Gains from Export Growth: Do Linkages Matter?

Policy makers in developing countries often place emphasis on inter-sectoral input
linkages (‘linkages’ for short) in determining sectoral priorities in export development
policy, particularly in designing export promotion schemes and in screening and
monitoring export-oriented foreign direct investment. Development analysts too place
emphasis on linkages as an operational norm in assessing the developmental impact of
emerging export industries. The purpose of this paper is to argue that the use of this
closed-economy planning tool as a performance criterion in the context of exportoriented
growth strategy is fundamentally flawed. We illustrate our argument using
Indonesia as a case study. The methodology adopted involves the examination, using
the Leontief inter-industry accounting framework as the main analytical tool, of the
relationship between sectoral input linkages, and employment impact and contribution
to net foreign exchange earnings of manufactured exports in Indonesian manufacturing
during 1985-95.