Decomposition of Structural Change into Technology and Price Components: Turkey, 1973–85

The purpose of this paper is to report on an approach to the analysis of intertemporal change in input-output tables in terms of the components of this change with time. We define two alternative forms of decomposition: additive and multiplicative. The multiplicative form is found to have advantages over the additive form: it is not affected by the choice of price-adjusting mechanism and it enables us to define summary measures in the line of for example, direct backward linkages. We apply the methodology to input-output tables for Turkey for 1973 and 1985, and compute the components of total change for 1973–85. We illustrate that, in economies where price changes across industries vary to a great extent, studying structural change first requires the removal of the relative price effects. Otherwise, misleading conclusions regarding the real or technological change are very likely.