Linkages and imports: A comparative study of India and Pakistan

Summary This paper takes a critical look at the notion of linkages as guides to sectoral expansion in less developed countries. In particular a distinction is drawn between gross linkages (typically defined on the inverse of the Leontief technology matrix) and net linkages defined on the ‘domestic inverse’. It is argued that for economies which exhibit a persistent dependence on intermediate and capital goods imports, the latter may be the appropriate concept for identifying sources of induced economic development. Using data for India and Pakistan it is shown that the two concepts imply very different ranking of sectors, thus providing an important qualification for using gross linkages as a form of investment criterion.