The Evaluation of the Potential of Lithuanian Manufacturing Industry Structure on the basis of CI Index

Abstract

Industry is a significant strategic part of every country economics. Achievements of activities in industry influence an overall level and the growth of economics and welfare of a country. Therefore it is important and beneficial to analyze the structure of industry and its changes; to be aware of activities that are most significant in the structure of industry of a particular country. The analysis of the structure of industry allows us to determine the most significant branches of industry. Finally, the determination of the most significant branches of industry and changes of their significance allows evaluating the potential of the structure and the importance of that structure of industry in overall view of economics. Nowadays the results, changes and dynamics of industry are important in order to evaluate capabilities of national industry companies and also to compete in open global economy. Lithuanian industry structure was formed as a result of economic transformation in conditions of global market competition and economic integration to the European Union. The market failures and imperfections are revealed in the industry of Lithuania, especially in the areas of progress of science and technique, information technologies and management. The significance of low value-added industries in Lithuania is obvious, and higher technologies are not used in such level as in the developed countries. It is essential that Lithuanian industrial companies identify their comparative advantage in the products of traditional branches of industry. Nowadays industry companies are forced to seek for the means to withstand global competition. Considering the results of restructuring the industry, it is important to evaluate a set of factors, affecting industry’s activity and structure. Some of the applied tools to measure the structure of industry were the evaluation of export specialization, as suggested by Balassa (1965), analyzing knowledge intensive in manufacturing industry by using the index of knowledge composition of export (Sheehan, Tikhomirova, 1996), also using the method of export unit values (Brunner, Cali, 2006) and others. This paper presents the analysis of changes of Lithuanian industry structure in 2000-2008 and the evaluation of the potential of the structure of manufacturing industry by using modified Indices of the Long Run Income Potential of Industry Structure. In order to assess the changes in the structure of manufacturing industry five key characteristics of industries - value added, wage per employee, export growth, export intensity and output growth - are outlined and used in this study. The results of Indices of the Long Run Income Potential of an industry structure reveal the possibilities of Lithuanian industry branches to operate and generate increasing incomes in the long term.