Max Mendez-Parra.
June 2015.
A policy-maker interested in promoting economic transformation needs information about the type of sectors and activities that have the greatest knock-on effects on output and employment of different types of labour. The most appropriate sectors have the ability to raise the output of other sectors through backward linkages and to generate jobs.
Output and employment multipliers calculate the value of production in all sectors and payments to factors of production (mainly labour) that will be necessary in order to meet a level of final demand. They take into account the direct and indirect effects through all sectors of the economy. The analysis can also be turned around. In this example, we calculate output and employment multipliers using social accounting matrices (SAMs) for Tanzania.
There are a number of data options for calculating multipliers, but at the minimum, they need to include information about how sectors are linked to each other through purchasing and delivering inputs. Input-output (I-O) tables usually contain these data.