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An Introductory Review of Input-Output Analysis in Sustainability Sciences Including Potential Implications of Aggregation

Author

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  • Jonas Bunsen

    (Chair of Sustainable Engineering, Technische Universität Berlin, 10623 Berlin, Germany
    Current address: Fachgebiet für Sustainable Engineering, Technische Universität Berlin, Institut für Technischen Umweltschutz, Sekr. Z 1, Straße des 17. Juni 135, 10623 Berlin, Germany.)

  • Matthias Finkbeiner

    (Chair of Sustainable Engineering, Technische Universität Berlin, 10623 Berlin, Germany
    Current address: Fachgebiet für Sustainable Engineering, Technische Universität Berlin, Institut für Technischen Umweltschutz, Sekr. Z 1, Straße des 17. Juni 135, 10623 Berlin, Germany.)

Abstract

Input-output analysis has become a widely established method in sustainability sciences. It is primarily used in macroeconomic footprint analyses for allocating an economy’s externalities among the agents in that economy based on the agents’ input-output interdependencies. However, databases for input-output analyses are commonly compiled by aggregating data. Aggregation of input-output data inevitably leads to a loss of information and in some instances can lead to misinformed decision-making. The goal of this paper is to provide a simple hands-on numerical introduction to input-output analysis including the potential implications of data aggregation in an original manner. First, the calculation of production-based and consumption-based inventories is introduced based on a dummy 2 × 2 input-output table. Next, the inventories of the 2 × 2 input-output table are compared with the production-based and consumption-based inventories of a corresponding non-aggregated 4 × 4 input-output table. A comparison of the inventories of both dummy input-output tables allows for an exemplary demonstration of inaccurate allocation as a result of data aggregation and to conclude on potential implications for decision-making. Overall, this work offers a succinct and numerically substantiated introductory review of input-output analysis for practitioners in sustainability sciences including the potential implications of aggregation of input-output data. Its simplistic approach sets this work apart from other publications on aggregation in input-output analysis that are founded in economics or econometrics.

Suggested Citation

  • Jonas Bunsen & Matthias Finkbeiner, 2022. "An Introductory Review of Input-Output Analysis in Sustainability Sciences Including Potential Implications of Aggregation," Sustainability, MDPI, vol. 15(1), pages 1-24, December.
    • Handle: RePEc:gam:jsusta:v:15:y:2022:i:1:p:46-:d:1009240
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