| This dissertation argues that a proper identification of the key sectors of growth with significant linkages to the rest of the economy can enhance the ability of policymakers to affect the outcomes of policy changes or external shocks. The research question answered is therefore, how and which sectors and economic agents would most likely be affected in the presence of some policy changes or external shocks. This is addressed subsequently by way of a social accounting matrix (SAM) multiplier model and a computable general equilibrium (CGE) model.; In a departure from conventional practice which consists to borrow from the handful of empirical literature, this study offers the estimation of key parameters (Armington, income elasticities, and Frisch parameters) for use in the Lesotho CGE model. Taking account of the poor quality and dearth of data, this research utilizes generalized maximum entropy (GME) techniques to estimate Armington elasticities. Moreover, as factors market-clearing conditions, the Lesotho CGE model combines both a Keynesian closure (fixed wages for low skilled and unskilled labor) and a neoclassical closure (fixed employment of skilled and sector specific fixed capital).; Our finding indicates that Textiles, Private services, Agriculture, Other Manufacturing, Tourism, Real Estate, Transport and Communication, and Financial services are potential candidates for the prospects of growth. A viable policy advice would be to exploit, for example, the linkages between Agriculture and, say, Textiles, by improving the productivity in Agriculture. Investing in skills and other infrastructure is also recommended. Finally, a diversification of products in Textiles is also required in order for Lesotho to get full benefit of the U.S. African Growth Opportunities Act (AGOA). |
