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Production linkages and dynamic fiscal employment effects of the extractive industries: input-output and nonlinear ARDL analyses of Azerbaijani economy


  • Elkhan Richard Sadik-Zada

    (Ruhr-Universität Bochum
    University of Cambridge
    Azerbaijan State University of Economics (UNEC))

  • Wilhelm Loewenstein

    (Ruhr-Universität Bochum)

  • Yadulla Hasanli

    (Azerbaijan State University of Economics (UNEC)
    Azerbaijan National Academy of Sciences (ANAS))


In this paper, we address the production linkages and employment effects of the petroleum sector on the rest of the Azerbaijani economy. The availability of the input-output tables for the years 2006, 2008, and 2009 enables the assessment of the changes with regard to the multiplier effects of the extractive industries over the first 3 years of the oil boom. We find that despite advanced infrastructure, well-developed petrochemical complex, and local content policies, the degree of integration of the international oil and gas business into the domestic economy is rather weak. In addition, both production and job creation multipliers slightly decreased after 3 years of exponential growth rates of oil production. The assessment of the production multipliers indicates that additional investments in processing, construction, and network industries have the highest production linkages. Concerning employment multipliers agriculture, education, health care, and public sector have the greatest job creation effects. To assess the fiscal employment effects of the oil revenues, which cannot be captured over the static input-output analysis, we employ the cointegrating nonlinear autoregressive distributed lag model. The model reveals a sustainable job creation effect of oil revenues in the case of Azerbaijan.

Suggested Citation

  • Elkhan Richard Sadik-Zada & Wilhelm Loewenstein & Yadulla Hasanli, 2021. "Production linkages and dynamic fiscal employment effects of the extractive industries: input-output and nonlinear ARDL analyses of Azerbaijani economy," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 34(1), pages 3-18, April.
  • Handle: RePEc:spr:minecn:v:34:y:2021:i:1:d:10.1007_s13563-019-00202-6
    DOI: 10.1007/s13563-019-00202-6

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    More about this item


    Input-output analysis; Employment; Nonlinear ARDL (NARDL); Asymmetric error correction model (AECM);
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • P22 - Economic Systems - - Socialist Systems and Transition Economies - - - Prices
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)


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