Linkage Based Growth: An Analysis of the Determinants of Leontief Multiplier Size
Abstract
Traditional developmental economics gives primary emphasis to the creation of base industries, such as automobile manufacture or high-tech sectors. The present research follows Hirschman in emphasizing the size of the linkage from base industries to other sectors of the economy rather than the size of the base industries themselves. Leontief multipliers (also called economic multipliers) are a measure of how large or small the linkages of an economy are. We analyze two types of multipliers: Industrial and Wage multipliers This study aims to identify what factors influence multiplier size which lead to bigger rather than smaller linkages. Bigger linkages result in greater economic growth; therefore, understanding what factors are correlated with bigger linkages has the potential to positively influence economic policy. We consider the size of the local manufacturing sector and income inequality as possible factors that influence multiplier (linkage) size. We include GDP per capita and education levels as control variables. Our results showed the importance of reducing income inequality to increase multiplier effects in an economy. However, local manufacturing presented conflicting results so we suggest further steps to address this discrepancy.
Subject
Economic multipliersLeontief multipliers
Input-output tables
Economic growth
Income inequality
Local manufacturing
Citation
Morales, Jose Israel; Poe, Madison Corinne; White, Rachel Diane (2020). Linkage Based Growth: An Analysis of the Determinants of Leontief Multiplier Size. Undergraduate Research Scholars Program. Available electronically from https : / /hdl .handle .net /1969 .1 /200596.