Linkage measures of the construction sector using the hypothetical extraction method

Abstract

The hypothetical extraction method (HEM) is used to extract a sector hypothetically from an economic system and examine the influence of this extraction on other sectors in the economy. Linkage measures based on the HEM become increasingly prominent. However, little construction linkage research applies the HEM. Using the recently published Organisation for Economic Co‐operation and Development input‐output database at constant prices, this research applies the HEM to the construction sector in order to explore the role of this sector in national economies and the quantitative interdependence between the construction sector and the remaining sectors. The output differences before and after the hypothetical extraction reflect the linkages of the construction sector. Empirical results show a declining trend of the total, backward and forward linkages, which confirms the decreasing role of the construction sector with economic maturity over the examined period from a new angle. Analytical results reveal that the unique nature of the construction sector and multifold external factors are the main reasons for the linkage difference between countries. Moreover, hypothesis‐testing results consider statistically that the extraction structures employed in this research are appropriate to analyse the linkages of the construction sector.

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