SHIGEMI KAGAWA, GLORIA P. GERILLA, YUICHI MORIGUCHI and HAJIME INAMURA
Abstract. This paper proposes a spatial structural decomposition analysis, based on an inter-country input-output system, to measure the effects of the changes in intra- and inter-country linkages on the embodied energy demand in the concerned country. Applying the
China-Japan inter-country input-output tables for 1985 and 1990 expressed in 1990's constant price to the model, the empirical analysis was done. The empirical results revealed that, considering the
China-Japan inter-country feedback effects, at least between 1985 and 1990, the technological progress in China led to a 39% increase in the total energy requirement in contrast with Lin & Polenske’s results
(1995). Moreover, the technological progress in China slightly contributed to 0.2% increase of total change in the embodied energy requirements in Japan and its contribution to the Japanese energy use structure was extremely low against our expectations.
Keywords: Spatial structural decomposition analysis, energy demand, China,
Japan
*Shigemi KAGAWA, Research Center for Material Cycles and Waste Management, National
Institute for Environmental Studies, Onokawa 16-2, Tsukuba, Ibaraki, 305-0053, JAPAN, Phone:
+81-298-502843, Fax: +81-298-502840, E-mail: kagawa.shigemi@nies.go.jp. Gloria P. GERILLA,
Graduate School of Information Sciences, Tohoku University, Aoba, Aoba-ku, Sendai, 980-8579,
JAPAN, Phone: +81-22-2177497, Fax: +81-22-2177494, E-mail: glo@plan.civil.tohoku.ac.jp.
Yuichi MORIGUCHI, Research Center for Material Cycles and Waste Management, National
Institute for Environmental Studies, Onokawa 16-2, Tsukuba, Ibaraki, 305-0053, JAPAN, Phone:
+81-298-502540, Fax: +81-298-502572, E-mail: moriguti@nies.go.jp. Hajime INAMURA,

Professor, Graduate School of Information Sciences, Tohoku University, Aoba, Aoba-ku, Sendai,
980-8579, JAPAN, Phone: +81-22-2177497, Fax: +81-22-2177494, E-mail: inamura@plan.civil.tohoku.ac.jp. This paper was prepared for the fourteenth International
Conference on Input-Output Techniques, Montréal, Canada, October 10-15, 2002. We thank the
IDE staff for the helpful comments and suggestions about the PPPs and China-Japan inter-country input-output tables for 1985 and 1990.
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1. Introduction
For the study of the causal investigation of the fluctuation in demand and supply throughout the entire economic system, input-output structural decomposition analysis (I-O SDA) has been widely employed nowadays. In fact, in the fields of environmental economics and energy economics, it gives us a number of useful economic and environmental inventories in terms of the sources of the increases or decreases in embodied energy requirements and in embodied air pollutants in various countries such as United States (Rose &
Chen, 1991; Casler & Rose, 1998), China (Lin & Polenske, 1995), Mexico (Gale,
1995), Denmark (Wier, 1998), and Japan (Kagawa & Inamura, 2001).
Unfortunately, these studies were basically focused only on the domestic production structure and did not consider the effects of the changes in inter-country linkages on the energy demand and environment. This obviously imposes various limitations on identifying the effects of the foreign technological changes on domestic energy demand. In this sense, it is natural that the well-known multi-regional input-output model should be connected with the energy/environmental model in order to measure the inter-country linkage effects.
Metzler (1950), Isard (1951), Moses (1955), Chenery & Clark (1959), and
Leontief & Strout (1963) discussed the basic framework of the multi-regional allocation model. After that Polenske (1970) investigated its empirical validity by applying the 1960 interregional input-output table in Japan to the aforementioned model. By comparing the actual and estimated regional outputs, the multi-regional input-output approach has been widely employed to estimate regional multipliers in various fields such as regional science and
3

environmental management. In the same period, Miller (1966) also decomposed the regional output multiplier into intra- and interregional feedback effect by using the multiplication of the interregional accounting matrices and performed a simple numerical experiment. Miller’s idea indicated the direction to the entropy model under the multi-regional input-output framework. More recently, Sonis & Hewings (1993,1997) and
Hewings et al. (1999) greatly contributed not only to the mathematical expansion of hierarchical decomposition analysis but also to its empirical validity. Furthermore, one can see that the application of the graph theory to the hierarchical decomposition analysis is useful for quantifying the various strengths of economic transactions among sectors and/or regions (see for example Schnabl, 1993, 1995; Aroche-Reyes, 1996). In this way, the hierarchical decomposition analysis has been rapidly developed as an analytical tool to understand the internal state of intra- and interregional economic system.
On the other hand, the I-O SDA has also played an important role in the study of the measurement of total factor productivity growth (see Wolff, 1985,
1994; Wolff & Nadiri, 1993; ten Raa & Wolff, 1991; Casler & Gallatin, 1997).
Their empirical results indicated that the I-O based measurement was very useful for decomposing the TFP growth into the primary factor productivity growth, technological changes in terms of primary and secondary products, and final demand shifts. In recent years, the decomposition analysis of growth in regional factor productivity has been performed, as ten Raa & Wolff (1991) and ten Raa (2001) stated the importance of connecting the measurement of
TFP growth with the multi-regional input-output model. For instance,
Oosterhaven & Van der Linden (1997) and Oosterhaven & Hoen (1998) applied
4

the spatial structural decomposition analysis using the inter-country framework to the six European countries input-output tables for 1975 and
1985 (Belgium, Denmark, France, Germany, Italy, and Netherlands). They discussed the sources of the income changes from the viewpoints of trading pattern shifts and the respective domestic production structural changes.
For the inter-country I-O based studies of factor productivity, Dietzenbacher et al.
(2000) decomposed the labor productivity growth between 1975 and 1985 in the above-mentioned six European countries into six sources by using the multiplication of the measurement based on the inter-country input-output model. In Japan, Hitomi et al. (2000) applied the Japanese nine-region input-output table in 1980, 1985, and 1990 to the spatial I-O SDA based on the interregional input-output model. He discussed the sources of the growth in the regional outputs from the viewpoint of the changes in trading pattern, regional production technology, and final demand.
As mentioned above, needless to say, the I-O SDA based on the interregional (inter-country) input-output framework would also be useful for environmental and energy analysis. Thinking intuitively into its usefulness, we can easily understand that it is possible to estimate the effects of the changes in interregional (inter-country) linkages on the energy demand and environment. In this paper, we roughly succeeded to answer mainly the three deeper questions: ( ⅰ ) How much are the effects of the technological progress and final demand shifts between 1985 and 1990 in China on the embodied energy requirements in Japan? ( ⅱ ) In contrast with the analysis, how much are the effects of the technological progress and final demand shifts between
1985 and 1990 in Japan on the embodied energy requirements in China? ( ⅲ )
How much are the effects of the changes in the production technology
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containing the China-Japan inter-country feedback structure on the domestic energy demand. The empirical analysis was performed by using the
China-Japan inter-country input-output tables for 1985 and 1990 made by
Institute of Developing Economies (IDE) in Japan.
Fortunately, Lin & Polenske (1995) estimated the effects of the changes in the Chinese technological changes between 1981 and 1987 on the embodied energy requirements in China and, on the other hand, Kagawa & Inamura
(2001) estimated the effects of the changes in the Japanese technological changes between 1985 and 1990 on the embodied energy requirements in
Japan. Therefore, we will try to discuss by referring to both the effects estimated in this paper and the previous effects.
In the next section, this study is compared with other I-O based energy analysis from the viewpoints of the different methodology. The model is explained in the section 3. In section 4, the basic data and the empirical results of the spatial structural decomposition analysis is shown and the roles of Chinese and Japanese production structure in both energy demand are explained. In section 5, we discuss the empirical results. Finally, section 6 is the conclusion.
2. Comparison with Other Studies
In order to fully understand the feature of our analysis, this study should be compared with other studies from the viewpoints of its different anatomy.
Needless to say, although there are a number of energy analyses employing the CGE model, multi-regression model and so on, only the I-O based
6

