Academic journal article Journal of Sustainable Development

An Input-Output Analysis with an Environmentally Adjusted Agricultural and Forestry Sector in Bangladesh

Academic journal article Journal of Sustainable Development

An Input-Output Analysis with an Environmentally Adjusted Agricultural and Forestry Sector in Bangladesh

Article excerpt

Abstract

Traditional national income accounting methods does not make an allowance for the environmental damages incurred while producing the current output. Agriculture is no longer considered to be an environmentally friendly activity. In Bangladesh, efforts to feed an ever-increasing population have meant unsustainable farming practices and a steady depletion of the resource base. The quality of the environment has been degraded and ability of the future generations compromised. This calls for "greening" of GDP by deducting negative changes in environmental quality in national income calculation. This paper begins by developing an environmental account for Bangladesh's agricultural sector. This is done by collecting physical data on depletion and degradation of environmental resources and then estimating their costs by appropriate valuation techniques. The environmentally adjusted agricultural sector is then integrated with a Social Accounting Matrix. Finally, sectoral products for agriculture and forestry are estimated net of environmental cost.

Keywords: Social accounting matrix, Input-output table, GDP, Sustainability

1. Introduction

The effect of the "green revolution" in Bangladesh has been mixed. Introduction of high yielding varieties (HYV) of rice and associated technology is credited with feeding an ever-expanding population of Bangladesh. The environmental damages done in the process has been formidable, and will probably carry in to the future. Alauddin and Tisdell (1989) noted a 50 to 200 per cent higher return on capital compared to labor encouraged an inappropriate choice of inputs like chemical fertilizers and modern irrigation methods over Bangladesh's much abundant labor. Higher doses of chemical fertilizers are responsible for creating conditions where the natural nutrients of the soil are fast depleting.

Very recently Goldar et al. (2011) used the input-output (I-O) methodology on 2003-04 data in order to take into account both direct and indirect emissions from the foreign trade sector of India. Certain categories of traditional export items such as cotton textiles were found to be far more damaging to the environment in this I-O framework than what their direct emission coefficient would suggest. Their recommendation to policymakers was to emphasize or de-emphasize the export of certain categories of exports in line with national environmental goals.

Our research presented in this paper forms one of the early attempts to integrating environmental accounts into national accounts. We used the economic I-O matrix to develop a social accounting matrix (SAM) for the Bangladesh economy. We then extended the analysis in the satellite account to determine the depletion and degradation impact on Gross Domestic Product (GDP). Being an early attempt, this research is confined only to the study for agriculture and forestry sector (contributed about 16.03% of the total GDP in 2008-09) to illustrate that a sustainable income growth would mean a choice between sectors. If a sector has a higher degradation and depletion effect compared to other sector, then income growth using this particular sector may not be the right choice of an economy. Unlike Goldar et al. (2011) study that considered only foreign trade sector of India, our study concentrates only on two of the environmentally sensitive sectors within the domestic economy of Bangladesh.

The research is conducted in three stages: (i) to start from a suitable I-O table for the Bangladesh economy, (ii) to extend the I-O table into a Social Accounting Matrix (SAM), and finally (iii) to determine the depletion and degradation impact from agriculture and forestry activities on GDP. The SAM is a matrix presentation of the System of National Accounts (SNA) elaborating the linkages between the supply and use table, commonly known as the input-output (I-O table) and institutional sector accounts.

An adjustment to GDP from environmental damage is done by deducting environmental costs caused by economic activities including environmental degradation cost and ecological damage cost. …

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