Decomposition Approaches to the Identification of Change in Regional Economies

This paper reports the results of ongoing research into the measurement of economic structure and structural change using two approaches to the decomposition of regional economic structure. Because of its wealth of detail on the structure of interindustry interactions, the input-output table provides the basis for analysis. Two methods are applied to the Washington input-output tables for 1963, 1967, and 1972 to uncover changes in structure that occurred over the period. The first approach applies Theil's entropy decomposition methods to a nine-fold partition of forty-nine industrial sectors grouped according to primary, secondary, and tertiary categories. The second method, Sonis' extreme tendency decomposition, hierarchically orders transactions in a regional economy. Each method can provide important insights into regional economic structure. Although the results of the test application of the decomposition methods are not definitive, they reveal aspects of structural change that otherwise could not have been noted. Future applications should reveal the utility of the two approaches in a broader context. The issues raised throughout these applications accentuate the heuristic value of this area of research.