages of Turkish economy based on Leontief input/output model

Abstract

Purpose

The purpose of this paper is to address an econometric procedure which revises and updates the technical production coefficients of latest Turkish input/output (I/O) table, as new information about sectoral productions become available.

Design/methodology/approach

Both maximum entropy (ME) method, which estimates the technical production coefficients directly, and cross entropy (CE) estimation method using the Turkish 1996 I/O table as prior information are considered. Moreover, some linkage measures both traditional and relatively new ones are calculated and interpreted using the same data.

Findings

Under squared error measure criterion, CE estimation method using the Turkish 1996 I/O table as prior information gives a better statistical fit than the ME method which estimates the coefficients directly. Also, Dietzenbacher and van der Linden method's linkage values are found to be in between those of the Chenery and Watanabe, and the Rasmussen methods for both backward or forward definitions using the Turkish data.

Research limitations/implications

There still remains the job of collecting information about sectoral productions in the year where updating the latest I/O table is to be undertaken in order to complete the design to be used in practice. This paper suggests this vector to be estimated using some proxy or instrumental variables approaches as a topic for further research.

Practical implications

During the last ten years in Turkey, the five‐year state development plans losing their traditional importance and the free markets replacing them may have partly accounted for the highly infrequent constructions of such tables. However, academic researches continue to use them as a basis, and therefore an updating of the latest table using an econometric approach such as that of the paper may be necessary.

Originality/value

If in practice the preparation of a new I/O table is costly and/or difficult without a political need, then an updating scheme may be valuable.

Citation

Özçam, A. (2009), "Entropy estimation and interpretation of the inter‐sectoral linkages of Turkish economy based on Leontief input/output model", Journal of Economic Studies, Vol. 36 No. 5, pp. 490-507. https://doi.org/10.1108/01443580910992401