InterSectoralLinkagesinJordanEconomyInputOutputAnalysis

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Global Joural of Maagemet ad Busiess Research Fiace Volume 13 Issue 7 Versio 1.0 Year 2013 Type: Double Blid Peer Reviewed Iteratioal Research Joural Publisher: Global Jourals Ic.

Waleed Abdul Moem Al -Darkazaly Baghdad Uiversity, Uited Arab Emirates Abstract- The purpose of this study is to ivestigate the iter-sectoral likages ad the effects of each sector

To facilitate the compariso process betwee sectors the researcher assembled ad aggregated the each table to 15 sectors.

Keywords: iput ad output tables (iot), jordaia iput ad output tables (jiot), backward likages, forward likages, key (leader) sector.

1 Global Joural of Maagemet ad Busiess Research Fiace Volume 13 Issue 7 Versio 1.0 Year 2013 Type: Double Blid Peer Reviewed Iteratioal Research Joural Publisher: Global Jourals Ic. (USA) Olie ISSN: & Prit ISSN: Iter-Sectoral Likages i Jorda Ecoomy: (Iput-Output Aalysis) By Osama Mahmoud Al Zoubi & D.Waleed Abdul Moem Al -Darkazaly Baghdad Uiversity, Uited Arab Emirates Abstract- The purpose of this study is to ivestigate the iter-sectoral likages ad the effects of each sector oother sectors i Jordaia ecoomy by usig Iput ad output tables for the years: 1987, 2000, ad 2009.To facilitate the compariso process betwee sectors the researcher assembled ad aggregated the each table to 15 sectors. This study applied Iput ad Output techique to determie the leader sector which has highest backward ad forward likages. Keywords: iput ad output tables (iot), jordaia iput ad output tables (jiot), backward likages, forward likages, key (leader) sector. GJMBR-B Classificatio : FOR Code: JEL Code: O50 IterSectoralLikagesiJordaEcoomyIputOutputAalysis Strictly as per the compliace ad regulatios of: Osama Mahmoud Al Zoubi & D.Waleed Abdul Moem Al-Darkazaly. This is a research/review paper, distributed uder the terms of the Creative Commos Attributio-Nocommercial 3.0 Uported Licese permittig all o-commercial use, distributio, ad reproductio i ay medium, provided the origial work is properly cited.

2 Iter-Sectoral Likages i Jorda Ecoomy: (Iput-Output Aalysis) Osama Mahmoud Al Zoubi α & D.Waleed Abdul Moem Al-Darkazaly σ Abstract- The purpose of this study is to ivestigate the itersectoral likages ad the effects of each sector oother sectors i Jordaia ecoomy by usig Iput ad output tables for the years: 1987, 2000, ad 2009.To facilitate the compariso process betwee sectors the researcher assembled ad aggregated the each table to 15 sectors. This study applied Iput ad Output techique to determie the leader sector which has highest backward ad forward likages. This study foud that there is a discrepacyi the values ofthe backward ad forward likages of each sector amog the three years. However, the maufacturig ad agriculture sectors have had the strogest backward ad forward likages i Keywords: iput ad output tables (iot), jordaia iput ad output tables (jiot), backward likages, forward likages, key (leader) sector. I. Itroductio Backward ad forward likages are descriptive measures of the ecoomic iterdepedece of idustries i terms of magitude trasactios. Idustries with strog backward ad forward likages are termed as key sectors, ad play a importat role i the developmet strategy of a coutry. Likages aalysis is essetial because it shows the importace of each sector withi the ecoomy. It used to examie the iterdepedecy of productio structures, ad it was itroduced by Rasmusse (1956), Cheery& Wataabe (1958) ad Hirschma (1958). Sice that may differet methods were improved ad expeded for measurig likage coefficiets (Bhalla ad MA, 1990; Heimler, 1991; Su, 1998). Oe of the wellkow methods for aalysis iterdepedecy betwee sectors is backward ad forward likage aalysis usig Iput Output Tables.This study will use table for the year 2000 which was built by the researcher usig the actual data, ad the updated table forthe year 2009 which built by the researcher usig RAS method, fially, the table for the year 1987 which built by Jordaia govermet. II. Research Problem ad Objectives There are o such studies aalyzig itersectoral relatios by usig IOT i Jordaia Ecoomy, which debilitatig decisio-makig process to motivate ecoomic growth. The lack ofaalytical studiesof the Authors α σ: Baghdad Uiversity, Faculty of Ecoomic, Baghdad, Iraq. s: zoubizoubizoubi@yahoo.com, darkzlyabbas@yahoo.com Jordaia ecoomy is iterested i the role of the ecoomic sectors i stimulatig the ew ivestmets i other sectors, whether these sectors are usig the outputs of other sectors(backward likages) or by providig what the other sector eed from it (forward - ikages). The aim of this study to aalyze the ite sectoral likages i Jordaia Ecoomy to determie - the most ifluetial ecoomic sectors i the ecoomy, which steer the polices toward true decisio makig to direct ivestmets o leader sectors that most affected accordig to the ecoomic priorities i Jorda if icreasig the ecoomic growth through motivate the ivestmets ad productio i other sectors.this will stimulate all sectors through the effects of direct ad idirect effects geerated from the backward ad forward likages of all sectors which ecourage ecoomic growth ad thus positively impact o icome ad employmet levels i the commuity. III. The Importace of Research Jordaia ecoomic is sufferig sice the ed of eighties i the last cetury from several ecoomic problems which obstruct its growth ad progress; from weakess of output ad iability to meet local eeds i various forms, to debt burde which absorbsa sigificat portio oflocal resourcesto meet its obligatios. Likage aalysis ca be quite useful to assess the effectiveess of developmet strategies,which aim to stregthe the supply chai process amog idustries, ad to provide a way to the policy makers to allocate resources for gettig the best outcome. Havig iformatio about the priority sectors, suitable policies ca be avigable towards those sectors for higher growth of the ecoomy, ad ca be take careby the weaker sectorsfor further improvemet. For these reasos ad to highlight the stregthe of every sector, to help the decisio makers to bettermet the Jordaia Ecoomy. IV. Methodology This study was primarily carried out o compiled Iput ad Output Tables for Jordaia ecoomy to three differet years. The table for year1987 was produced by the Jordaia Departmet of Statistics. The table for the year 2000 built by the researcher depedig o the actual data, while the 35

3 36 table for the year 2009 built by the researcher by updatig 2000 table usig RAS method. For aalytical purposes, the origial Iput ad Output Tables cosistig of differet umber of sectors are aggregated ito 15th sectors based o Iteratioal Stadard Idustrial Classificatio (ISIC3.1).(Uited Natios, 2002). The direct iput coefficiet matrix costructed by dividig each flow show i the Iput ad Out put Table o the total of colum. Alteratively, whe each flow is divided o the total of row, adirect output coefficiet matrix obtaied. Direct iput ad output coefficiet matrices are used to establish the direct likages. Direct Iput ad Output coefficiet matrix iverted to obtai the total Iput ad Output coefficiet matrix respectively. The elemets of a iverse matrix represet both direct ad idirect flows betwee each sector ad other sectors. V. Theoretical Framework Jorda represets a small ope ecoomy with few aturalr esources ad limited maufacturig. If the Jordaia Ecoomic shows growth that meas the debt burdes would be reduced, also by improvig the ecoomic growth it will effect o reducig the uemploymet rates ad poverty. Iput ad Output aalysis has bee widely used to assess sectoral ecoomic performace ad productio iterdepedece. This paper used compiled Iput ad Output Tables sice 1987s for Jordaia Ecoomy to aalyze the sigificace of iter-sectoral relatio ad to determie the highest rakig sectors i term of backward ad forward likages. Also itused this techique of Iput ad Output to explore the structural chage of the Jordaia Ecoomy, ad to aswer both questios: Who receives from whom? ad Who gives to whom?. Moreover it iteded to serve three mai purposes. First, to aalyze the iter-sectoral likages i Jordaia Ecoomy to determie the most ifluetial ecoomic sectors,ad to provides a guide to the costructio ad iterpretatio for forecastig purposes. Secod, it provides details of the way i which the itersectoral likages tables ca be used. Fially, it provides a meas of aswerig some of the questios ofte requested by iput ad Output practitioers. VI. Literature Review After 1941, whe Leotief itroduced the first I- O Tables for the Americae coomy, the Iput ad Output aalysis became fudametal meas for studyig iter-sectoral likages of sectors of ay ecoomy. Cosequetly, the I-O Tables bega to be used quite early by Poul N.Rasmusse (1958) ad Cheery ad Tsuehiko Wataabe (1958) for establishig the likages betwee sectors of the ecoomy. These likages were studied o the side of iputs (the side of supply) to each sectors (backward likages)as well as o the side of outputs (the side of sales) of a each sector to other sectors (forward likages) (Lovrec Pfajfar ad AleaLotric Doliar 2000). Rasmusse (1956) proposed to use the colum (or row) totals of the Leotief iverse, (I - A)-1, to measure iter-sectoral likages. The backward likage, based o the Leotief iverse matrix, is simply defied as the colum totals of iverse matrix. Similarly, the correspodig forward likage ca be defied by referece to the row totals of Leotief iverse matrix. A empirical study of Iput ad Output likage aalysis was proposed by Hirschma (1958), who used the Rasmusse likage idicators to idetify Key or Leader Sectors, i a ecoomy which will promote growth to the follower sectors. The way of likig key sectors ad iduced sectors is the developmet of backward ad forward likages betwee these sectors. These ratios measure the degree of iterdepedece of differet sectors oly; to what degree a sector uses iputs from other sectors. Although the likage is a causal cocept ad this is the truth, the sector developed strictly as a result of a likage to a leadig sector oly, oe could also fid some sectors with high ratios ot due to likage effects but oly due to sectoral iterdepedece. I this case, the sector did ot develop as a result of likages to aother sector but rather i a syoymous with it. As early as 1958 Hirschma (Hirschma (1958) itroduced the aalytical cocept of the key sector of the ecoomy as a sector with forward ad backward likages above average. I the literature umerous modificatios of the basic procedures for establishig the key sectors ad their use o data o differet ecoomies ca be foud (Strassert (1968), Hazari (1970), Laumas (1975), Bharadway (1976), Joes (1976), Schultz (1970, 1977), Rao ad Harmsto (1979), Hewigs (1989), Dietzebacher (1992)). Each of them has its advatages ad disadvatages, which mea it has advocates ad critics (Lovrec Pfajfar ad AleaLotric Doliar 2000). VII. Backward Likages Through these likages we ca estimate the reliace of oe sector o other sectors by view productio iput side, it measures the volume of usig oe sector to produce the other oe, which meas icreasig the productio for the sector affected by high backward likages will provoke ew idustries to provide this sector by its iput productio. These direct backwards likages measured by usig coefficiet matrices (A), it is summatio of the elemets of the colum for the target sector (Cheery, 1958), by usig the data of Iput Output of the Jordaia ecoomic we have bee reached results as