energy-environmental analysis is focused on. We took up Yoshioka & Hayami
(1995), Lin & Polenske (1995), Garbaccio et al. (1999), and Kagawa & Inamura
(2001) as the characteristic studies in terms of the Chinese and Japanese energy use structure.
The four studies can roughly be classified as the static and comparative static perspective. The first study focused on the China-Japan international comparison from the viewpoints of the embodied energy requirements and embodied air pollutants in physical base. The most important point is that the analysis was based the identical monetary units by using the PPPs. Hence it was possible to evaluate the changes in the absolute embodied emission level.
The perspective of other studies lies in comparative static analysis. Lin &
Polensle (1995) and Kagawa & Inamura (2001) basically examined the effects of the changes in the commodity technology changes, industrial input structure, industrial output structure (product mix), and final demand shifts on the “embodied energy requirements (intensities)”, while Garbaccio et al.
(1999) estimated the impacts on the “embodied energy requirements per unit of
GDP” by using the Divisia discrete approximations. Especially, speaking about the changes in the Chinese energy use structure, the previous results asserted that the technological progress led to the reduction in both the embodied energy requirements and the embodied energy requirements per unit of GDP. However, considering that the said studies did not estimate the intra- and inter-country linkage effects, we have a doubt about the above-mentioned assertion. Even if the energy-extensive goods in China were exported to Japan, the Japanese production system using them may absorb a number of the energy-intensive goods and/or services from China as the inter-country feedback effects. Hence, it would be clear that the results largely
7

depend on the definition of the international and domestic technological embodiment.
There are mainly three differences in the anatomy. First, since our analysis was based on the I-O framework expressed in both Rmb and Yen, the distortions of the production technology caused by using the PPPs or real exchange rate were completely avoided. This, however, compelled us to evaluate the embodied energy requirements by using different units at the same time. Hence, it was impossible to internationally compare the absolute level of the fluctuations in the embodied energy requirements.
Second, the changes in the input-output system were decomposed into the changes in the non-energy input-output subsystem and energy input-output subsystem. The decomposition technique enabled us to estimate the impacts of the changes in the energy and non-energy demand structure in China on the embodied energy requirements (intensities) in Japan and vice versa.
Third, we estimated the effects of the changes in the embodied production technology containing the inter-country feedback system. As is mentioned in section 3, our analysis revealed whether the technological progress in China and China-Japan inter-country feedback structure led to the increase in the
Chinese and Japanese energy demand or the decrease. Thus findings obviously show the feature of our analysis.
If one considers the energy analysis based on the augmented inter-country input-output system with the endogenous income distribution, the importance of treating the embodied production technology will more and more increase. The reason is clear that the increase in the household consumption in China stimulates the national income in Japan and
8

consequently brings about the energy increase by the rise in the household consumption in Japan. In this sense, it is natural that an emphasis should be placed on the augmented energy model with endogenous income distribution.
In this paper, we did not consider the effects of the changes in the income distribution in the concerned countries.
3. The Model
Let us define the following standard notation first before explaining about the contents of the model.
A CC
  a CC ij
 i, j

1 ,  , n
= domestic technical coefficient matrix in China (Rmb/ Rmb)
A JJ
   ij i, j

1 ,  , n
= domestic technical coefficient matrix in Japan (Yen/ Yen) f C
   i

1 ,  , n
= column vector of final demand in China (Rmb) f J
 f i i

1 ,  , n
= column vector of final demand in Japan (Yen) q C
   i

1 ,  , n
= column vector of commodity outputs in China (Rmb) q J
   i

1 ,  , n
= column vector of commodity outputs in Japan (Yen)

CC
 
I n

A CC
 
1 = Leontief inverse matrix in China

JJ
 
I n

A JJ
 
1 = Leontief inverse matrix in Japan
I n
=  n
 n
 identity matrix n = number of commodities in China and Japan
Here note that the superscripts C and J denote China and Japan respectively.
The superscripts CC and JJ also stand for the domestic circular flow in China and in Japan respectively. Then, it is well known that the total commodity outputs in China and in Japan can be formulated as
9

q C
 
I n

A CC
 
1 f C
 
CC f C
, (1) and q J
 
I n

A JJ
 
1 f J
 
JJ f J
. (2)
In both equations (1) and (2), the inputs of imported goods are treated as an exogenous row vector in value added. In short, these equations represent the non-competitive type system. Subsequently, we shall consider the intra- and inter-country allocation system induced by the foreign production of the imported goods. Defining the input structure of the goods exported from
China to Japan and that exported from Japan to China as
A CJ
(Rmb/Yen) and
A JC
(Yen/Rmb) respectively, we have the following enlarged technical coefficient matrix:
A



A
A
CC
JC
A CJ
JJ


A
. (3)
See the section 3 for employing the irregular technical coefficient matrices expressed in different units. Moreover, following Miller & Blair (1985), the
China-Japan inter-country input-output system can be written as 1

 q q
C
J





I n


A
A CC
JC I n


A CJ
A JJ



1 
 f f
C
J







CC
JC


CJ
JJ



 f f
C
J


(4) where

CC
 
CC

I n

A CJ

JC
 (5)

CJ
 
CC A CJ

JJ
(6)

JC
 
JJ A JC

CC
(7)

JJ
  
-JJ

A JC

CC A CJ


1 , (8) or
10


CC



-CC

A CJ

JJ A JC


1 (9)

CJ
 
CC A CJ

JJ
(10)

JC
 
JJ A JC

CC
(11)

JJ
 
JJ

I n

A JC

CJ
 (12) where 
-CC
and 
-JJ
represent the inverse of 
CC
and 
JJ
. Although the derivation shown in equations (5) ～ (8) are obviously different from that in (9)
～ (12), the respective solutions obtained by the two mathematical derivations are equivalent. The fundamental differences in the derivations of equations (5)
～ (8) and of (9) ～ (12) lie in the interpretations of the inter-country feedback system. The important point in performing the spatial input-output structural decomposition analysis mentioned later is to identify whether the interpretation is required for the concerned multiplier from the viewpoint of the spatial structural changes or not. In our analysis, the target is an energy demand structure. Hence the multipliers related to the sources of the fluctuations in the energy demand structure should be identified accurately.
With the points mentioned above kept in mind, let us consider the total commodity outputs in China and in Japan. From (5) ～ (8) and (9) ～ (12), the total commodity outputs in China can be written as q C
 
CC

I n

A CJ

JC
 f C
 
CC A CJ

JJ f J
(13) or q C



-CC

A CJ

JJ A JC


1 f C
 
CC A CJ

JJ f J
(14) where the first terms on the right-hand side of (13) and (14) denote the
Chinese factor requirements embodied in the Chinese final demand and similarly the second terms describe the Chinese factor requirements embodied
11

in the Japanese final demand. The second terms definitely assert that the final demand shifts and production technology changes in Japan affect the material (non-energy) and energy inputs required for the productive activity in
China. We shall mathematically consider the deeper sources of the final demand shifts and technological changes. Since both equations (13) and (14) are equivalent, we regarded an internal state of the inter-country linkages as the algebraic system described by equation (14) in order to focus on the deeper sources. Another reason is to mathematically derive the effects of the changes in the final demand shifts and the production technology changes on the embodied energy input requirements in China.
In addition, before the derivation, it would be very convenient and useful for the energy analysis to redefine the enlarged technical coefficient matrix as 2
A
 e ne e ne

