Production Linkages and Employment Effects of the Petroleum Windfalls: An Input-output Analysis of Azerbaijani Economy

In this paper, we address the production linkages and employment effects of the petroleum sector on the rest of the Azerbaijani economy. We employ an input-output (IO) analysis. The availability of the IO tables for the years 2006, 2008 and 2009 enables the assessment of the changes with regards to the multiplier effects of the extractive industries over the first 3 years of the oil boom. We find that despite advanced infrastructure, well-developed petrochemical complex and local content policies the degree of integration of the international oil and gas business into the domestic economy is rather weak. In addition, both production and job creation multipliers slightly decreased after 3 years of exponential growth rates of oil production. The assessment of the production multipliers indicates that additional investments in processing, construction and network industries have the highest production linkages. Concerning employment multipliers agriculture, education, health care and public sector have the greatest job creation multipliers.