4 show i Table (1), these likages shows (reflect, express) about the proportio of itermediate iputs (Itermediate Cosumptio; goods ad services) for sector j to the total productio for the same sector, which meas: Db j = xij Xj = j= 1 j = 1 a ij (1) Whereas Db j: the value of direct backwards xij likages, while the relatioship is the value of Xj coefficiet for sector j. From Table (1) we see chages i raks of some sectors, for example, agriculture sector moved from rak 8 to rak 1, this reflects the icreasig of agriculture sector depedecy o the output of other sectors specially idustry, which deotes to techological progress i agriculture sector by usig mechaism rather tha rely o primitive meas i agriculture, while maufacturig ad costructio sectors rak moved just oe step forward, the most importat sectors which sigificatly their raks moved backward electricity ad Retail & wholesale Trade. But this measure direct backward likages oly without thoughtfuless the idirect effects resultig from expasio i the productio of ay of the productive sectors, I the structure of Iput ad Output, the sales of sector A to sector B recorded as forward likage for sector A ad backward likage for B but oe of these effects which could result i a impact was take ito cosideratio i this scale. (Joes, 1970) To measure the direct ad idirect effects we should use Leotief iverse matrix [(I-A)-1], we ca calculate the direct ad idirect effects for backward for ay sector through the total of colum elemets i this matrix, (Yotopoulos ad Naget, 1976), accordig to the equatio: DIB = j = 1 (I-A) -1 (2) After applyig this quotatio o the Jordaia ecoomy we ca see the results i the table (1).We should otice here that the value of these likages is the same value of output multipliers. From Table (1) it is oted that the raks of some sectors have remaied pretty much the same except little bit chages, as i costructio sector its rak chaged i idirect backward likages from 3 to 2 i direct ad idirect backward likages i the year These measures have ot bee highly accepted amog ecoomists, as they thought some of them iaccurate, so some mior adjustmets have bee ivolvig i the type which is usig averages, which is a compared the average of all likages (direct ad idirect) for sector j with overall average for all sectors (Rasmusse, 1957), i followig mathematical formula: 1/ Ib i =. (I - A) -1 (3) 1/ 2 (I - A) -1 The umerator represets the average of direct ad idirect eeds to meet the icreased of fial demad by oe uit from sector j products, whereas the deomiator refers to average total eeds i macro ecoomy to meet the icreased of fial demad by oe uit, meas, the aggregatio of icreased fial demad i all sectors is oe uit. (Hajy, 1985) By applyig this quotatio o the Jordaia ecoomy data we reached to the direct ad idirect backward likages Idex to the Jordaia Ecoomy which is show i Table (3). The direct ad idirect backwards likages for sector j are high if the value of idex exceed more tha oe, if it was 1>Ibj, whereas i the revers situatio weak, ad whe the value is more tha oe it meas the sector eeds more relatively volume productio to cope the icreasig i fial demad o sector j products by oe uit, so sector j will be strog leader for other sectors compared with other sectors. From Table (3) we ca see that the backward likages i Jordaia ecoomy is weak i geeral, i 2009 the sectors have likages are agriculture ad maufacturig, however, the maufacturig sector characterized i high stability i backward likages, we ca explai why agriculture sector has bee characterized because of depedig o usig chemical idustries products as pesticides ad veteriary drugs ad treatmets more tha it was i VIII. Forward Likages The focal idea for forward likages is to study the impact of icreased output that occurs or may occur i the used sectors whe there is a chage i its provider sector of productio iputs. (Bulmer, Thomas, 1982) Also it measures the impact of forward likages sectors depedecy to other sectors whe productio of this sector is used as iputs productio i other sectors, high impact of these likages to a particular sector that icludes the expasio i this sector will geerate the power stimulate all sectors to elargemet. I other words, the impact of forward likages happes whe particular sector products used as iputs i productio oe sector or more from other sectors which geerate a icetive to do ew activity or icrease productio for specific sector which meas these likages stimulate ew ivestmet through creatio excess supply. (Zahra, 1968) We ca fid the value of direct forward likages through coefficiet productio matrix (O) which is a result of dividig each cell i the matrix of itermediate 37

