THE ANALYSIS OF STRUCTURAL CONSTRAINTS IN DEVELOPING ECONOMIES: A CASE STUDY*
| Published date | 01 May 1974 |
| DOI | http://doi.org/10.1111/j.1468-0084.1974.mp36002002.x |
| Date | 01 May 1974 |
THE ANALYSIS OF STRUCTURAL CONSTRAINTS IN
DEVELOPING ECONOMIES: A CASE STUDY*
By J. DIAMOND
1. INTRODUCTION
Prior to the construction of elaborate programming models for planning pur-
poses there is a case for a preliminary analysis of the inter-industry relationships
on which these policy models typically are based. One technique which has been
used frequently by planners for this purpose is Rasmussen's 'key industry' analysis
(Rasmussen, 1957).' This approach attempts to provide indices by which to gauge
the relative performance of a sector according to its inter-industry linkage effects.
The underlying goal is the identification of those sectors' 'key' industries, which have
a high degree of interdependence with other industries in the economy. Rasmussen
described the crucial feature of a 'key' industry as its ability to call forth a rela-
tively large increase in the output of other sectors when the final demand for its
products is increased, while at the same time its output must expand more than
average to meet the final demand on other sectors. In identifying these industries
planners gain a fuller appreciation of the pattern of sectoral interdependence in the
economy.
Unfortunately, since the linkage indices are derived from the inverted input-
ouput matrix, it is only possible to examine the inter-industry transactions from
the supply side with all final demand effects excluded from the analysis. It is also a
distinct drawback for policy formulation that the indices are derived in terms of
unweighted increases in intermediate output. This paper presents an extension
of the conventional Rasmussen technique to accommodate both final demand
repercussions and explicit policy objectives. Turkey was chosen as a case study
since the problems it currently faces are representative of those encountered by
many developing countries. The results not only provide a useful quantitative
indication of the severity of the constraint imposed by the structure of the economy
on the Government's ability to attain desired policy objectives, but they also in-
dicate the chief areas of policy conflict and compatibility.
2. TURKISH POLICY PRIORITIES
In common with many developing countries, Turkey at present faces several
policy problems created by rapid industrialization.2 The single-minded pursuit of
* This paper is derived from a thesis recently submitted for the degree of D.Phil., at the
University of York. I would like to acknowledge the debt to my thesis supervisor, Professor
A. T. Peacock, and the helpful comments of an anonomous referee. The author, a member of the
Public Sector Studies Research Programme at York, also acknowledges the financial assistance
received from the Social Science Research Council.
'See for example (Hazari, 1970; Bharadwaj, 1966). An alternative technique, suffering
similar defects, which uses the direct inputoutput table rather than its inverse has been
developed by Chenery (cf. Chenery and Watanabe, 1958).
2In 1970 'industry' (manufacturing, energy, mining) accounted for 20.5% of net domestic
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