Production linkages and dynamic fiscal employment effects of the extractive industries: input-output and nonlinear ARDL analyses of Azerbaijani economy

Sadik‐Zada, Elkhan Richard; Loewenstein, Wilhelm; Hasanli, Yadulla

doi:10.1007/s13563-019-00202-6

Cited by 51 publications

(41 citation statements)

References 23 publications

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“…Most cross country studies and individual case studies contemplating natural resource exporting transition economies detect the negative growth effect mainly over the symptoms of Dutch disease in the petroleum exporting transition economies (Oskenbayev and Karimov 2013;Hasanov 2010;Bayramov and Conway 2010;Oomes and Kalcheva 2007;Dobryanskaya and Turkisch 2009). In the case of the Gulf countries, which are not labor surplus but rather labor shortage economies, the issue of resource movement is also less severe because of the extremely low labor intensity of the petroleum industry which dominates the extractives in the Gulf region (Sadik-Zada et al 2019). The appreciation of the RER, in contrast is, as we shall see later, a relevant problem for the developing countries.…”

Section: Literature Reviewmentioning

confidence: 99%

“…This kind of policies which target the short and middle term satisfaction of the population rather than long term economic growth are in conflict with good economic policies both in the short and in the long run. Desai et al (2009) argue that this kind of policies which target the short and middle term satisfaction of the population rather than long term economic growth can be attributed to the strategic behavior of the politicians who strive to appropriate the maximum share from the revenue for themselves in the short and middle term perspective (Sadik-Zada et al 2019).…”

Section: Purely Economic and Institutional Transmission Channels Of Rmentioning

confidence: 99%

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Commodity Revenues, Agricultural Sector and the Magnitude of Deindustrialization: A Novel Multisector Perspective

2019

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This study puts forward a model of a multisector economy and embeds it in a novel theoretical framework to address the relationship between commodity revenues and manufacturing output with a special focus on the role of the agricultural sector. The three-sector model lays the groundwork for analyzing policy choices in more complex sectoral settings. Based on the theoretical analysis, the study identifies the weight of the individual economic sectors in the public revenue generation as a determinant of the magnitude of rent seeking epitomized in the crowding out effect of investments in manufacturing. We find that enclave agriculture contributes to the deindustrialization pressure in the face of natural resource windfalls. The central finding of the multisector analysis is the conclusion that not diversification per se but rather a diversification with the substantial domestic factor or market orientation has the capability to limit the magnitude of deindustrialization. For the empirical validation of the theoretical findings, the study employs fixed effects, fully modified OLS, dynamic common correlated effects estimators and dynamic fixed effects estimators for the dataset of 113 developing and transition economies for 1963–2014 period. The estimations reveal that natural resource revenues correspond with a higher level of the manufacturing sector output. In the economies with a low level of economic diversification, commodity bonanza leads however to the shrinkage of the manufacturing. In the commodity revenue dependent settings, nevertheless, agricultural sector exports have a negative impact on the performance of the manufacturing sector. These findings are in line with the predictions of the theoretical model.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Purely Economic and Institutional Transmission Channels Of Rmentioning

confidence: 99%

Commodity Revenues, Agricultural Sector and the Magnitude of Deindustrialization: A Novel Multisector Perspective

2019

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“…According to him, because of the lack of production linkages of mining with the rest of the economy, mining is not sufficiently capable of leading the process of industrialization. The Hirschman thesis has been confirmed in investigations of the linkage effects emanating from the extractive industries (Sadik‐Zada et al, 2019; Sadik‐Zada, 2020b). The third explanation, the Dutch disease, was suggested by Meade and Russel (1957), formalized and successfully tested for the case of oil‐exporting Venezuela by Seers (1964) and, interestingly enough, mentioned as a potential problem for the case of the Caribbean and Jamaica by Lewis (1944, 1954).…”

