Abstract
A two-stage standardization and grouping algorithm is applied to a 75×75 submatrix of the 86×86 1967 United States interindustry transaction table. The rows and columns of the submatrix are first adjusted so that they all have uniform sums. Entries of the adjusted table are maximum entropy estimates of flows in an idealized economy, in which all industries produce and consume an equal value of goods. Industries are then aggregated according to whether or not they are connected by chains of links with values equal to adjusted entries, all of which are greater than a given threshold level. Variation of the threshold yields a hierarchical aggregation scheme. Groups of functionally integrated industries can be identified through the examination of a tree diagram (dendrogram) which shows the aggregation results.
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Support for this research was provided by the National Science Foundation under Grant No. SOC 74-23880, “Applications of Graph-Theoretic Clustering and Transaction Flow Analysis in Geography and Regional Science.”
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Slater, P.B. The determination of groups of functionally integrated industries in the United States using a 1967 interindustry flow table. Empirical Economics 2, 1–9 (1977). https://doi.org/10.1007/BF01764717
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DOI: https://doi.org/10.1007/BF01764717