Is the Relationship between Transportation and Communications Industries Complementary or Substitutional? An Asian Countries-Based Empirical Analysis Using Input-Output Accounts

Abstract

The relationship between transportation and communications has been discussed throughout the past decades. This study also investigates that relationship to determine whether they are complementary or substitutive in terms of the industrial perspective, focusing mainly on six Asian countries (China, Japan, India, Korea, Indonesia, and Taiwan). National input-output (I-O) tables from the World Input-Output Database (WIOD) were used to construct research dataset. Each activity in the table was examined and fell into either transportation or communications category when they are related to those categories, thereby establishing six categories: Transportation manufacturing (TM), transportation utilities (TU), communications manufacturing (CM), communications utilities (CU), all transportation (AT), and all communications (AC). To examine the interrelationship between two sectors, direct and total coefficients were calculated for four benchmark years (2000, 2005, 2010, and 2014), then Spearman correlation analysis was conducted using those two coefficient matrices after weighting each coefficient using the economic contribution-based weight (ECBW). As a result, we confirm the predominant complementary relationship between two industries. Most Asian countries present consistent, dominant complementarity in both direct and total analysis. Although there are mixed total effects in Japan and Taiwan, the overall pattern demonstrates remarkable positive relationships. In analyzing the same effects in western countries, we also find the same straightforward positive association between two sectors, mostly in France, the US, and the UK. We believe that our findings can contribute to the literature by providing compelling evidence of the overall trend of a complementary relationship between two industries.