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Key sectors in economic development: a perspective from input-output linkages and cross-sector misallocation

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  • Leal-Ordoñez Julio C.

Abstract

For a typical developing country, this paper shows that once inter-sectoral linkages are taken into account, closing the productivity gap in a number of services gives bigger gains in aggregate productivity than closing it in agriculture or in manufacturing. This is performed in the context of an input-output economy and general equilibrium. Also, the importance of sector-specific distortions that produce cross-sector misallocation is addressed. I compute the effect of the removal of these distortions on aggregate productivity using the input-output model and find that this could increase productivity up to 68%, depending on whether the rents from distortions stay in the economy or not.

Suggested Citation

  • Leal-Ordoñez Julio C., 2015. "Key sectors in economic development: a perspective from input-output linkages and cross-sector misallocation," Working Papers 2015-23, Banco de México.
    • Handle: RePEc:bdm:wpaper:2015-23
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    References listed on IDEAS

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    More about this item

    Keywords

    key sectors; economic development; input-output linkages; cross-sector misallocation;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models

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