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Industrial Complex Analysis

The objective of industrial complex analysis is to estimate the cost advantages of various combinations of industrial activities for a region in order to identify its most favorable development projects. this type of analysis has been carried out for Puerto Rico in which petroleum refining, petrochemical, fertilizer and synthetic fiber production are considered.

The method of analysis is an extension of input-output or interindustry analysis called activity analysis. In activity analysis a process may produce more than one output and there may be more than one process that produces a given output. In input-output or interindustry analysis there is a one-to-one correspondence between processes and products. In activity analysis, because there may be more than one technique for producing a good, there can be tradeoffs, such as between labor and capital, in producing a good.

In the industrial complex analysis for Puerto Rico 73 activities or processes involving 37 different inputs or outputs are considered. These include the production of four different synthetic fibers (Dacron, Dynel, Orlon and Nylon) each in three different forms (polymer, staple and filament).

The analysis for Puerto Rico is limited to four regions:

The South Atlantic region was left out of the analysis because, due to economies of scale, the shipping rates to the New York-Philadelphia-Baltimore region are cheaper than to the South Atlantic region even though the South Atlantic region is physically closer to Puerto Rico.

The raw material inputs were assumed to be directly proportional to the level of operation of a process. This is dictated by the chemistry of the process. The analysis did considered possible economies of scale in the capital equipment requirements and also the labor input requirements. These inputs were assumed to be of the forms:

C = C0Qa
L = L0Qb

where a and b are positive exponents of less than 1.0 in value.

The focus of the analysis is cost comparison, which seems dramatically different from the focus of interindustry analysis on changes in output, but the mathematics is very closely related.

Conclusions of the Analysis:

Source: Walter Isard, Euguene W. Schooler and Thomas Vietorisz, Industrial Complex Analysis and Regional Development: A Case Study of Refinery-Petrochemical-Synthetic Fiber Complexes and Puerto Rico Technology Press and John Wiley & Sons, New York, 1959,

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