Linkages and imports: A comparative study of India and Pakistan

Summary

This paper takes a critical look at the notion of linkages as guides to sectoral expansion in less developed countries. In particular a distinction is drawn between gross linkages (typically defined on the inverse of the Leontief technology matrix) and net linkages defined on the ‘domestic inverse’. It is argued that for economies which exhibit a persistent dependence on intermediate and capital goods imports, the latter may be the appropriate concept for identifying sources of induced economic development. Using data for India and Pakistan it is shown that the two concepts imply very different ranking of sectors, thus providing an important qualification for using gross linkages as a form of investment criterion.

Notes

Teaching Fellows in the Doctóral Program, Harvard University. We are grateful to Professors W. W. Leontief and A. Gerschenkron for discussion and comments and to A. MacEwan for kindly allowing us to use his data on Pakistan. Remaining errors and shortcomings are, of course, ours. 'Computer time for computations was kindly made available by the Harvard Economic Research Project.