INTERINDUSTRY AND PROGRAMMING ANALYSIS: THE CASE OF LIBYA

The purpose of this study is to develop a model that would be of some use in planning optimal resource allocations for the Libyan economy. More specifically, in this study, a linear programming model that takes account of human capital as a scarce resource in Libya is developed. The model was first constructed for the year 1975 and then projected to the years 1980 and 1985. Of the many parameters needed for the implementation of this model, the input-output coefficients of the interindustry (intersector) endogenous transactions of the Libyan economy were estimated for the first time. Our programming model, in conjunction with a set of optimal solutions to the activity levels, provided the marginal revenue products (shadow prices) of the various skill categories of the labor constraints. For the year 1975, the model showed that the highest classified skill (managerial and professional skill category) was the most binding skill constraint to the expansion of the Libyan economy (maximization of gross domestic product). For the years 1980 and 1985, lower skill categories were found to be most binding to the expansion of the Libyan economy. Parametric programming postoptimal procedures were performed for a simultaneous change in the availabilities of all skill categories. This technique showed that all skill categories were binding to the expansion of the Libyan economy in all the years 1975, 1980, and 1985. This result supports our hypothesis that, because of modernization and expansion of the nation\u27s economy, the demand for various skill categories exceeds their supply. Thus workers from various skill categories do have a significant impact upon Libya\u27s rate of economic growth. Hence, investment in human capital to upgrade workers to higher skill categories is indispensible for structural transformation and modernization of the nation\u27s economy. Furthermore, importation of various skill workers would be optimal, since realistically domestic supplies can not meet the economy\u27s requirements within the near future. The usefulness of the results of our model must be qualified, however, because many variables have been ignored or kept constant, and because the accuracy of some of the data used is questionable. Moreover, a number of simplifying assumptions have been adopted for this model. In spite of its shortcomings, our model with its general equilibrium approach has qualities which are useful and necessary for a comprehensive analysis of the nation\u27s economy. Hopefully, future programming models formulated for the Libyan economy will be far more disaggregated than the fourteen sector classification adopted in this study. This can be accomplished when more reliable and diversified data on the structure of the nation\u27s economy becomes available, particularly the input-output coefficients, capital coefficients, and manpower coefficients