For the analysis of industry linkages and economic impacts, it is more meaningful to represent the Use Table in Industry by Industry (IxI) form or Product by Product (PxP) form. These symmetric tables form a basis from which a wide range of macroeconomic models and impact analyses can be constructed. The fundamental purpose of the Input-Output framework is to analyse the interdependence of industries in an economy. A key output from this analysis is the production of multipliers.

Please note these published results are designated as “experimental” statistics to reflect their status as new official statistics undergoing evaluation. The statistics are published to encourage feedback from users and to build in quality at an early stage in line with the Code of Practice for Official Statistics.

Users should adopt a cautious approach to the use of the multipliers which are prototype in nature.

## Industry by Industry Table

In order to calculate "multipliers" NISRA has produced an Industry by Industry (IxI) symmetric Input-Output Table which is derived from the Supply-Use Tables (SUTs). This table shows the amount purchased by each industry from industries in the rows to produce the demand of the column. The IxI table can be an important component of macro-economic modelling and analyses. The IxI table derived from the 2018 SUTs can be accessed below.

NI Supply-Use Tables and Multipliers 2018

Further information on the multipliers produced from the IxI table is presented below.

## Multiplier Analysis

If there is an increase in **final use **for a particular industry output, we can assume that there will be an increase in the output of that industry, as producers react to meet the increased use; this is the **direct effect**. As these producers increase their output, there will also be an increase in use on their suppliers and so on down the supply chain; this is the **indirect effect**. As a result of the direct and indirect effects the level of household income throughout the economy will increase as a result of increased employment. A proportion of this increased income may be re-spent on final products, this is the **induced effect**. The ability to quantify these multiplier effects is important as it allows economic impact analyses to be carried out on the NI economy.

## Multipliers - Assumptions & Limitations

Multipliers derived from Input-Output Analytical Tables are a useful tool and provide a framework for estimating economic impacts and changes to the domestic economy. Input-Output Analytical Tables (and their Multipliers) are based on a strict set of assumptions/limitations, which users should familiarise themselves with to ensure the application of the multipliers is reasonable. These Multipliers are designated as experimental to reflect the fact that they are still under development and we welcome any feedback or comments from users.

The overarching assumption is that the interdependency between inputs and outputs is solely based on the structure and composition of the NI economy in the relevant reference year.

Some of the key assumptions include: ** Responsive Supply Chain - **relevant industries in the supply chain will vary their own production to meet the change in the demand for their outputs.** Fixed Price Supply Chain** – there will be no price adjustment or supply constraints.** Fixed Production patterns** – input proportions are fixed in the production process.** Industry Homogeneity** – a change in production for an industry/product classification is based on the characteristics of all production within that classification.** Local Supply Conditions** – does not make an adjustment for local industries who may purchase inputs from outside the region.

As a result, Input-Output Analytical Table Multipliers are not well suited, for example, to estimate very large scale changes to the economy or aspects of the economy experiencing significant or rapid changes from the reference year. Input-Output modelling is also not suited to assessing supply side shocks (for example, changes in labour productivity).

## Type I and Type II multipliers

**Supplier linkage** effects **or Type I **multipliers cover direct and indirect effects only. They estimate the impact on the supply chain resulting from a producer of a certain product increasing their output to meet additional demand. In order to meet the additional demand the producer must in turn increase the goods and/or services they purchase from their suppliers to produce the product in question. These suppliers in turn increase their demands for goods and services and so on down the supply chain. These Type I multipliers are also referred to as direct and indirect effects. **Type I multipliers may potentially** **underestimate the effect on the economy as they do not estimate induced effects. **

In addition to direct and indirect effects,** Type II **multipliers also cover induced effects.

Type II multipliers for Northern Ireland have been produced for the first time for reference years 2017 and 2018.

Multiple methodologies can be used to calculate Type II multipliers, however the approach we have used is the Miller and Blair Type II methodology.

Different multipliers measure the effect on different policy targets:

**The Northern Ireland Type I and Type II multipliers and Industry by Industry tables for 2017 and 2018 can be accessed below. **

NI Supply-Use Tables and Multipliers 2018

**Output Multipliers and Effects**

The ** output multiplier** is the ratio of direct plus indirect output changes (and induced if Type II multipliers are used) to the direct output change.

The ** output effects **is the direct plus indirect (and induced if Type II effects are used) output impact for every £1m change in final demand for that sector.

*For output, these two definitions (multipliers and effects) produce the same numbers, because a £1m increase in final demand always leads to a £1m increase in output.*

**GVA Multipliers and Effects**

The **GVA multiplier** is expressed as the ratio of the direct and indirect (and induced if Type II multipliers are used) GVA changes to the direct GVA change. In other words, if you have the change in GVA for the industry, the GVA multiplier can be used to calculate the change in GVA for the economy as a whole. This multiplier should therefore be multiplied with the £ change in GVA.

The ** GVA effects **describes the amount of GVA directly and indirectly (and induced if Type II effects are used) supported in Northern Ireland due to a

**£1m**increase in final demand. This multiplier should therefore be multiplied with the £ change in final demand.

**FTE Employment Multipliers and Effects**

The **employment multiplier** is the ratio of direct plus indirect (and induced if Type II multipliers are used) employment changes to the direct employment change.

