Trees of the essential economic structures: A qualitative input-output method

The structure of an economy in the framework of the Input-Output (IO) model is defined by the set of industries within, together with the set of existing links between those industries, the latter determined by the demand and supply of intermediate goods exerted by the producers. Such a structure can be characterized by a subset of those connections between industries, regarded as the essential substructure, whose analysis allows learning some of the fundamental features of the system at large. This paper presents a qualitative method to find that essential productive structure, employing endogenous IO information only. Furthermore, the proposed method has been used to compare two such structures, namely, the United States and Mexico. Results assign structural positions to each sector in each system and describe the way industries influence one another in each economy. As expected, those results confirm that these economies are structurally different, despite existing similarities.