Backward Linkage Effects Research Articles

Foreign Direct Investment, Local Content Requirements and Regional Resource Allocation

This paper investigates the effects of foreign direct investment (FDI) into the export processing zones (EPZs) on factor rewards, national income, and the price and output of a domestic intermediate good producing sector (backward linkage effect) under a local content requirement (LCR) by the host government. FDI has important regional resource allocation effects between the domestic region and EPZ through the backward linkage effect. It also examines the effects of a change in the LCR itself on these variables.

Input-output analysis of Vietnamese structural changes (1989-1995)

The pattern and sequencing of economic reform in transition economies have become a major issue of interest since the late 1980s. While Eastern Europe and especially the Soviet Union have experienced difficulties in their transition to a market-based economy, Vietnamese reform has proceeded relatively smoothly and resulted in significant improvement in economic performance and macroeconomic stabilization. The purpose of this paper is to analyze the distinctive features of the gradual reform process in Vietnam, and focused on the empirical study of the significant impacts of structural changes and their characteristics in its transition to a market-oriented economy. This paper then proceeds to a discussion of Vietnamese reform utilizing inter-industry analysis. In this analysis, a series of input-output tables are used, in which 25 sectors grouped into 9 major industries of 1989 and 1995 are classified. These input-output tables demonstrate how the output of each industry is distributed among industries and sectors of the economy. At the same time it shows the input to each industry from other industries and sectors. Derived and listed are the important coefficients and linkage effects for inter-industry relation analysis. The results of inter-industry analysis by using a series of input-output tables are as follows: 1) The ratio of domestic production in total supply of output declined due to increased imports; 2) The share of manufacturing production in domestic output and backward linkage effect to other sectors have declined in the open economy; 3) The agricultural sector has continued to play a greater role in overall production and exports than does the manufacturing sector. We find that the key to achieving sustained development in Vietnam will be the ability of the agriculture sector to yield sufficiently large agricultural surpluses on a consistent basis and then utilize such surpluses for productive investment in the underdeveloped industrial sector. The non-agricultural sector, utilizing this increased investment, must grow fast enough to absorb Vietnam's rowing labor surplus. Thus, to ensure sustained growth, Vietnam mu

Output Effects of Transport Infrastructure: The Netherlands, 1853–1913

In this paper we put to trial the alleged role of investment in transport and communications infrastructure in economic growth in the Netherlands in the second half of the nineteenth century. To do so, we combine a new data set with data‐oriented econometric techniques. Testing of the main hypothesis by applying Granger's concept of causation in a vector auto‐regression model reveals that the development of infrastructure ‘caused’ Dutch economic growth. In order to investigate the underlying mechanisms, we enhance the basic model with impulse‐response analysis. This leads to a clear response pattern of GDP to a change in transport infrastructure investment. The response of GDP is explained as being induced by three underlying mechanisms:1. Positive forward linkage effects (mainly through reductions in the costs of transport and communications).2. Positive backward linkage effects (mainly through expenditure and income effects).3. Negative transitional dynamics (mainly through changes in the spatial setting of the economy).

An Inter Regional Input Output Analysis for Regional Development in Indonesia

(1) The trade flow coefficients make clear the differences of the domestic imports structure between Jawa and outside Jawa; Jawa has relatively high imports ratios in the agriculture, forestry, fishery and mining sectors, while the manufacturing and service sectors have low dependence on imports from other domestic regions. (2) The imports coefficients outside Jawa are rather high even in the light manufacturing sectors such as the food processing sector, the textile sector and so on, and thus the manufacturing sectors have not fully developed supplying capacities there. (3) The backward linkage effects are relatively high outside Jawa. On the contrary, they are lower in Jawa, because there is high dependence on foreign imports in Jawa, and there exists a biased domestic trade flow from Jawa to outside Jawa especially in the manufacturing sectors. (4) In respect to the forward linkage effect, the manufacturing sectors of Jawa have higher effects, and in Sumatra and Kalimantan, they are relatively high in some resource located industries such as chemical products and wood products, in which these regions have specialized. (5) The effects of the domestic import substitution are not always positive, but you see more than ten sectors with fairly high effects even in the manufacturing sectors; the highest effect, for example, is expected in the metal products sector of Sulawesi. (6) Foreign import substitution effects in general are larger than domestic effects, and they differ very much among regions and sectors. Finally the inter regional IO analysis depends on the estimated inter regional IO table. For a more reliable inter regional IO model, it would be very important to improve the estimation method and the data with trade flow.

A MODIFIED LEONTIEF MODEL FOR ANALYSING THE IMPACT OF MILK QUOTAS ON THE WIDER ECONOMY

The paper estimates the impact of milk quotas on the UK economy using a modified SAM‐based Leontief model. Since milk quotas involve the control of gross output as opposed to final demand, it is argued that the traditional form of a Leontief model needs to be adapted so as to make the output of dairy producers exogenous to the system. Modifications to both the demand‐driven and supply‐driven Leontief model are suggested thus allowing the estimation of both the backward and forward linkage effects of quotas. The results suggest that, in total, the backward linkage effects of milk quotas are more significant than the forward linkage effects, with the magnitude of the latter constrained by the pattern of milk marketing. Taking both types of linkages into account, it is estimated that the potential 3 per cent further reduction in quota levels being discussed in the context of CAP reform threatens a total of 11,000 jobs in the economy.

Potential effects on rural economies of conversion to sustainable farming systems

AbstractConversions from conventional to sustainable farming systems could affect local rural economies either positively or negatively, by several means: changes in income of agricultural households; backward linkages to input supply firms; forward linkages to transportation, processing, and marketing firms; and changes in consumer expenditures by agricultural and other households. We estimated these effects for five local rural economies in South Dakota, representing different agroclimatic and population settlement patterns. Whole-farm economic models of case study conventional and sustainable farms in each area were used to estimate differences in input purchase and marketing patterns. We found declines in on-farm personal income (returns to farm labor and management) in four of the five case comparisons under a conversion to sustainable farming systems if organic price premiums are ignored; we found increases in three of five cases if applicable organic premiums are included. In all five study areas, total off-farm personal income drops in the portions of local economies connected to farming through backward linkages. It also drops in four of the five study areas in the portions of local economies connected through forward linkages if organic premiums are ignored (all five if organic premiums are included). However, net forward linkage effects are usually much smaller than net backward linkage effects, and on-farm personal income effects are substantially greater than either backward or forward off-farm linkage effects in most cases. The total (on-and off-farm) personal income effect of converting to sustainable systems is positive in only one area without organic premiums, and in one additional area with premiums. The ratio of total to on-farm personal income effects within local economies, considering only first round effects on backward- and forward-linked firms, averages 1.2 without organic premiums, or 0.6 with them. Taking account of more complete multiplier effects, which also consider changes in consumer expenditures and changes in expenditures for supplies by backward- and forward-linked firms, the average is 1.8 without organic premiums, or 0.8 with them. With more time for changes in sustainable production techniques and in the structure of farms and the rural economy, the overall economic effects of conversions to sustainable farming are likely to be more positive than our estimates.

Some interindustry empirical evidence on the question of stockpiling crude oil

86-order interindustry transactions tables for selected years are used to assess the forward and backward linkage effects of energy sectors, 1958–1970, in the U.S. economy. The magnitude of the linkage effects were obtained by calculating intermediate input and demand coefficients. The crude oil sector is found to have the second largest forward linkages of all sectors in the 86-order table and the largest of all energy sectors. As a consequence, there is strong empirical evidence supporting the argument for stockpiling crude oil supplies.

The Backward Linkage Effect of Railroads on Swedish Industry, 1860-1914

The concept of Backward Linkage Effect and its impact on economic growth is often discussed in economic literature. The concept has been used to explain the industrial break-through of developed countries. The role of the construction and maintenance of railroads has often been stressed in this context. The backward linkage effect of railroads on Swedish industry during the Swedish industrial break-through is quantified and discussed in this article. The railroad demand did not have much impact on the Swedish iron and steel industry partly because the domestic market for rails was small and partly because rails could not be produced within the country at competitive prices. The impact on the mechanical engineering industry was greater, although it still did not create any specialized firms for railroad material due to the small size and irregularity of the market.