A




 A
A
A
CC
11
CC
21
JC
11
JC
21
A
A e ne e ne
CC
12
CC
22
JC A
12
A JC
22
CJ A
11
A
A
A
CJ
21
JJ
11
JJ
21
A
A
CJ
12
CJ
22
JJ A
12
A JJ
22






(15) where the subscript 11 denotes the energy inputs required to produce the energy commodities; 12, the energy inputs required to produce the non-energy commodities; 21, the non-energy inputs required to produce the energy commodities; 22, the non-energy inputs absorbed to produce the non-energy commodities. Accordingly, for instance,
A CC
11
represents the input structure of
Chinese energy commodities required to produce the energy commodities in
China and
A JC
21
describes the input structure of Japanese non-energy commodities required to produce the energy commodities in China. Similarly, we can easily understand the meanings of other sub-matrices. e and ne describe the m energy sectors and n-m non-energy sectors respectively. This
12

means that the entire row/column in the matrix
A
shown in equation (3) was rearranged as the groups of the rows/columns related to the energy sectors and non-energy sectors. The corresponding final demand can be naturally written as f


 f f C
J


 e ne e ne





 f
1
C f
2
C f
1
J f
2
J






(16) where f
1
C
and f
2
C are the Chinese final demand sub-vector in terms of energy commodities and of non-energy commodities respectively and f
1
J
and f
2
J
are the Japanese final demand sub-vector in terms of energy commodities and of non-energy commodities. Applying the enlarged technical matrix and final demand vector to (14) and using the appropriate binary operational matrix, we get the column vector of the embodied energy input requirements in China
(
EIR C
) as
EIR C
 e
1

CC f C
 e
1

CC A CJ

JJ f J
(17) where e
1
is the  n
 n
 matrix whose diagonal elements related to the energy sectors are one and whose other diagonal elements and off-diagonal elements are zero. Recalling the allocation mechanism in terms of the commodity outputs in Japan from equations (4) ～ (8), the embodied energy input requirements in Japan (
EIR J
) can also be written as
EIR J
 e
1

JJ A JC

CC f C
 e
1

JJ f J
. (18)
Next, by using the proposed energy model shown in equations (17) and
(18), we shall consider the discrete-time structural decomposition model between time period 0 and 1. Considering the ad hoc growth path by applying
13

the mid-point weights to equation (17), the approximate decomposition form can be obtained as 3

EIR C

1
2 e
1
 

CC f C
0
 
CC f
1
C




CC A CJ
0

0
JJ f
0
J
 
CC A CJ
1

1
JJ f
1
J
 
(19.a)

1
2 e
1


CC
0
 f C
 
CC
1
 f C

(19.b)

1
2 e
1


CC
0

A CJ

0
JJ f
0
J
 
CC
1

A CJ

1
JJ f
1
J

(19.c)

1
2 e
1


CC
0
A CJ
0

JJ f
0
J
 
CC
1
A CJ
1

JJ f
1
J

(19.d)

1
2 e
1


CC
0
A CJ
0

0
JJ
 f J
 
CC
1
A
1
CJ

1
JJ
 f J

(19.e) where subscripts 0 and 1 denote the time period 0 and 1 respectively and  implies the discrete changes between the time periods.
Here note that the high order interaction terms were completely ignored. The first term shown in
(19.a) represents the effects of the Chinese embodied technological changes on the energy requirements in China.
The second term (19.b) describes the effects of the Chinese final demand shifts. The third term (19.c) represents the effects of the changes in the input structure of goods imported from China to
Japan.
The fourth term (19.d) represents the effects of the Japanese technological changes. And finally the fifth term (19.e) gives the effects of the
Japanese final demand shifts. Here, note that the meanings of the words, embodied technological change and technological changes, are altogether different. The former, in short 
CC in equation (19.a), implies the changes in the Chinese input structure containing the input requirements of the Chinese products needed for the production in Japan, while the latter, 
JJ
in (19.d), stands for the changes in the domestic input structure in Japan.
In the same way, considering the ad hoc solutions of the approximate
14

structural decomposition of equation (18), we have

EIR J

1
2 e
1
 

JJ A
0
JC

0
CC f
0
C
 
JJ A
1
JC

1
CC f
1
C
 

JJ f
0
J
 
JJ f
1
J
 
(20.a)

1
2 e
1


0
JJ
 f J
 
1
JJ
 f J

(20.b)

1
2 e
1


0
JJ

A JC

0
CC f C
0
 
1
JJ

A JC

1
CC f
1
C

(20.c)

1
2 e
1


0
JJ A
0
JC

CC f
0
C
 
1
JJ A
1
JC

CC f
1
C

(20.d)

1
2 e
1


0
JJ A
0
JC

0
CC
 f C
 
1
JJ A
1
JC

1
CC
 f C

(20.e) where the first term (20.a) represents the effects of the Japanese embodied technological changes on the energy requirements in Japan; the second term
(20.b), the effects of the Japanese final demand shifts; the third term (20.c), the effects of the changes in the input structure of goods imported from Japan to China; the fourth term (20.d), the effects of the Chinese technological changes; the last term (20.e), the effects of the Chinese final demand shifts.
Equations (19) and (20) are the basic structural decomposition forms based on the mid-point weights.
Moreover, it would also be possible to decompose the effects of the domestic technological changes in detail. In our analysis, by applying additive decomposition techniques to the spatial structural model shown in (19) and
(20), the effects of the technological changes in Japan (or in China) were further decomposed into the effects of the energy technology changes and non-energy technology changes in Japan (or in China). The mathematical operation enables us to estimate the impacts of the energy and non-energy technology changes in China on the embodied energy requirements in Japan.
Of course, in contrast with it, it is also easy to estimate the effects of the energy
15

and non-energy technology changes in Japan on the embodied energy requirements in China. Recognizing the importance of this analysis, we will describe the mathematical operation.
Since it is convenient to use the binary diagonal matrix e
1 as shown in equations (17), (18), let us formulate the detailed decomposition forms by using it. What we can further decompose as the technological changes are the effects of 
CC
, 
JJ
, 
A CC
, 
A CJ
, 
A JC
, 
A JJ
, 
CC
, and 
JJ
. If we hope to stand for only the energy technological components in terms of 
CC
, 
JJ
,

A CC
, 
A CJ
, 
A JC
, and 
A JJ
, it is easy to formulate it as e
1

CC
, e
1

JJ
, e
1

A CC
, e
1

A CJ
, e

A
1
JC , and e
1

A JJ
respectively. The non-energy technological components can also be written by multiplying the respective matrix by e
2
whose diagonal elements related to the non-energy sectors are one and whose other diagonal elements and off-diagonal elements are zero.
However, in order to perform similar decompositions in terms of 
CC
and

JJ
, some mathematical devises are necessary (see for example Afrasiabi &
Casler, 1991; Rose & Casler, 1996; Casler & Hadlock, 1997). Following their decomposition techniques, we have