The ** employment effects **is the direct plus indirect (and induced if Type II effects are used) employment impact for every £1m change in final demand for that sector.

Please note that care must be taken when interpreting multiplier analysis of industries that contain a large number of self employed persons. Unfortunately robust data for self employed at the required industry level was not available for NI.

**Examples of how the multipliers can be used to estimate the effect of a change in output, GVA and Employment, as well as examples on how an increase in final demand may impact on the NI Economy are presented below.**** **

The direct impacts upon an industry are often presented in monetary terms, i.e. increased exports or a change in Government spending. NI multipliers are used to estimate the following hypothetical scenarios:

**Output example (using Industry output multipliers)** Using 2018 figures, for an increase in final demand of

*Multipliers:*

**£5m**for the

**‘59-60 Motion Picture, Video & TV Programme Production, Sound Recording & Music Publishing Activities & Programming And Broadcasting Activities’**Industry, the direct impact on this industry will be a requirement to increase its total output by £5m, to meet the additional final demand. A change in final demand will always equal the change in direct output as goods and services must be produced in order to be sold.

To estimate the subsequent indirect effects on the industry’s suppliers, we multiply the direct impact (£5m) by the Type I industry output multiplier for this industry grouping (

**1.49**) giving

**a total of direct plus indirect impact on output of £7.43m.**

Using the Type II industry output multiplier for this industry grouping (

**2.07**), we can estimate the

**total of the direct, indirect and induced impacts on output by multiplying it by the direct impact (£5m) to give £10.33m.**We can then work out the induced impact on output by subtracting the direct plus indirect impact worked out using the Type I multiplier above (£7.43m) from the total of the direct, indirect and induced impacts using the Type II multiplier (£10.33m),

**resulting in an induced impact on output of £2.90m**

*Effects***:**This means that an increase in

**£5m**of final demand for the

**“59-60 Motion Picture, Video & TV Programme Production, Sound Recording & Music Publishing Activities & Programming And Broadcasting Activities’”**Industry is estimated to support

**£7.43m of output**using Type I effects (Direct & Indirect), and

**£10.33m of output**using Type II effects (Direct, Indirect & Induced).

**GVA example**** (using GVA Industry multipliers)** ** Multipliers**: A hypothetical change in demand for the “

**10 Food Products**” industry group that leads to a £10m increase in GVA for that industry therefore has a direct impact of £10m. Using 2018 figures, to estimate the subsequent indirect effect on this industry’s suppliers given the increase in GVA, we multiply the direct GVA impact (£10m) by the Type I GVA multiplier for this industry grouping (

**2.45**) giving

**a total of direct plus indirect impact on GVA of £24.51m**.

Using the Type II industry GVA multiplier for this industry grouping (

**3.84**), we can estimate the

**total of the direct, indirect and induced impacts on GVA by multiplying it by the direct impact (£10m) to give £38.41m.**We can then work out the induced impact on GVA by subtracting the direct plus indirect impact worked out using the Type I multiplier above (£24.51m) from the total of the direct, indirect and induced impacts using the Type II multiplier (£38.41m),

**resulting in an induced impact on GVA of £13.90m.**

*Effects***:**This means that an increase in

**£1m**of final demand for the

**“10 Food Products”**Industry is estimated to support

**£0.58m of GVA**using Type I effects (Direct & Indirect), and

**£0.92m of GVA**using Type II effects (Direct, Indirect & Induced).

**Employment example (using FTE employment multipliers)**** Multipliers**: For example if an increase in final demand for a firm operating in the

**‘27 Electrical Equipment’**Industry led to the firm employing an additional

**20 Full Time Equivalent Employees (FTEs)**, the direct impact on employment will be 20 FTEs.

Using 2018 figures, to estimate the indirect employment effects i.e. the effects on suppliers of that industry to the economy, we multiply the direct employment impact (20 FTEs) by the Type I industry employment multiplier for the grouping (

**1.88**) giving a

**total of direct plus indirect employment impact of 37.5 FTEs**. By subtracting the direct FTE increase, we can identify the

**additional indirect**number of FTEs supported throughout the NI economy as

**17.5**.

Using the Type II industry employment multiplier for this industry grouping (

**3.00**), we can estimate the

**total of the direct, indirect and induced employment impacts in FTEs**by multiplying it by the direct impact (20) to give

**60.1 FTEs.**We can then work out the induced employment impacts in FTEs by subtracting the direct plus indirect impact worked out using the Type I multiplier above (37.5) from the total of the direct, indirect and induced impacts using the Type II multiplier (60.1),

**resulting in an induced employment impact of 22.6 FTEs**supported throughout the NI economy

**.**

*Effects***:**This means that an increase in £1m of final demand for the

**‘27 Electrical Equipment’ Industry**is estimated to support

**7.2 FTEs**across the economy using Type I effects (Direct & Indirect), and

**11.6 FTEs**across the economy using Type II effects (Direct, Indirect & Induced).

Generally, you will most likely see multipliers rather than effects used for employment due to data availability.

**DfE Research Bulletin**

In December 2018, the Economic Account Project authored a short paper (as part of the DfE Research Bulletin Series, 18/9) which provided a brief overview of Input-Output Analytical Tables and their Multipliers. The article can be accessed here.

**Additional Reading **

Other useful sources of information relating to Multipliers derived from Input-Output Analytical tables: