Economic Growth, Material Flows and the Environment: New Applications of Structural Decomposition Analysis and Physical Input-Output Tables by Rutger Hoekstra


Economic Growth, Material Flows and the Environment: New Applications of Structural Decomposition Analysis and Physical Input-Output Tables by Rutger Hoekstra . Cheltenham , UK : Edward Elgar , 2005 , 215 pp., ISBN 9781845421892 , £65.00

The use of input–output (I-O) analysis for environmental life cycle and material flow analysis is expanding. Hoekstra's book facilitates this development with a lucid description of how physical flows can be modeled alongside monetary transactions in the economy. The approach is instructional in nature, taking the reader through the basics of I-O analysis and the construction of conventional monetary, physical, and hybrid I-O tables. Particularly valuable are the many numerical examples that reinforce basic concepts, such as the Leontief inverse, and techniques, including impact analysis and hybrid I-O models. This book is a must-read for researchers conducting work in this area and also would appeal to industrial ecologists interested in learning I-O analysis and its relationship with physical flows.

The book contains ten chapters built around the theme of modeling the interactions between the economy and the environment. After the introductory chapter, the second chapter begins with a nice primer on I-O analysis that sets up the main focus of the book: modeling monetary and physical flows in the economy using hybrid I-O analysis. While physical I-O models date back to the original research by Leontief, they have been supplanted by transactions-based monetary tables developed by government statistical agencies around the world. A hybrid I-O model is a compromise incorporating both physical and monetary units. The main advantage of physical models is that they allow a more accurate description of technology and ensure mass and energy balances. The author argues that hybrid models offer the same advantages. Measurements of physical flows, however, often are not accomplished with the same degree of rigor as monetary transactions. The third chapter presents the underlying methodology for constructing I-O models and provides a good background for understanding the various national I-O tables, such as commodity-by-industry tables, published by the Bureau of Economic Analysis in the U.S. Department of Commerce.

The next two chapters round out the core analytical chapters of the book. Physical I-O models are the focus in chapter 4. The author provides a survey of previous models and a discussion of three variants of physical I-O models, as well as an extended numerical example. He also illustrates how physical I-O tables (PIOTs) can be used to estimate environmental indicators of dematerialization and for impact analysis. The fifth chapter develops hybrid I-O tables for the iron and steel industry, clearly laying out the required steps and adjustments necessary to get nonnegative tables. Negative entries in an I-O table can arise due to measurement errors, nonuniform prices, heterogeneous production processes, and aggregation errors. Given the use of a hybrid table, only the last two sources of error occur, and the author describes the procedures used to correct negative elements that arise in this application.

The last half of the book uses structural decomposition analysis (SDA) on the hybrid I-O tables to establish the determinants of materials use. One should consider the analysis by Dietzenbacher and Stage (2006), however, in judging the findings presented in this study. Nevertheless, Hoekstra's main result, that dematerialization can be reversed due to technological change, is intuitively plausible. In summary, this volume provides a valuable introduction to
hybrid I-O analysis and therefore should be useful to the growing number of researchers working with these techniques.