CC
 
0
CC e
1

A CC

CC
1
 
1
CC e
1

A CC

0
CC
 
0
CC
 
CC
1 e
2

A CC e
2

A CC

1
CC

0
CC
(21.a)
(21.b) where the first terms on the right-hand side of (21.a) and (21.b) represent the domestic energy technology changes in China (or in Japan) and the second terms describe the domestic non-energy technology changes in China (or in
Japan). Hence substituting the decomposition forms in terms of energy technological components described above into equation (19), the effects of the energy technological changes in China and in Japan on the energy demand in
16

China can be written as 4

EIR C e

1
2 e
1
  
CC e f
0
C
 
CC e f
1
C
   
CC e
A CJ
0

0
JJ f
0
J
 
CC e
A CJ
1

1
JJ f
1
J
 
(22.a)

1
2 e
1
 
CC
0
 f e
C
 
CC
1
 f e
C

(22.b)

1
2 e
1
 
CC
0

A CJ e

0
JJ f
0
J
 
1
CC

A CJ e

1
JJ f
1
J

(22.c)

1
2 e
1
 
CC
0
A CJ
0

0
JJ

A e
JJ

1
JJ f
0
J
 
CC
1
A CJ
1

0
JJ

A e
JJ

1
JJ f
1
J

(22.d)

1
2 e
1
 
CC
0
A CJ
0

0
JJ
 f e
J
 
CC
1
A CJ
1

1
JJ
 f e
J

(22.e) where 
CC e
 e
1

CC
,  f e
C
 e
1
 f C
, 
A CJ e
 e
1

A CJ
, 
A JJ e
 e
1

A JJ
, and  f e
J
 e
1
 f J
.
Here note that the composition effects of final demand were also decomposed as  f e
C
 e
1
 f C
and  f C ne
   e
2
 f C
. Similarly, we have

EIR J e

1
2 e
1
 
 e
JJ A
0
JC

0
CC f C
0
  e
JJ A
1
JC

1
CC f
1
C
 
 e
JJ f
0
J
  e
JJ f
1
J
 
(23.a)

1
2 e
1


0
JJ
 f e
JJ
 
1
JJ
 f e
JJ

(23.b)

1
2 e
1


0
JJ

A e
JC

0
CC f
0
C
 
1
JJ

A e
JC

1
CC f
1
C

(23.c)

1
2 e
1


0
JJ A
0
JC

0
CC

A CC e

1
CC f
0
C
 
1
JJ A
1
JC

0
CC

A CC e

1
CC f
1
C

(23.d)

1
2 e
1


0
JJ A
0
JC

0
CC
 f e
C
 
1
JJ A
1
JC

1
CC
 f e
C

(23.e) where 
JJ e
 e
1

JJ
, 
A e
JC
 e
1

A JC
, and 
A CC e
 e
1

A CC
. Similarly, effects of the non-energy technological changes in China and in Japan on the energy demand in China (or in Japan) can be formulated. The decomposition technique shown in equation (21) is useful for observing the impacts of the technological progress in terms of the energy-supply industries and other industries on the total system throughout the entire national economy. It is, however, not suitable as an analytical tool for measuring the impacts on the
17

subsystem, for instance, non-energy input-output system. In order to estimate it, the dual or triple character in terms of production technology should definitely be identified with respect to time period. Therefore we further decomposed 
CC
into the non-energy input-output subsystem and other sub-system that is energy demand subsystem. Decomposing the enlarged technical coefficient matrix in China and Japan as
A CC



A CC
11
A CC
21 
A CC
12
O
A CC e



 
*


O
O
O

A CC



A CC ne
(24)
 
* respectively, we have the following decomposition forms:

CC
 
W CC

0
CC


I n

W
1
CC


0
CC
  

A CC ne
 
*


1
CC
  (25.a)
 
W CC

CC
0


I n

W CC
1


1
CC
  

A CC ne
 
*


0
CC
  (25.b)

 
W CC

W CC

1
CC

1
CC



I n

I n

W CC
0

W CC
0


1
CC
  

A CC ne
 
*


0
CC
  (25.c)


0
CC
  

A CC ne
 
*


1
CC
  (25.d) where
W CC
 
CC A CC e
 
*
and 
CC
 
I n

A CC ne
 
*


1 .
5 Hence by substituting
(25.a) ～ (25.d) into (19.c) and (20.c) respectively and taking the average of the obtained four decomposition forms, the sectoral impacts of the non-energy inter-industry structural changes in China on the embodied energy requirements (intensities) in Japan or of the non-energy inter-industry structural changes in Japan on the embodied energy requirements
(intensities) in China can be measured. If one subtracts the impacts of the non-energy inter-industry structural changes in China on the embodied energy requirements in Japan, from equation (20.c), the impacts of the energy demand structural changes in China on the embodied energy requirements in
Japan can be easily observed. Similarly, we can compute the impacts of the
18

energy demand structural changes in Japan on the embodied energy requirements in China. For the final demand shifts in China and Japan, we further decomposed it as
 f C
 
C

  f C
 
 
C

  f C oce, J
  f

C fcf, C
  f C
  


C nis, 
  f C
 
 
C

 
C f row, J
(26)
Private consumption expenditure
Other consumptio n expenditur
Fixed capital formation
Net increase in stock
Exports to the third country where subscripts C and J denote the final demand in China and in Japan respectively. Accordingly, for instance,  f J
represents the demand of
Japanese products for the private consumption expenditure in China and
 f C fcf, J
stands for the demand of Chinese products for the fixed capital formation in Japan. We can easily understand other terms in the same way. If the respective terms are multiplied by the binary operational matrix, the energy impacts of the energy and non-energy final demand shifts can be easily estimated.
In the next section, the basic data used for numerical analysis is explained as well as the empirical results.
4. The Numerical Analysis: 1985-1990
4.1. The Basic Data
For the numerical analysis, the China-Japan inter-country input-output tables for 1985 and 1990 made by Institute of Developing Economies (IDE) in
Japan were applied to the above-described model. Accordingly, needless to
19

say, the empirical validity of our analysis largely depends on the reliability of the available basic tables. Before explaining about the results of the numerical analysis, let us mention some difficulties of the numerical analysis.
First, although the problem of energy prices should naturally be resolved in order not only to avoid the overestimation and/or underestimation of the embodied energy requirements but also to evaluate in physical base at the same time, 6 unfortunately, we could not get the physical input-output tables corresponding to the China-Japan inter-country input-output tables for 1985 and 1990 and convert the monetary energy input requirements into the physical and/or calorific requirements.
7 This limitation compelled us to evaluate the energy requirements in monetary base.
The second is the problem of the ordinary double deflation of input-output tables. We think seriously about it as Dietzenbacher & Hoen (1998b) have pointed out.
8 Especially, in our analysis, it was crucial to determine the price indices in China. Since Teng (1995) estimated the concerned sectoral deflators from various Chinese statistics, we employed the estimations.
Although it is needless to say that the economic hypothesis of purchasing power parities (PPPs) can be introduced, we did not employ the hypothesis.
9 If the distortions of the relative prices among commodities can be precisely made revisions as Kuroda (1994) has pointed out, in this case, the production technology in China and Japan can be compared from the viewpoint of the induced effects expressed in identical units. In this study, the China-Japan inter-country input-output tables for 1985 and 1990 in 1990’s price index were made by using the Teng’s estimations (Rmb/Rmb) and from the sectoral deflators (Yen/Yen) obtained from the 1985-1990 linked input-output tables in Japan and hence expressed in different units.
10
20

