The Leading Capacity of the Oil and Gas Sector in National and Regional Economy; Evidence from Iran and Canada

Abstract

In oil-exporting countries, it is important to have a clear evaluation of the oil sector at the national and regional levels. In input-output literature, the traditional and extraction methods are often used to analyze the status of economic sectors. These methods have two major shortcomings: double-counting of linkages and having a flaw to show the changes in income of the labor. In this paper, to overcome these shortcomings and to provide a more realistic picture of the status of the oil sector at national and regional levels, a comparative comparison has been used between Iran and Canada focusing on their two major oil-exporting provinces, Khuzestan and Alberta. For this purpose, the production-to-production approach based on the Sraffa-Pasinetti-Leontief theoretical model which its main concept is the induced effect of value-added will be used. The results show that the oil sector creates 0.0435 and 0.0372 units of induced value-added in Iran and Khuzestan. In Canada and Alberta the corresponding figures are 0.3173 and 0.4382. Therefore, this sector has more interdependency with the other sectors in both national and regional levels in Canada (as a well-developed country) than Iran (as a developing country). However, services and industry sectors absorbed more decomposed induced value-added of the oil sector in comparison to other sectors. Therefore, national and regional policies should be implemented to have diversified products and prepare the requirement of having the most of interdependency prerequisites between the sectors.

Keywords

• induced effect of value added
• production to production approach
• vertical integration
• oil and gas sector
• regional input-output tables
• khuzestan