INTERDEPENDENCE OF INDUSTRIES AND KEY ECONOMIC SECTORS BASED ON LINKAGE INDICES: EMPHASIS ON AGRICULTURE

Interdependence of Industries

Abstract

Inter-sectoral linkage using input-output table provides proper strategies for future economic development where the sectors with the highest linkages rouse rapid progress of production, income, and employment. The linkage indices identify the key sectors of the economy that influence efficient application of resources and hence the study will aid the planners and policy makers in resource allocation. The study examined the different empirical measures of inter-industry linkages, inter-dependent of industries and identified the key sectors of an economy. Chenery-Watanabe, Rasmussen, Cella, Harrigan-McGilvray, Dietzenbacher-Van der Linden, and pure linkage techniques were applied for the Bangladesh data. An input output table with 79 sectors constructed and updated by The Bangladesh Institute of Development Studies was used. Agricultural and service sectors showed low backward linkage indices due to input dependence but some of the agro-processing sectors and garments industry occupied higher backward linkage due to heavy dependence on input supplies from the other sectors. Manufacturing sectors were considered as dominant sectors due to higher Rasmussen's 'backward' linkage indices with the least coefficient of variation. Livestock, forestry and cotton were the key agricultural sectors having higher forward linkage indices (1.694, 1.478 and 1.412, respectively) with comparatively low coefficient of variation (2.866, 2.975 and 3.623, respectively). Among the manufacturing industries machinery, other chemicals, fertilizer and readymade garments were the higher ranked backward linkage indices (1.509, 1.443, 1.429 and 1.376, respectively) with low coefficient of variation (4.182, 4.745, 3.335 and 3.538, respectively). The forward linkage indices of Cella and pure linkage methods were very close. Among the service sectors trade, transport, housing and banking were the key sectors according to Cella, Harrigan-McGilvray, Dietzenbacher-Van der Linden, and pure linkage methods. The ranking of sectors was close related for these methods but there was no common sector for both backward (accept rice milling) and forward linkage indices in the comparison of the top ten sectors. Economic impact of the imported inputs embodied in garment export must be evaluated. Investment policy should be made based on inter-industry linkages for adequate employment creation. Interrelationships and relative linkages between agricultural sub sectors should be modeled.