industry, Mj, is taken as the numerator. The denominator is the value of total inputs
(both domestic and imported) used in the ;th industry, Tj, less the value of inputs
supplied by the industries with no imports (tradables and non-tradables), ODj. Average
import intensity, mj, is given by
j =
1,2 MjJ T .- O D .
J J
For industry
j, mj is relevant for those inputs which are both domestically
supplied and imported. In reality, it is possible that the ith input in the y'th industry is entirely imported. However, lack of information rules out such a possibility in this decomposition. All the inputs used from non-importables (tradables with no imports and non-tradables) enter only in the domestic component o f the input-output table as they are only of domestic origin. The corresponding flows in the import counterpart of the input-output table are thus zero. Imports so defined include a /d o m e stic currency import values, tariffs, scarcity premium, and net sales taxes.
The domestic component of the 1-0 table at purchasers' prices is obtained by subtracting the import component matrix from the aggregate flow matrix. Flows into the domestic component of the 1-0 table are at purchasers' prices and include basic values and excise taxes.
Data on good-specific excise duties and sales taxes are used to deflate domestic and imported flows respectively on a pro rata basis to arrive at the domestic and import components (of the 1-0 table) at the basic value. The domestic flows so defined are at the basic value. The imported flows so defined are at the basic import prices which include tariffs and scarcity premium. Both tariffs and scarcity premiums have to be subtracted from relevant import values at basic import prices to arrive at
the
cif import value (see Figure 5.1). The NBR input-output table gives figures on
tariff revenues that constitute vector in Figure 5.1. The scarcity premium is
assumed to exist for all imports except rice, wheat and fertilizer (Chapter 2). It is defined, because of data limitation, according to Equation 4.20c in Chapter 4. First, imports valued at the importers' price were netted of tariffs. The new series contained
cif imports plus scarcity premiums (in terms of Equation 4.20c, the series
corresponded to Xi3.Pmi3.E?). These values were multiplied by (1 - —- ) to obtain
E 2
figures for scarcity premiums which represent vector in Figure 5.1. In CGE-B89
notation, the ith element of the vector is given by
E
Xi3*Pmi3*E0* (l— —)
i=l,2,...,m
E 2
where El and E2 are respectively the official and secondary exchange rate; X ß is the
volume of ith import; and Pmi3 is the border price of ith import in US dollars.
In the ORANI model, the input-output table is conventionally at basic values and demands for trade and transport and other margins are modelled explicitly, rather
than as inputs in the jih industry or as consumer goods (Dixon et al. 1982:106). In
view of the smallness of the country and non-availability of independent margins data, this approach was abandoned in the present exercise. Trade and transport services aggregated in the physical overhead (Appendix A5.1) are treated as intermediate inputs and thus modelled as arguments in the production functions. Ignoring the trade margins between domestic producer prices and consumer prices, leads to a suppression of the share of commercial services, and an upward bias for the strength of the domestic commercial policy (Yeldan and Roe 1991:573). Such caveats have to be kept in mind in analyzing the simulation results.
The 47 industries in the 1989 table have been aggregated into 19 industries for the present model. Appendix A5.1 shows the mapping scheme that has been used for the industry aggregation. The aggregation has been done by simple arithmetic. Each industry is assumed to produce only one distinct good (see Chapter 4). There are thus 19 commodities, also aggregated according to the industry aggregation scheme. The relevant entries in the final demand columns and value-added row are also added to correspond to the newly defined 19 industries and 19 commodities.
The NBR input-output table for 1989 contains values of total absorption, import components of total absorption and changes in stock. Domestic and imported aggregate absorptions thus have to be distributed among household's and government's current consumption and investment. In the absence of recent information, aggregate expenditures have been disaggregated into household consumption, household investment, government current consumption and government investment using the distributional pattern recorded in the previous input-output table of the Planning Commission (Bangladesh 1992a). Private consumption constitutes most of the absorptions, reducing the possible distortionary effects of such a disaggregation. For both domestic and imported absorption, decomposition has been based on the same distributional pattern.
The National Board of Revenue's 1989 input-output table contains industry specific aggregate value-added entries without industry specific distribution between labour and capital. But the 1987 input-output table of the Planning Commission (Bangladesh 1992a) reports industry specific value-added decomposed into total wage and non-wage (called gross operating surplus) categories. For the present purpose, the same distributional pattern was adopted on the assumption that the input intensity and wage-rental ratio have not changed significantly over a period of two years.