The third is the problem of the identification of the primary and secondary energy sources. The energy sectors in the China-Japan inter-country input-output tables were coal mining, crude oil and natural gas, electricity and heat supply, and coal products and petroleum refinery, so that it was impossible to estimate the energy impacts by the detailed energy sources.
This compelled us to roughly consider the differences between Chinese and
Japanese energy use structure. See appendix A for the sectoral classification in our analysis. With those problems kept in mind, let us explain about the empirical results of the spatial structural decomposition analysis.
4.2. Spatial structural decomposition analysis of embodied energy requirements
-China’s case-
In this section, we examined the effects of the China-Japan intra- and inter-country linkage changes between 1985 and 1990 on the embodied energy requirements in Chinese economy. Table 1 shows the empirical results.
From the first row in Table 1, at least between 1985 and 1990, the Chinese technological changes containing the China-Japan inter-country feedback effects totally led to the 38.8% increase in the embodied energy requirements.
More concretely speaking, it led to the increase in the transactions of electricity and heat supply (+23.9%), and coal products and petroleum refinery
(+21.5%), while it led to the reduction in crude oil and natural gas (-4.0%), and coal mining (-2.7%). In this way, considering the changes in the “embodied
production technology” containing the direct and indirect input requirements of the Chinese products needed for the production in Japan, we notice that the technological progress in China made a considerable contribution to the
21

increase in the domestic energy demand. This is obviously different from the
Lin & Polenske’s results 11 .
We will deepen the discussion about the differences in next section.
Although the promotion of trade relation (import/export) between China and Japan is crucial for Asian economic development, the energy-environmental impacts brought about by it should be considered at the same time.
The second row in Table 1 definitely answer the question of whether the structural changes in imports from China to Japan led to the energy increase or energy decrease.
The answer is energy decrease.
More concretely speaking from the results, the structural changes were effective in reducing the transactions of crude oil and natural gas. However, we must note that the contribution was –0.06% of total change and extremely small in comparison with other sources.
From the third row, it can be seen that the technological changes in Japan slightly contributed to the 1.2% decrease in the embodied energy requirements. Especially, the technological progress in Japan was more effective in saving the transaction of crude oil and natural gas. Considering the detailed sources in terms of the technological progress in Japan, we can understand that the above-mentioned effectiveness brought about by the energy technological changes rather than by the manufacturing technological changes (see the row of technological change in energy in Japan, technological change in non-energy in Japan, energy demand structural change in Japan, and non-energy demand structural change in Japan for the detailed calculations).
The final demand shifts in China contributed to the remarkable increase in the embodied energy requirements (see the row of Chinese final demand
22

change CP ) 12 . The contribution is 59.2% of total change. Considering the detailed sources, we can understand that the shifts in the exports to the third country and in the private consumption expenditure in China dominate the significant positive effects. In particular, the effects of the final demand shifts of coal mining (No.1), construction (No.24), and food products (No.8) remarkably increased by 9,859 million Rmb, 7,995 million Rmb, and 3,963 million Rmb respectively (see Table B1 in appendix B for the detailed results of the sectoral energy requirements in China). In addition, as is also seen from Table B1, we must say that these three sectors were major contributors in Chinese energy use structure. Although, needless to say, the Japanese final demand shifts affect the embodied energy requirements in China, its impacts were 1.4% of total change and very small against our expectations. As is mentioned above, this result largely depends on the weakness of the trade relation between
China and Japan.
Subsequently, let us explain about the effects of the final demand shifts in
Japan on the embodied energy requirements in China.
From the row of
Japanese final demand change CP , the final demand shifts in Japan definitely contributed to the energy increase in China. The energy increase brought about mainly by the private consumption expenditure and fixed capital formation in Japan. Especially, we found that the shifts in the final bills of
coal products and petroleum refinery (No.4), construction (No.24), electronics
and communication equipment (No.20) in Japan remarkably led to the increase in the crude oil and natural gas usage in China.
23

4.3. Spatial structural decomposition analysis of embodied energy requirements
-Japan’s case-
Table 2 shows the results of the spatial structural decomposition analysis of the embodied energy requirements in Japan.
From the first row, we can easily understand that the embodied technological changes in Japan largely contributed to the reduction in the embodied energy requirements. Especially, the first row shows the remarkable decrease in coal products and petroleum refinery.
The contribution to the saving energy was –52.7% of total change and very large. Considering the sectoral contributions to the saving energy from the column of ETC J in Table B2, it can be seen that the embodied energy requirements of coal products and petroleum refinery (No.4), electricity and
heat supply (No.3), electronics and communication equipment (No.20),
construction (No.24), and transport equipment (No.18) rapidly went down due to the embodied technological changes in Japan. These findings are very similar with Kagawa & Inamura’s results (2001). Hence, we can understand the interrelationship between concrete technological innovations and the sectoral energy requirements in their reports.
On the other hand, how much are the effects of the technological progress in China on the embodied energy requirements in Japan? The answer is 9,631 million yen from the third row of Table 2. As is also seen from the row of technological change in non-energy in China or of non-energy demand structural change in China, the increase was caused mainly by the manufacturing technology changes rather than the energy technology changes. Considering the sectoral impacts due to it, the embodied energy requirements of the construction (No.24), machinery (No.17), and agriculture
(No.5) in Japan unfortunately remarkably increased due to the manufacturing
24

technology changes in China (see the column of TC C in Table B2).
Moreover, from the row of Japanese final demand change, we can see that the contribution of the Japanese final demand changes was 158.7% of total change and dominated the Japanese energy use structure between 1985 and
1990. Especially, the influences of the fixed capital formation and private consumption expenditure were extremely large in comparison with other sources.
The Chinese final demand changes acted in the direction of the energy increase. Concretely speaking, the use of electricity and heat supply, and coal products and petroleum refinery in Japan went up due to the non-energy final demand changes in China (see the row of Chinese final demand in non-energy CP ). Considering the detailed sources, it can be seen that the fixed capital formation and private consumption expenditure in China mainly led to the energy increase in Japan. However, note that the total contribution was
0.9% and extremely small. In this sense, the empirical results assert that the
Chinese final demand shifts did not affect the energy use structure in Japan at least between 1985 and 1990.
25

Table 1. Structural decomposition analysis of change in Chinese energy requirement in
1990yr-million Rmb
Source
Embodied technological change in China
Trading pattern change (China → Japan)
Technological change in Japan
--- Technological change in energy in Japan
--- Technological change in non-energy in
Japan
--- Energy demand structural change in
Japan
--- Non-energy demand structural change in Japan
Chinese final demand change CP
--- Chinese final demand change in energy CP
--- Chinese final demand change in non-energy CP
--- Private consumption expenditure in
China CP
--- Other consumption expenditure in
China CP
--- Fixed capital formation in China CP
--- Net increase in stock in China CP
--- Private consumption expenditure in
Japan CP
Japan CP
--- Fixed capital formation in Japan CP
--- Net increase in stock in Japan CP
--- Exports to the third country CP
Japanese final demand change JP
--- Japanese final demand change in energy JP
--- Japanese final demand change in non-energy JP
--- Private consumption expenditure in
China JP
--- Other consumption expenditure in
China JP
--- Fixed capital formation in China JP
--- Net increase in stock in China JP
--- Private consumption expenditure in
Japan JP
--- Other consumption expenditure in
Japan JP
--- Fixed capital formation in Japan JP
--- Net increase in stock in Japan JP
--- Exports to the third country JP
Total Change
3
24
-19
13,281
346
90
256
-1
-0
-3
-1
159
14
145
13
20
15,790
Coal mining
-2,301
443
-106
-89
-17
-90
-16
17,405
Primary and secondary energy
Crude oil and natural gas
Electricity and heat supply
Coal products and petroleum refinery
-3,366
-706
-739
-733
20,281
292
-60
-54
18,239
-83
-72
-84
-5
-740
2
6,049
-6
-54
-6
14,181
12
-88
15
12,520
8,774
8,631
4,849
479
2,078
5,683
176
-436
6,485
2,498
489
1,250
2,066
148
1,075
13,106
6,495
753
3,052
-1,769
266
149
12,371
5,203
946
2,554
-41
284
2
16
27
5,466
1,505
571
934
-3
-0
-11
-2
813
53
488
84
80
2,716
4
38
18
12,444
218
42
176
-1
-0
-2
-0
89
9
101
8
14
34,903
4
31
184
9,743
686
71
615
-3
0
-7
-1
288
37
270
16
81
31,280
Total
13
110
210
40,935
2,756
775
1,980
-8
-0
-23
-4
1,349
113
1,004
122
195
84,689
32,854
-54
-977
-960
-16
-972
-5
50,155
9,561
40,593
19,045
2,667
8,934
5,939
875
26