Section: Literature Reviewmentioning

confidence: 80%

“…There are three possible explanations why Lewis never made natural resource abundance explicit in his elaborations: first, the special focus on the overpopulated resource‐poor settings in the Caribbean, dominated by subsistence agriculture; second, the lack of recognition for the grave differences between extractive and non‐extractive industries in terms of growth and employment linkages (Hirschman, 1958; Downes, 2004; Sadik‐Zada, Loewenstein, & Hasanli, 2019; Sadik‐Zada, 2020b); and third, the absence of Malthusian pressure on a subsistence sector in the settings with natural resource abundance. The abundance of mineral wealth or land translates into increasing welfare in the traditional sector and weakens the push factors to shift into the modern sector (Gollin, 2014).…”

Section: Literature Reviewmentioning

confidence: 99%

Natural resources, technological progress, and economic modernization

Sadik‐Zada

2020

Review Development Economics

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The present inquiry focuses on the modernization perspectives of the commodity‐exporting countries through the lens of development economics. To this end, the study adopts the Kaldorian framework to address the modernization effects, epitomized in the absorption of surplus labor. To trace the process of economic modernization, the study augments Lewis’s dualistic economy model by the extractive sector. Three different scenarios for the management of resource revenues are scrutinized. An altruistic mode, which implies a pure redistribution of the revenues among the poor swaths of the population, protracts the process of economic modernization, requires a greater amount of capital stock, and harbors a greater risk of a poverty trap. This effect is less pronounced if the modern sector is more capital‐intensive. A productive mode, which elicits full reinvestment of the commodity revenues, in contrast, accelerates the pace of economic modernization. Further, predicated on the scrutiny of a more realistic scenario, a bargaining mode, the study derives the condition for a net positive (or negative) modernization effect. The study identifies technical progress alongside capital accumulation as a further important source of economic modernization.

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“…Input-output (IO) models, despite their well-known limitations, such as, fixed prices, constant returns to scale, no supply constraints and the aggregation of input-output data over different products supplied by one industry [13][14][15], have been incrementally used in the literature to analyze how an exogenous shock propagates in an economy through the interdependence and the links between the production sectors [16,17]. IO techniques have previously been applied in the fisheries sector for economic impact analysis.…”

Section: Introductionmentioning

confidence: 99%

Economic Consequences of Coronavirus Disease (COVID-19) on Fisheries in the Eastern Mediterranean (Cyprus)

Giannakis

Hadjioannou²,

Jiménez

et al. 2020

Sustainability

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Fisheries are among the sectors hardest-hit by the coronavirus pandemic (COVID-19) crisis due to the sudden decrease in the demand for seafood. This study employs demand-driven and supply-driven input-output models to conduct an economy-wide assessment of the contraction of the fisheries activities in Cyprus, as well as a questionnaire survey to reveal fishermen’s perceptions of COVID-19 crisis impacts. The results at the macroeconomic level reveal that the contraction in the economic output of the fisheries sector does not have any significant impact on the wider economy due to the small size of the sector. However, the COVID-19 crisis has major negative effects on fishermen’s income and the livelihoods of fishers’ households. The average gross margin of the interviewed fishermen for March 2020, i.e., the month where a national quarantine and lockdown was imposed, was four times less the average monthly gross margin for the winter period (December 2019–February 2020) and 2.5 times less compared to the average monthly gross margin of 2019. The recessionary impacts of the COVID-19 crisis in conjunction with the chronic challenges that fisheries are currently facing in Cyprus, negatively affect the viability of the sector.

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Production linkages and dynamic fiscal employment effects of the extractive industries: input-output and nonlinear ARDL analyses of Azerbaijani economy

Cited by 51 publications

References 23 publications

Commodity Revenues, Agricultural Sector and the Magnitude of Deindustrialization: A Novel Multisector Perspective

Commodity Revenues, Agricultural Sector and the Magnitude of Deindustrialization: A Novel Multisector Perspective

Natural resources, technological progress, and economic modernization

Economic Consequences of Coronavirus Disease (COVID-19) on Fisheries in the Eastern Mediterranean (Cyprus)

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