Sucro-Econ Plan SCI Vol. 20. No. 3. pp 135-143, 1986 0038~l21/86 $3.00 + .I0 Pnnted in Great Bntam 0 1986 Pergamon Journals Ltd. INAPPROPRIATE INDUSTRIES AND INEFFICIENT RESOURCE-USE IN BANGLADESH: SOME EVIDENCE FROM INPUT-OUTPUT ANALYSIS MOHAMMAD ALAUDDIN and C. A. TISDELL Department of Economics, University of Newcastle, NSW 2308, Australia (Received 14 September 1985) Abstract-A 47-sector input-output table was used to consider the appropriateness of Bangladeshi industries given their labour-capital requirements and relative availability of labour and capital in the economy. We examined the efficiency of industries in terms of needed production to satisfy final demand given relative factor intensities. The findings suggest that agricultural industries are most appropriate to Bangladesh. A case, in terms of attaining the highest returns on capital, can be made for directing capital to agricultural and agroindustries as well as for avoiding (subject to qualifications) construction and energy industries. It seems that a number of urban located industries with inappropriate factor proportions have been developed. There is a case on productivity grounds for expanding Bangladeshi investment in industries based on living resources. 1. INTRODUCr’ION This paper uses the latest available 47-sector input- output table [I] to consider the appropriateness of Bangladeshi industries given their labour/capital re- quirements and the relative availability of labour and capital in Bangladesh [cf. 21. Bangladesh, like all LDCs, is characterized by a low ratio of available capital to labour. For Bangladesh to maintain or expand indus- tries requiring higher ratios of capital to labour than available overall in the economy can add to unem- ployment or underemployment and reduce output available to satisfy final demand. Furthermore, where industries have similar relative factor intensities some may be more efficient than others in supplying pro- duction to satisfy final demand. This aspect is also ex- amined for Bangladesh. The analysis is based upon a Leontief open input- output model. Basically, it is assumed that the tech- nology of each industry is such that inputs are required in fixed proportions and that constant returns to scale prevail. These are limiting assumptions but may hold at least for small changes in the economy. The usual limitations of static input-output analysis apply and one has to be cautious in interpreting the results. Nev- ertheless, it is still possible to obtain significant pointers from an input-output overview which takes account of production interdependence in the economy as a whole. The static Leontief model underlying this paper is summarized in the Appendix. The model assumes two primary inputs (labour and capital) and allows for in- terdependencies between industries in production. The measurement of the effect of a change in sectoral final demand should take into account both its direct and indirect impact. Sometimes the indirect input require- ments for the expansion of an industry exceed the extra input required directly in the industry. It is therefore important not to neglect indirect effects. The paper proceeds first of all by discussing the data used for determining output, capital and labour re- quirements (both direct and indirect) for a unit ex- pansion in final demand of each of the Bangladeshi industries specified in the 1976-77 input-output table. It then indicates how capital and labour availability have been estimated for Bangladesh. This is followed by the presentation of empirical results. After discussing the degree of dependence of each of the industries or sectors on inputs from outside the industry or sector, the factor-intensities of different industries and their efficiency in producing a unit of final demand are out- lined. In comparing these intensities with ratios of available labour and capital, industries with inappro- priate factor proportions can be identified. Further- more, industries that appear to be relatively inefficient in supplying final demand can be identified. 2. THE BASIC DATA For the purpose of the present analysis the latest available 47-sector input-output table [I] has been used. It relates to 1976-77 and provides data on sectoral output and capital coefficient vectors. The methods used to estimate the capital coefficients are discussed in [3]. By multiplying sectoral outputs by the capital coefficients, we obtain the estimates of the amount of capital used in each of the sectors. These estimates of the quantity of capital used in each of the sectors are set out in Table 1 together with output levels. The aggregate amount of capital stock employed in the economy in 1976-77 is estimated to be Taka 223,658 million. The employment figures used to derive sectoral la- bour coefficients were estimated by Alauddin [4] from a number of sources. This was necessary because es- timates did not accompany the 1976-77 input-output table. Without going into the controversies surrounding conceptual and measurement issues, labour employ- ment is defined to include only those persons who were actually engaged in various sectors of the economy. Labour requirements for the agricultural crop sectors were estimated by using per acre labour requirement data for various crops from [5]. This required a con- sideration of distribution of acreage by variety of crops and use of irrigation by techniques, and details of these variables were obtained from [6]. Estimation of labour requirements for livestock, forestry and fishery sectors posed special problems since information was not SFPI 2c:i.s 135 ,