Source: Author’s calculations.
Notes: Embodied technology in China implies the Chinese input structure containing the direct and indirect input requirements of the Chinese products needed for the production in Japan. Superscripts CP and JP imply the
Chinese products and the Japanese products respectively.
27

Table 2. Structural decomposition analysis of change in Japanese energy requirement in
Source
Embodied technological change in Japan
Trading pattern change (Japan → China)
Technological change in China
--- Technological change in energy in China
--- Technological change in non-energy in
China
--- Energy demand structural change in
China
--- Non-energy demand structural change in China
Japanese final demand change JP
--- Japanese final demand change in energy JP non-energy JP
China JP
China JP
--- Fixed capital formation in China JP
--- Net increase in stock in China JP
--- Private consumption expenditure in
Japan JP
Japan JP
--- Fixed capital formation in Japan JP
--- Net increase in stock in Japan JP
--- Exports to the third country JP
Chinese final demand change CP
--- Chinese final demand change in energy CP
--- Chinese final demand change in non-energy CP
China CP
China CP
--- Fixed capital formation in China CP
--- Net increase in stock in China CP
--- Private consumption expenditure in
Japan CP
--- Other consumption expenditure in
Japan CP
--- Fixed capital formation in Japan CP
--- Net increase in stock in Japan CP
--- Exports to the third country CP
Total Change
1990yr-million Yen
Coal mining
Primary and secondary energy
Crude oil and natural gas
Electricity and heat supply
Coal products and petroleum refinery
2,087
22,321
-17,822
2,983
395
6
389
92
10
112
6
0
210
-141,105
7
0
1
-176,739
-1,132
101
4
97
23
79
36,387
-2,626
39,013
-147
-3
-479
-91
27,648
Total
-51,768
-699
57
2
94,934 -2,199,862 -2,333,434
-62,243
4,382
-58,034
5,091
-122,108
9,631
-71 -12 -77
55
12
4,452
811
45 3,571
45,239 3,107,589
5,103
910
9,708
1,756
4,181 7,875
3,398,133 6,587,347
27,575 1,036,109
17,664 2,071,480
-66 -8,967
-1
-230
-137
-29,305
-44 -5,554
13,968 1,730,046
1,554,710
1,843,423
-4,996
-98
-20,741
-3,845
2,615,767
3,971,580
-14,176
-239
-50,754
-9,534
1,942,034 3,713,696
956 124,998
9,308 1,049,677
19,566 33,148
1,668
199
3
195
201,347
17,939
278
17,661
45
6
56
4
4
0
1
4,111
502
4,881
305
339
6
61
0 11
107 9,661
-6,989 3,161,155
100,731 228,772
1,037,627 2,118,932
231,089
113,833
17,616
288
17,328
4,042
465
5,205
437
316
6
60
265,980
319,831
36,150
576
35,573
8,290
984
10,253
752
666
12
123
12 23
9,134 19,112
1,160,830 4,173,891
28

Source: Author’s calculations.
Notes: Embodied technology in Japan implies the Japanese input structure containing the direct and indirect input requirements of the Japanese products needed for the production in China. Superscripts CP and JP imply the
Chinese products and the Japanese products respectively.
29

5. Discussion
5.1. Energy impacts influenced by the technological progress
The most important viewpoint of I-O SDA is that the role of production technology in economic (sub-) system should be explained. Our analysis definitely indicated that even if the technological progress of the concerned good led to the saving energy from the viewpoint of the domestic economic system, there was a possibility that it brought about the energy increase from the viewpoint of the international economic system.
The typical instance was the heavy industry. Although Lin & Polenske
(1995) found that the embodied energy requirements of the heavy industry such as machinery (No.17) decreased due to the domestic technological progress, the Japanese intermediate goods and services imported in order to produce the machinery in China directly and indirectly absorbed a large quantity of machinery (No.17) and transportation and communication (No.25) in China as the positive feedback effect.
Considering the absorption increased between 1985 and 1990, we can easily understand that the changes in the production technology containing these feedback effects are not always similar with the domestic technological progress. The above-mentioned positive feedback effects will increasingly go up because of the Chinese government’s protective strategy toward domestic industries such as shipping company.
5.2. Energy impacts influenced by the final demand shifts
The remarkable increase in the embodied energy requirements in Japan brought about by the domestic final demand shifts. Especially, the shifts in the private consumption expenditure and fixed capital formation were major
30

contributors in Japan. Hence, watching the demand of the energy-intensive goods and services related to the final bills would be crucial for the saving energy.
This paper revealed that the effects of the Chinese final demand shifts on the embodied energy requirements in Japan were negligible, the value is less than 1.0%. However, we must not forget that the total effect was never zero and the construction (No.24), electronics and communication equipment (No.20), and transport equipment (No.18) in China were major contributors to the
Japanese energy use structure. Considering the rise in the final consumption from 1990, it would also be important for policy makers in Japan to watch these contributions of energy-intensive goods in China.
6. Conclusions
This paper definitely raises doubts about the considerations of the previous energy impacts of the technological progress in the Chinese economy.
Especially, considering the changes in the embodied production technology with the China-Japan inter-country feedback effects, we greatly doubt that the technological progress in China led to the saving energy. The empirical result, at least between 1985 and 1990, that the changes in the embodied production technology in China led to 39% increase in the total energy requirement gives us the grounds to the doubts.
The result has a crucial policy implication. Although it is important to watch and control the fluctuations in the partial energy intensiveness determined by only the domestic inter-industry structure, more accurate
31

energy analysis should be focused on the exhaustive energy intensiveness containing all the inter-country feedback effects. Supposing the future increase in exports/imports promoted by the expansion of world trade after
China’s WTO accession, it would be clear that the inter-country feedback effects will continue to increase and affect the Chinese and Japanese energy demand structure.
In addition, we must not forget that the changes in foreign production structure directly and indirectly contributes to the fluctuations in the domestic energy demand. Our energy analysis clarified the point in question.
There are two major findings from this viewpoint. First, the technological progress in Japan slightly contributed to the 1.2% decrease of total change in the embodied energy requirements in China. Especially, it was more effective in reducing the transaction of crude oil and natural gas in China. Second, the technological progress in China slightly contributed to the 0.2% increase of total change in the embodied energy requirements in Japan. The empirical fact such that the energy technology changes in China clearly brought about the saving energy in Japan, while the manufacturing technology changes in
China led to the energy increase in Japan is of high interest. However, considering the rapid rise in the income and consumption in China, the effects of the fluctuations in the Chinese income distribution on the Japanese energy requirements will increasingly become large (see appendix C for the mathematical description of the augmented model).
The effects of the Chinese final demand shifts on the embodied energy requirements in Japan were extremely small against our expectations and the contribution to the total change in Japanese energy demand was +0.9%. Our results also illustrate that the contribution of the Japanese final demand
32

