Structural decomposition analyses: the differences between applying the semi-closed and the open input–output model

The open and the semi-closed input–output model are widely used in impact analysis but usually yield considerably different outcomes. This paper examines whether such differences also exist in structural decomposition analyses. The empirical part considers the decomposition of the growth in gross output and in labor compensation, for China (1997–2007) and for a set of 35 other countries. Our main findings are twofold. First, for gross output growth, both models yield very similar results for the factors they have in common. Therefore, if only the contribution of these common factors is of interest, it does not matter whether the semi-closed or the open input–output model is used. Second, for the analysis of labor compensation growth, both models may yield significantly different results for the labor compensation coefficients. Therefore, if the contribution of changes in labor compensation coefficients is of interest, the semi-closed model is recommended to be used.