A note on linkage between gross value added and final use at the industry level

ABSTRACT

Gross value added (GVA) is a common indicator of an industry/sector’s economic performance. While an economy’s total GVA is always equal to its total final use, an individual industry/sector’s GVA is usually not equal to its final use. Yet an accounting identity between an industry/sector’s GVA and the final use of multiple industries/sectors can be established by a gross value added-final use (GVA-FU) matrix. This paper derives the GVA-FU matrix in the Leontief demand-driven model and its equivalence in the Ghosh supply-driven model and interprets the matrix from different perspectives. The GVA-FU matrix can help policymakers and practitioners better understand an industry/sector’s percentage of gross domestic product (GDP) – the underlying measure behind the United Nations Sustainable Development Goals (SDGs) Indicator 14.7.1 – from the demand-side perspective and facilitate its proper use for policy and planning. The GVA-FU matrix can become a standard component of the input–output apparatus for multiple applications.

KEYWORDS:

• Input–output model
• gross domestic product (GDP)
• gross value added (GVA)
• final use
• sustainable development goals (SDGs)

Acknowledgements

The highly valuable comments and suggestions of three anonymous reviewers and the editor on the manuscript are acknowledged.

Disclosure statement

No potential conflict of interest was reported by the author(s).