shifts to the total change in Chinese energy demand was +3.3% and 3.6 times larger than the above-mentioned contribution.
Although the results in this paper show the rough macro-economic impacts because of the problem of aggregation and lack of appropriate physical data, we explained about the sources of the Chinese and Japanese energy demand changes between 1985 and 1990 from the viewpoints of inter-country input-output relationship. Considering that the importance of the energy decomposition analysis based on the inter-country input-output system will continue to increase, it is natural that the evaluation, in physical and calorific base should be emphasized in order to discuss the absolute level of international energy demand and/or air pollutants.
13
33

Notes
1.
In equation (4), we extracted the allocations of the goods from China to Japan and that from Japan to China from the exogenous row vector mentioned above and endogenously treated it by using the respective input structure. Hence the non-competitive import goods in equation (4) mean the goods imported from rest of the world except China and Japan. In addition, of course, equation (4) can also be transformed into more complicated internal decomposition model by using both techniques of multiplicative and additive operations (see Miller & Blair, 1985; Sonis &
Hewings, 1993, 1997).
2.
As Bullard & Herendeen (1975a, 1975b) have pointed out, it is natural that the I-O based energy model should be proposed under the hybrid input-output framework expressed in both monetary and physical terms. However, unfortunately, we could not get the reliable physical input-output table accurately corresponding to the
China-Japan inter-country input-output table. The rearranged matrix shown in equation (15) hence was expressed only in monetary terms.
3.
See Dietzenbacher & Los (1997, 1998a) for the detailed discussion of sense and sensitivity of structural decomposition techniques.
4.
Since the sensitivities of both equations (21.a) and (21.b) are almost same, we introduced equation (21.a) as the decomposition technique.
5.
See Kagawa & Inamura (2001) for the proof.
6.
See for example Bullard & Herendeen (1975a, 1975b).
7.
Hayami & Kiji (1994, 1997) made the Chinese input-output table for 1987 and
Japanese input-output tables for 1985 based on the common sectoral classification
(45 sectors) and constructed the air pollutant emission tables and energy demand tables in physical base. Unfortunately, we could not use the physical energy demand tables in our comparative static analysis due to the data inconsistency with the
China-Japan inter-country input-output tables for 1985 and 1990 by IDE.
8.
Oosterhaven & Hoen (1998) employed the RAS procedure and deflated the EU inter-country input-output tables for 1970, 1975 and 1980.
9.
See Li (1995a, 1995b) and Shinozaki et al. (1994). Considering the implausibility of the international arbitrage of goods and services from the viewpoints of the economic hypothesis and the data availability, it would be sometimes dangerous to introduce the economic hypothesis of the purchasing power parities.
10.
Although the China-Japan inter-country input-output tables for 1985 and 1990 provided by IDE were usually expressed in US thousand dollars, we converted them
34

into the table expressed in both Yen and Rmb by using the nominal exchange rates in
1985 (238.54 Yen/US$ and 2.9367 Rmb/US$) and in 1990 (144.79 Yen/US$ and
4.7832 Rmb/US$). Note that the nominal exchange rates were provided by IDE.
11.
Lin & Polenske (1995) observed that the technological changes in China led to the saving energy, especially coal and petroleum.
12.
Lin & Polenske (1995) also found that the final demand shifts in China led to the remarkable increase in the embodied energy requirements in physical base (million tsce).
13.
This opinion may point out the importance of the Leontief’s world economy model
(1974).
35

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39

Appendix A. Sectoral classification (32 sectors)
No. Sectors (column 32 × row 32)
01. Coal mining
02. Crude oil and natural gas
03. Electricity and heat supply
No. Sectors (column 32 × row 32)
17. Machinery
18. Transport equipment
19. Electrical machinery and communication
05. Agriculture
06. Iron ore mining
07. Non-ferrous metal mining
08. Food products
09. Textiles
10. Sewing and leather
11. Wood and furniture
22. Repair of machinery
23. Other manufacturing goods
24. Construction
25. Transportation and communication
26. Commerce
27. Restaurants and eating places
12. Pulp and paper and educational goods 28. Public enterprises and private services
13. Chemical products
14. Cement, ceramic, stone and clay
15. Iron and steel and Non-ferrous metal 31. Public administration
16. Metal products
32. Unclassified
Notes: The gray-shaded rows show the energy sectors. The other rows stand for the non-energy sectors.
40

Appendix B. Structural decomposition analysis of sectoral energy requirements
Table B1. Structural decomposition analysis of change in sectoral energy requirements in
China
32 sectors
1. Coal mining
2. Crude oil and natural gas
3. Electricity and heat supply
4. Coal products and petroleum
6. Iron ore minning
7. Non-ferrous metal mining
8. Food products
9. Textiles
10. Sewing and leather
11. Wood and furniture
12. Pulp and paper and educational
14. Cement,Ceramic, stone and clay
15. Iron and steel and Non-ferrous
17. Machinery
18. Transport equipment
19. Electrical machinery
20. Electronics and communication equipment
21. Measuring instruments
22. Repair of machinery
23. Other manufacturing goods
24. Construction
25. Transportation
26. Commerce and
27. Restaurants and eating places
28. Public enterprises and private
29. Education, health, research,
30. Finance and insurance
31. Public administration
32. Unclassified
Total
Production in
ETC C FDS C
1,805
604
1,192
1,613
3,064
171
1,211
405
141
284
38
10,098
2,279
-33
664
199
-12
-787
3,777
-14
146
2,819
705
-972
50
506
-53
114
1,866
333
73
3,950
10
963
34
1,521
1 0
32,854 50,155
9,859
-585
498
-211
1,703
-97
-323
3,963
820
1,991
303
1,692
3,875
1,036
640
2,043
505
441
2,310
1,565
477
614
679
7,995
2,819
-370
(unit: 1990yr-million Rmb)
Production in
TC J
Japan
FDS J
TPC CJ Total
-194
-4
-4
-6
-102
-34
-35
-65
-8
-24
-3
-35
-71
-23
-43
-77
-75
-5
24
-3
-977
0
-43
-4
-24
3
-16
0
0
-44
-54
-8
0
23
44
216
18
16
4
2,756
294
16
8
41
574
129
52
206
-24
-22
2
122
161
56
0
27
-14
18
7
4
0
0
110
665
2
0
0 10,522
0 -386
56 608
-153 -540
14 5,488
0 -111
0 -176
59 6,825
-14 1,494
-14
4
999
368
-9 2,177
-333 5,489
14 1,622
61 1,846
22 3,678
65 3,720
-22 680
19 3,574
19 2,090
3 633
-2 900
6 758
232 18,797
82 5,274
-11 -396
75
-6
335
148
-146 5,811
-1 55
-68 2,457
-7 -5
-54 84,734
41

