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New Zealand’s Production Structure: An International Comparison - WP 03/16

4.5  Cumulated primary input coefficient for compensation of employees[23]

Wages and salaries are a large component of value added (Figure 2). To assess the relative importance of industries in terms of their contribution to employment, the cumulated primary input coefficient for compensation of employees can be used. The coefficient measures the effect of an increase in gross output by one industry on wages and salaries for the economy as a whole. It takes into account direct payments by an industry for salaries and wages and indirect payments, i.e. compensation of employees by industries that produce commodities used in that industry. The cumulated primary input coefficient for primary input l of industry j,EIj is calculated as follows

(17)    

where PIj denotes the primary input l absorbed by industry j, PIk is the primary input l absorbed by final demand category k and K denotes the number of final demand categories. M = [mIj] with M = PwB, where Pw = is the matrix of industries’ primary inputs weighted by their total gross output, i.e. .

The cumulated primary input coefficient for compensation of employees is shown in Figure 15. In New Zealand, it is largest for construction; trade, restaurants, hotels; education, health, social services etc; public administration; and dwellings, property and business services. The coefficients for these industries ranges between 0.12 (construction) and 0.5 (dwelling, property and business services); that is, given the existing production structure, doubling gross output of construction would increase compensation of employees for the whole economy by 12 percent. The coefficient for compensation of employees for construction; trade, restaurants, hotels; education, health, social services etc; public administration; and dwellings, property and business services is also generally large in the other countries. The contribution of agriculture, forestry, fishing is relatively low in all countries.

Figure 15: Cumulated primary input coefficients of industries for compensation of employees
Figure 15: Cumulated primary input coefficients of industries for compensation of employees: Australia.

Notes

  • [23]See New Zealand (1989) for more details on cumulated primary input coefficients.
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