MIT 11 481J - INTERDEPENDENCE AND INDUSTRIALIZATION (20 pages)

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INTERDEPENDENCE AND INDUSTRIALIZATION



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INTERDEPENDENCE AND INDUSTRIALIZATION

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Pages:
20
School:
Massachusetts Institute of Technology
Course:
11 481j - Analyzing and Accounting for Regional Economic Growth
Analyzing and Accounting for Regional Economic Growth Documents

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MIT OpenCourseWare http ocw mit edu 11 481J 1 284J ESD 192J Analyzing and Accounting for Regional Economic Growth Spring 2009 For information about citing these materials or our Terms of Use visit http ocw mit edu terms INTERDEPENDENCE AND INDUSTRIALIZATION ALBERT O HIRSCHMAN THE STRATEGY OF ECONOMIC DEVELOPMENT NEW HAVEN CT YALE UNIVERSITY PRESS 1958 p 98 119 Interdependence Used to explain inter industry production relations illustrated through linkages The degree of interdependence is measured by Backward Linkages Proportion of output that represents purchases from other industries Link from an industry to its suppliers Forward Linkages Proportion of total output that goes to other industries Link from an industry to its users not final demand Assumptions Assumptions Input coefficients are fixed or needed inputs increase monotonically with outputs If a required input is not supplied from domestic sources it can be imported Maximizing Linkage Effects Development policy must attempt to enlist these well known backward and forward effects but it can do so only if there is some knowledge as to how different economic activities score with respect to these effects p 100 Importance vs Strength of Linkage Effects Importance of effect The net output x of new industries n that might arise Strength of effect The probability p that the new industries will actually come into being Total linkage effect Summation of product of x s and p s Satellite Industries Satellite Industry When the probability p that a new industry will come into being is high but its net output x is small Can be established through backward or forward linkages CEMENT MASTER Joint Linkage Effects AA B According to Hirschman This mechanism may go far toward explaining the acceleration of industrial growth p 104 A Mental Experiment For development we re interested in finding the most efficient sequence for industrialization p 105 Takes an example of averaged degrees of interdependence of various industries



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