An Analysis of the Interdependence between Goods and Service Sectors Using the Internal and External Matrix Multiplier Model

The Korean economy has been characterized as a service economy since the 1990’s. This study concentrates on the service economy and aims to make the relationship between goods and service industries clear from an inter-industrial point of view. To do this, we use input-output analysis.The Leontief inverse is commonly used as the main tool for analysis of the production inducement effect using the input-output tables. However, the usual Leontief inverse tells us only the ultimate total effects but not the relationship between goods and service industries explicitly. Miyazawa (1963) suggested a formula of partitioned matrix multipliers showing the interaction among two or more industry groups. It is called “internal and external matrix multiplier model”. Using this model, we can separate total effects into the internal effects for goods or service industries and the external effects induced to other industries.We will introduce Miyazawa’s interaction model of goods and service industries in the next section. The third section shows empirical result that applied this model in Korean industries, followed by final section where conclusion will be provided