Economic sectors are highly interdependent, allowing them to promote sustainable development and inclusive growth by generating positive spillover effects from small investments in the economy. However, this interdependent nature can also generate negative spillover effects that lead to widespread inoperability and unemployment. While interdependence and the problem of scarce resources have led to the development of multiple sector prioritization tools, none of these tools have been able to wholly measure sector significance based on its multiple dimensions. Hence, this paper develops a composite sector prioritization index that identifies the key sectors based on five criteria of sector significance: degree of influence, structural significance, degree of interconnectedness, dependence on domestic economy, and contribution to risk of inoperability. The index is constructed using the Analytical Hierarchy Process, which shows the economy’s priorities and primary concerns in order to aid policymakers in investing in sectors that would generate the highest positive spillover effects to the economy. A case study from the Philippines is considered and the results show that much of the economy’s resources must be allocated towards the manufacturing, trade, and private services sectors.
Input-Output Modelling, Analytic Hierarchy Process, Sector Prioritization, Sector Interdependence
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