The Decomposition of Goods and Services in a Block Structural Path Analysis in The Indonesian Economy

The purpose of this paper is to reveal the magnitude of the relationship between goods and service sector that is originally grouped into production activities in a social accounting matrix (SAM) framework. The decomposition of production activities into goods and services in 1995 and 1998 Indonesian SAM provide other features and interpretation on the structural changes in the Indonesian economy. Using block structural path analysis (BSPA) that traces feedback loop effects, there is evidence of the dominant role of the goods sector in generating factorial and institutional incomes in the Indonesian economy. This paper argues that the magnitude of the linkages between goods and services might have characterized a strong dependency of services on the goods sector, opposing those of typical developed countries that believe services might be relatively independent from goods sectors. Prior to the decomposition of goods and services, general pattern of the structural change in the Indonesian economy using 1975-1999 aggregated SAM will be presented.