Source: Author’s calculations.
Notes: ETC C and FDS C imply the embodied technology changes in China and the final demand shifts in China respectively.
TC J and FDS J imply the domestic technology changes in Japan and the final demand shifts in Japan respectively.
TPC CJ implies the trading pattern changes (China → Japan). The gray-shaded rows show the major sectors from the viewpoint of the Chinese production structural changes.
42

Table B2. Structural decomposition analysis of change in sectoral energy requirements in
Japan
32 sectors
1. Coal mining
2. Crude oil and natural gas
3. Electricity and heat supply
4. Coal products and petroleum
6. Iron ore minning
7. Non-ferrous metal mining
8. Food products
9. Textiles
10. Sewing and leather
11. Wood and furniture
12. Pulp and paper and educational
13. Chemical products
14. Cement,Ceramic, stone and
15. Iron and steel and Non-ferrous
16. Metal products
17. Machinery
18. Transport equipment
19. Electrical machinery
20. Electronics and communication equipment
21. Measuring instruments
22. Repair of machinery
23. Other manufacturing goods
24. Construction
25. Transportation
26. Commerce and
27. Restaurants and eating places
28. Public enterprises and private services
Production in
ETC J FDS J
-165 -22,055
477 19,641
-22,714
0 -38
-25 961
-9,188 44,120
-2,734 -18,373
-55,570 20,118
3,990 14,628
-37,152 8,569
-160,680 178,694
-18,978 -43,834
-67,750 -49,463
-16,489 4,966
-153,796 281,495
-224,576 341,800
-69,635 104,038
-539,678 650,520
-6,186 36,261
-7,316 17,719
-7,803 45,305
-45,299 219,156
-5,114 143,182
-73,181 45,450
-138,138 142,910
-212,965 527,393
TC C
China
622
139
317
461
1,666
10
371
-101
36
166
1
1,960
628
57
-21
10
688
167
74
45
73
1,222
0
49
764
497
-586
19
113
(unit: 1990yr-million Yen)
Production in
FDS C
TPC JC Total
585 -1,008 -22,476
-18 -144 20,030
14 -162 975,686
-5
642
9
-30 11 -57
-94 -121 770
1,405 -1,978 35,123
608 -1,883 -21,884
2,050 -941 -34,930
231 -1,148 17,720
1,208 -1,780 -29,042
2,353 -3,806 17,183
272 -742 -63,144
418 -2,501 -118,978
3,057 -4,271 -12,275
682 -18,056 111,991
666 -2,578 115,322
2,772 -5,305 32,241
5,495 -4,605 111,630
757 -531 30,338
686 -2,173 9,081
731 -473 37,761
8,753 -56,099 869,679
642
-152
-511 174,618
-694 137,278
108
9
-442 -28,086
-13 4,777
1,806 -5,619 311,303
31. Public administration
-6,015 44,441
91,556 39,583
2
182
13
486
-12 38,428
-936 130,871
32. Unclassified -8,917 7,697 0 0 0 -1,220
Total
Source: Author’s calculations.
-2,333,4
34
6,587,34
7
9,631 36,150 -122,10
8
4,177,58
5
Notes: ETC J and FDS J imply the embodied technology changes in Japan and the final demand shifts in Japan respectively.
TC C and FDS C imply the domestic technology changes in China and the final demand shifts in China respectively.
TPC JC implies the trading pattern changes (Japan → China). The gray-shaded rows show the major sectors from the viewpoint of the Japanese production structural changes.
43

Appendix C. Mathematical description of the augmented model
In this appendix, we shall consider the effects of the changes in income distribution on the embodied energy demand in concerned country. In order to estimate the effects, the model shown in previous section has to be augmented (see Miyazawa & Masegi, 1963). The augmented framework using the inter-country input-output structure can be written as:





 q g q g
C
C
J
J








I




 n


 l
A
O
A
CC
CC
JC
 h CC
1
 h JC
0

A CJ
O
I n


A JJ l JJ

 h
0 h
1
CJ
JJ







1 




 f f C y C y J
J






(C.1) where h CC h CJ


  i i

1 ,  ,
  i i

1 ,  , n
= column vector of consumption of Chinese products in China n
= column vector of consumption of Japanese products in China h JC

  i i

1 ,  , n
= column vector of consumption of Chinese products in Japan h JJ
 l CC
 l
  i i

1 ,  , n j

1 ,  , n
= column vector of consumption of Japanese products in Japan
= row vector of income in China l JJ
 l j

1 ,  , n
= row vector of income in Japan g C
= total household income in China g J
= total household income in Japan y C
= exogenous household income in China y J
= exogenous household income in Japan
Here let us rewrite equation (C.1) as


C
J

 


I n

1


~
A
~
A
JC
CC
I
 n

1
~
A CJ

~
A JJ



1 

~ f
~ f
C
J

 



~
CC
JC
~
~
CJ
JJ





~ f
~ f
C
J

 (C.2)
44

where ～ denotes the augmentation. Then we have the similar solutions as shown in (5) ～ (8) and/or (9) ～ (12). From the solutions, the embodied energy input requirements in China and Japan can be obtained as
EIR C *
 e *
1
~
CC
~ f C
 e *
1
~
CC
~
A CJ JJ
~ f J
, (C.3)
EIR J *
 e *
1
~ ~
JJ A JC

CC
~ f C
 e *
1
~
JJ
~ f J
(C.4) respectively where
CC

I
 n

1

~
A CC


1
and
JJ

I
 n

1

~
A JJ


1
. e *
1
is the (n+1)- dimensional binary operational matrix. As is seen from equations (C.3) and
(C.4), we can use the similar discrete structural decomposition forms conducted in previous section. The important differences lie in endogenously treating the structure of income distribution.
Since the augmented structures
CC
and
JJ can be internally decomposed as

~
CC

~
CC
0

A CC *
~
1
CC

~
CC
0
 h CC *
~
1
CC

~
CC
0
 l CC
 
*
~
CC
1
(C.5.

~
1
CC

A CC a)
*
~
CC
0
 
CC
1
 
 h CC
 
*
~

CC
0

Consumption


~

CC
1

 l CC

 
*

~

CC
0
 
Income shifts
(C.5.b) where 
A CC
 
*
,  h CC
 
*
and  l CC shifts
 
*
represent (n+1)-dimensional matrices which were appropriately adjusted by adding the zero sub-matrices on the respective structural matrices ( 
A CC
,  h CC
and  l CC
  ), the effects of the structural changes in Japanese income distribution on the embodied energy requirements in China and vice versa can be formulated as

EIR C *
I

1
2 e
1

0
CC
~
A CJ
0
~
0
JJ
 h JJ *
~
1
JJ
~ f J

1
CC
~
A
1
CJ
~
0
JJ
 h JJ *
~
1
JJ
~ f J

(C.6.a)

1
2 e
1

CC
0
~
A CJ
0
~
0
JJ
 l JJ *
~
1
JJ
~ f J

~
1
CC
~
A CJ
1
~
0
JJ
 l JJ *
~
1
JJ
~ f J

(C.6.b)
45


EIR
I
J *


1
2
1
2 e
1

~
0
~
JJ A
0
JC
~
CC
0
 h CC *
~
1
CC
~ f
0
C
e
1

~
0
~
JJ A
0
JC
~
CC
0
 l CC *
~
1
CC
~ f
0
C


~
1
~
JJ A
1
JC
~
CC
0
 h CC *
~
1
CC
~ f
1
C

(C.7.a)
1
~
JJ A
1
JC
~
CC
0
 l CC *
~
1
CC
~ f
1
C

(C.7.b) where the subscript I implies the effects of the changes in the another income distribution.
46