5 38 demad o total fial demad (itermediate ad the fial which is the total of row), the value of the direct forward likages for sector i is a total row for this sector i the coefficiet matrix productio (Yotopoulos ad Nuget, 1973), it ca be formulated mathematically: Df j = i 1 xij Xi = o ij (4) j 1 Where Dfj : the ratio of itermediate demad to total demad Xi for a particular sector, it has bee estimated = for Jordaia = ecoomy ad the result show i Table (2). Perhaps the most promiet ca be see from this table is the chage i rak of some sectors, as example, agriculture sectors which moved from 7th rak to the third rak, ad miig ad queryig from 6th rak to the first rak, but this reflects the oly direct forward likages ad does t i cosider the idirect effects which happeed i the ecoomy whe the ivestmet icreased. We ca measure the traces of direct ad i direct forward likages by usig Leotief output matrix (I-O)-1 through usig productio coefficiet (the itermediate demad proportio to total demad icludig fial demad), (Carter & Brody, 1970), the direct ad idirect forward likages equal the total rows of ivers Leotief output matrix, it ca be formulated mathematically: Tf i = (I - O) -1 (5) i = 1 The matrix (I-O)-1 express the icreasig i output of i sector to ecouter the eeds of growig fial demad by oe uit from products of every sector (Boucher, 1976), after applyig this formula o Jordaia ecoomy the result have bee show i Table (2). From this table we ca say that the commets metioed above with respect to the chage of sectors raks almost remai the same, the forward likages happes or could happes whe sector productio i use or maybe use as itermediate output for oe sector or more i atioal ecoomic sector. As metioed whe talked about backward likages there are several criticisms for direct ad i idirect style, so some modificatios have bee made to this idicator, ew idex was calculated usig averages ad average of averages hosted by the ecoomists Rasumussem (Al-Hammadi & Haoush, 1992), it might be called the idex for direct ad idirect forward likages, it ca be formulated mathematically: IF i = 1/ 1/ 2. (I - O) -1 (I - O) -1 (6) The umerator refers to average of the total of row which belogs to i sector i ivers Leotief matrix output, which measures the total impact o sector i whe the fial demad grows for all sectors by oe uit, the icreases i ivestmets i sector i it will motivate the productio of sectors which used the products of this sector by icreasig because it gaied the advatage of availability itermediate productio (Bulmer-Thomas, 1982). Whereas the deomiator states the average of averages for all sectors. After usig above equatio ad applyig it o the Jordaia ecoomy data, the results show i Table (3), it provides with idex for sesitivity of dispersio of forward likages. The sectors have a strog forward likages if the idex for ay sector greater tha oe IFi<1, ad the vice versa i case IFi>1 (Laumas, 1976). We ca otice from Table (3) that the electricity sector ad the costructio was marked by strog forward likages i 1987, while they declied i 2000, miig ad queryig became the stroger forward likages oly, it is a logic reflects the fact after establishig potash factory that relay o basis of mai products of this sector from potash ad phosphate. With regard to the chage i sectors order, ex-aalysis about direct forward likages ad idirect forward likages still largely true. Refereces Référeces Referecias 1. Al Zoubi, Osama, (2013). Costructio ad Aalysis Iput Output Tables for Jorda Ecoomy i 2000 & 2009, Baghdad uiversity, Iraq, PHD thesis, ot published. 2. Bhalla, A.S., ad MA, Y. (1990) Sectoral Iterdepedece i the Chiese ecoomy i comparative perspective, Applied Ecoomics, Boucher, M., (1976).Some further Results o Likage Hypothesis, Quarterly Joural of Ecoomics, Vol Bulmer R. Thomas, (1982). Iput-output Aalysis i Developig Coutry, Joh Willy ad sos, New York. 5. Carter, A. P. ad Brody, A. (eds.) (1970), Cotributios to Iput-Output Aalysis; Volume 2: Applicatios of Iput-Output Aalysis, Amsterdam: North-Hollad Publishig Compay. 6. Cheery, H.B. ad T. Wataabe, Iteratioal comparisos of the structure of productio, Ecoometrica, Vol. 26, Departmet of Statistics, (1992). Iput-Output Tables 1987, ot published, Directorate of Natioal Accouts, Amma, Jorda. 8. Europea Commuities, (2008). Eurostat Maual of Supply, Use ad Iput-Output Tables, 2008 editio, Luxembourg. 9. Haaji, J.A, (1985). Aalysis of Idustrial Iputoutput Tables, Kuwait.

