The distinction of direct and indirect inputs in the Input-Output subsystem approach

Input-Output analysis, and the subsystem approach in particular, have been widely used in the literature to assess the nature and process of structural change of national economies, with particular reference to deindustrialization and tertiarization processes, as well as to the evolution of the level of centrality of manufacturing in GDP growth. Our paper suggests a methodology to separate, within the subsystems, direct inputs from indirect inputs, which depend on the Input-Output production function and the general organization of the economic system respectively. We provide an example of the application of such methodology to the manufacturing subsystems in Germany and Italy over the period 2000–2014.