The role of supply and use/input output tables in the perspective analysis of economic development of Rwanda with example

NATIONAL UNIVERSITY OF RWANDA

FACULTY OF ECONOMICS AND MANAGEMENT

DEPARTMENT OF APPLIED STATISTICS

ACADEMIC YEAR 2010

THE ROLE OF SUPPLY AND USE/INPUT OUTPUT TABLES IN THE PERSPECTIVE ANALYSIS OF ECONOMIC DEVELOPMENT OF RWANDA WITH EXAMPLE

A dissertation submitted for the partial fulfilment of an award of Bachelor's degree in Applied Statistics by National University of Rwanda.

By

HABYARIMANA Jean Baptiste

Supervisor: Mr. RURANGA Charles

Huye, September 2010

Declaration

I, HABYARIMANA Jean Baptiste, hereby declare that, the work presented in this dissertation entitled «THE ROLE OF SUPPLY AND USE /INPUT OUTPUT TABLES IN THE PERSPECTIVE ANALYSIS OF ECONOMIC DEVELOPMENT OF RWANDA» is my original work and has never been presented elsewhere for any academic award.

All consulted references have been systematically presented in references.

HABYARIMANA Jean Baptiste

Signature: ............................

Date: .................................

Dedication

I dedicate this dissertation to:

God,

Family,

Teachers at all levels,

and

Friends.

Acknowledgement

The success of this research work cannot be solely attributed to the effort of one person. In fact, there must be combined efforts to make such exercise a success. It is therefore on this ground that other people deserve my sincere thanks and gratitude.

I thank in advance the National University of Rwanda and the Government of Rwanda for having formed me and supported this study.

I extend my sincere gratitude to my director RURANGA Charles for his help and active role he played towards the success of this work.

Thanks to my family, relatives and friends for their help either materially or morally, especially to NTAKIRUTIMANA Eric my colleague.

I would like to address my special thanks to anyone who directly or indirectly contributed to the success of my study.

Table of Contents

Declaration i

Dedication ii

Acknowledgement iii

Table of Contents iv

List of Tables and Graphics vi

Tables vi

Figures vi

List of Abbreviations vii

Abstract viii

Chapter I. INTRODUCTION 1

1.1. General introduction 1

1.2. Background to the study 2

1.3. Problem Statement 3

1.4. Research hypotheses 3

1.5. Objectives of the study 4

1.6. Scope of the study 4

1.7. Justification of the study 4

1.8. Limitation of the study 4

Chapter II: LITERATURE REVIEW 5

2.1. National Accounting in Economic Development. 5

2.1.1. Definition and nature of SNA information for economic development 6

2.1.2. Supply and Use Tables (SUT) 7

2.1.3. SUT concept, linear model, and GDP derivation 7

2.1.4. The role of SUT in decision making, projection and planning 8

2.1.5. What SUT can do in developing countries? 9

2.2. Economic Development Concept 9

2.2.1. Introduction 9

2.2.2. Measures related to Economic Development 9

2.2.2.1. Traditional measures of economic development. 9

2.2.2.2. Human Development Index 10

2.2.2.3. Poverty Weighted Index 10

2.2.2.4. Headcount Index 10

2.2.2.5. Human Poverty Index 11

2.2.3. Sustainable development and environment accounting 11

2.2.4. Three objectives of development 11

2.3. From SUT to economic development 11

2.3.1. System of Economic and Social Accounting Matrix and Extension (SESAME) 12

2.3.2. Supply and Use table as a SAM building-block 13

2.3.3. SUT model that would help in promoting economic development progress of Rwanda 13

Chapter III: METHODOLOGICAL APPROACH TO THE STUDY 14

3.1. Methodology 14

3.2. Sources of data 14

3.3. Conceptual framework of the study 15

3.4. Model designing for the purpose of analysis 16

3.3.1. Tables Analysis 16

3.3.2. SUT linear model Analysis 16

3.3.3. Human Development Index Analysis 16

Chapter IV: DATA PRESANTION, ANALYSIS, AND INTERPRETATION 17

4.1. The role of information from SU/ I-O Tables in Economic Development 17

4.2. Relevance of input-output analysis to policy 19

4.3. System of National Accounts of Rwanda 20

4.4. The role of Supply and Use Tables/Input-output Table in the perspective analysis of economic development 21

4.4.1. Estimating the quality of life with input-output table 21

4.4.1.1. The Linkage Technique 21

4.4.1.2. The Activity Specification Technique 21

4.4.1.3. The Dummy Sector Technique 22

4.4.1.4. Applying Techniques to Specific Quality Indicators 23

4.4.1.4.1. Linkage application 23

4.4.1.4.2. Dummy technique application 24

4.5. The role of Supply and Use tables/Input-Output Table in economic analysis and prevision, decision taking, and policy making for a sustained economic development 26

4.5.1. Quality of life, poverty and economic inequality 27

4.5.2. GDP and economic well-being 27

4.5.3. Environment quality and resource depletion 29

4.5.4. Tourism 30

4.5.5. Human Development Index Analysis 30

4.6. Challenges in information provided by Linear Model 32

4.6.1. Use of central equation system for input-output analysis 35

4.6.2. Use of output function to measure the impact of increasing or decreasing intensity of Input Coefficients 36

Chapter V: CONCLUSION AND RECOMMENDATIONS 39

5.1. Conclusion 39

5.2. Recommendations 42

REFFERENCES 44