Demand for construction products and the money flows of construction: An input-output analysis

This study applied input-output analysis to determine the changes in the demand and relative shares of different types of construction as well as its indirect impacts. The study examined separately the impacts of fluctuations in domestic construction and exports on building contracting and the construction products industry and the money flow they create between the economic units of the national economy. Several studies conducted in the 1990s and official statistical material produced by Statistics Finland were used as input data for the study. The official national accounts and related input-output statistics regard construction as a separate industry. Construction costs include costs incurred at the construction site. The builder s costs are not included in site costs. In this study, the scope of the official industry concept was expanded by taking into account the builder s costs and the value-added and capital-transfer taxes paid by the clients of the construction sector. The broader approach had a significant impact on the distribution of the costs of construction, and the income produced by it, between economic units. Naturally, the mentioned cost items had no impact on the demand for construction products. Building construction was dealt with as 26 system units while civil engineering was divided into 10 system units. System units allowed taking into account construction's internal technological and market-share changes. The study showed that the construction products industry as whole came through the drastic fall in demand in the early 1990s in better shape than building contracting. The metal industry was the subsector of the construction products industry that had most export success and benefited from the emphasis on renovation in building construction. The study also showed that higher taxes and tax-like charges had increased the public sector's share of income while households' share had decreased. Mechanization of civil engineering reduced the share of wages paid to households and increased the costs of operating machinery.