What are Government Imports and Exports?

The Input-Output model shows the flow of money within an economy. Most economic activity occurs in the private sector, and so I-O models are built using categories that make sense to represent the private sector.

However, I-O models must take the government’s finances into account as well. Since the government’s model of financial appropriation and distribution differs from that of the private sector, parts of the I-O model that make sense in terms of the private sector require more explanation for the government sector.

For example, I-O models capture sales. In private industry, a sale is two parties freely exchanging goods/services and money. For Government, taxation is the closest equivalent to sales: governments collect money and taxed citizens benefit from goods and services produced using the taxes. Therefore, the category “Sales” as applied to the government sectors represents taxes.

The purpose of this article is to explain how the Import and Export categories in the I-O model apply to government.

What Does the Government Export?

Certain sectors of government often receive their funding from outside the region. In order to account for this transaction in terms compatible with input-output modeling, funding received into the region is recorded in Exports. The “exported good” is a budget, in the amount of the export (money in, goods/services out).

Below is a screenshot showing exports for New York County:

Two of the top “exporting” government sectors are “Federal Government, Civilian” and “Local Government, Excluding Education and Hospitals.” For government, the exported “product” is the sector’s budget, and the exported amount is equivalent to the government funding that entered the region and was received by the sector.

What Does the Government Import?

Like exports, when goods or services come into the region, money matching the value of the goods or services must exit the region in the form of imports (money out, goods/services in).

Some sectors of government make out-of-region expenditures. One example of this would be Social Security payments, which leave the region and are collected by the Federal Government. When money leaves the region in the form of payments to government, the payment is represented in input-output modeling as an import.

Below is a screenshot showing New York County’s purchases. The Demand Met by Imports column represents New York County’s imports.

The top three goods/services “imported” are from the government sector, and are in exchange for payments leaving the region. The first row, “Federal Government, Civilian, Excluding Postal Service,” represents Social Security benefits and other goods or services that will be received by the region.