Assessing the Potential to Create Increased Economic Links

At a Glance

  • Policies to promote horizontal linkages should be based on an assessment of the skills and technology developed for the mining and/or oil and gas sector.
  • This involves assessing the depth of backward and forward linkages; assessing nonextractive economic sectors that could benefit; and understanding which capabilities and assets could be most easily transferred to other sectors.

Case Studies

Key Resources

Topic Briefing

Policies to promote horizontal linkages need to start with an assessment of the current capabilities of extractive industries and their value chains. As Hausmann put it: “The probability that a country will develop the capability to be good at producing one good is related to its installed capability in the production of other similar, or nearby, goods for which the currently existing productive capabilities can be easily adapted.”[1]

Read more

Assessing current capabilities involves looking at both skills and technology. Policy makers then need to consider how these existing capabilities may be best used to support other economic sectors, beyond mining and oil and gas. Key steps include:

  1. Assessing the depth of backward and forward linkages (which involve supplying the extractive industries and processing their outputs, respectively)
  2. Assessing non-extractive economic sectors that could benefit from current and adapted capabilities
  3. Understanding which skills can be most easily transferred from extractive industry activity

Each of these will be considered in the subtopics that follow.

View footnotes

[1] Ricardo Hausmann and Bailey Klinger, “Structural Transformation and Patterns of Comparative Advantage in the Product Space,” CID Working Paper No. 128, John F. Kennedy School of Government, Harvard University, Cambridge, MA, 2006.