6 10. Hamadi, A.M, ad M.S. Haoush, (1994). Applied Study of direct ad idirect forward likages for Maufacturig sector i Iraq, Dirasat, Vol. 21(a), No. 2, Uiversity of Jorda, Amma. 11. Heimler, A. (1991) "Likage ad Vertical Itegratio i the Chiese Ecoomy", Review of Ecoomics ad Statistics, Hirschma, Albert, O., (1958). The Strategy of Ecoomic Developmet, Yale Uiversity Press, New Have. 13. Joes, L.P., (1970). The Measuremet of Hirschmaia Likages, Quarterly Joural of Ecoomics, Vol.90. No Laumas, P. S., (1976), The Weightig problem i testig the likage hypothesis, Quarterly Joural of Ecoomics, Vol Nara palasigam, S., (1993). Iput - output Aalysis for Developmet plaig, UNDP, UNDESD project JOR/87/006: Termial Report o project: Results ad recommedatios, Amma, JAN Pfajfar, Lovrec, ad AleaLotricDoliar, (2000). Itersectoral Likages i the Sloveia Ecoomy i the years 1990, 1992, 1993 ad 1995: Key Sectors i the Sloveia ecoomy. Paper preseted at the 13th Iteratioal Coferece o Iput-Output Techiques, Macerata, Italy. 17. Rasmusse, P., Studies i Itersectoral Relatios, (1958). North-Holad, Amsterdam. 18. Uited Natios, (2002). Iteratioal Stadard Idustrial Classificatio of All Ecoomic Activities (ISIC) Revisio 3.1, New York, USA. Departmet of Ecoomic ad Social Affairs, (1999). Hadbook of iput-output, Compilatio ad Aalysis, Series F, No. 74, Uited Natio, New York. 19. Yotopoulos, P.A ad J.B. Nuget, (1976). I defese of a test of the likage hypothesis, Quarterly Joural of Ecoomics, Vol Zahra, H., (1968). Ecoomic Developmet Problems i Developig coutries, Al Kamaliah Press, Cairo. 39

7 40 Aex Table 1 : Backward Likages Direct Backward Likages Direct ad Idirect Backward Likages NO. Sector Name Value Rak Value Rak Value Rak Value Rak Value Rak Value Rak Agriculture, forestry ad fishig 1 2 Miig ad Queryig Maufacturig Electricity Water Costructio Retail & wholesale Trade, ad repair maiteace 7 8 Restaurats & Hotels Trasport Commuicatio Fiacial & isurace Real estate ad Busiess services Educatio Health ad social work Other services Sources: 1. Al Zoubi, Osama, Costructio ad Aalysis Iput Output Tables for Jorda Ecoomy i 2000, 2009, Baghdad uiversity, PHD thesis, ot published. 2. Departmet of Statistics, Iput-output tables 1987, ot published.

8 Table 2 : Forward Likages Direct Forward Likages Direct ad Idirect Forward Likages No. Sector Name Value Rak Value Rak Value Rak Value Rak Value Rak Value Rak Agriculture, forestry ad fishig Miig ad Queryig 2 3 Maufacturig Electricity Water Costructio Retail & wholesale 7 Trade, ad repair maiteace 8 Restaurats & Hotels Trasport Commuicatio Fiacial & isurace Real estate ad Busiess services Educatio Health ad social work Other services Sources: 1. Al Zoubi, Osama, Costructio ad Aalysis Iput Output Tables for Jorda Ecoomy i 2000, 2009, Baghdad uiversity, PHD thesis, ot published. 2. Departmet of Statistics, Iput-output tables 1987, ot published. 41

9 42 Table 3 : Idex of Power Dispersio of Backward ad Forward Likages Idex of Power Dispersio of Backward Likages Idex of Power Dispersio of Forward Likages Value Rak Value Rak Value Rak Value Rak Value Rak Value Rak No. Sector Name Agriculture, forestry ad fishig Miig ad Queryig 2 3 Maufacturig Electricity Water Costructio Retail & wholesale 10 7 Trade, ad repair maiteace 8 Restaurats & Hotels Trasport Commuicatio Fiacial & isurace Real estate ad Busiess services 13 Educatio Health ad social work Other services Sources: 1. Al Zoubi, Osama, Costructio ad Aalysis Iput Output Tables for Jorda Ecoomy i 2000, 2009, Baghdad uiversity, PHD thesis, ot published. 2.Departmet of Statistics, Iput-output tables 1987, ot published.

III. RESEARCH METHODS. Riau Province becomes the main area in this research on the role of pulp

III. RESEARCH METHODS. Riau Province becomes the main area in this research on the role of pulp III. RESEARCH METHODS 3.1 Research Locatio Riau Provice becomes the mai area i this research o the role of pulp ad paper idustry. The decisio o Riau Provice was supported by several facts: 1. The largest