Econometrica: Oct, 1954, Volume 22, Issue 4

The Effect of Structural Matrix Errors on Interindustry Relations Estimates

https://doi.org/0012-9682(195410)22:4<461:TEOSME>2.0.CO;2-9
p. 461-480

W. Duane Evans

The inevitable errors made in empirically quantifying a function system used to represent an economy will carry over and affect estimates derived through use of the system. This may be especially serious if relatively small errors can cumulate to produce large consequences. Some concern with this problem in connection with interindustry relations analysis has been expressed, in part because of the high order of the linear equation systems used. The propagation of errors through computations using interindustry structural matrices is examined. It is concluded that, with reasonable care in quantification, interindustry relations estimates can be made with confidence that structural matrix errors are not only non-cumulative but compensating in effect. The power of this approach is enhanced by an inherent ability to minimize the undesirable effects of data imperfections.