Economics
Export Led Growth
Export-led growth refers to a strategy where a country focuses on increasing its exports as a means to drive economic growth. This approach typically involves producing goods and services for foreign markets, aiming to boost domestic production and employment. By expanding international trade, countries can potentially achieve higher levels of economic development and prosperity.
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6 Key excerpts on "Export Led Growth"
- X. Fu(Author)
- 2004(Publication Date)
- Palgrave Macmillan(Publisher)
Despite various arguments against the export–development relationship, most of the schools of thought recognize the positive impact of exports on growth and development, even the ‘impoverishment’ school does not deny possible gains from exports. 2.5 Preconditions for successful export-led growth Although many economists agree on the importance of exports in the growth process, they also point out that exports do not necessarily lead to economic growth. As Kindleberger (1962) puts it: ‘exports can lead to growth, but they need not. . . If they are to do so, there must be capital formation, technical change, and reallocation of resources.’ In addition to this, the export sector should be able to pull or push other sectors to grow together. Otherwise, exports can result in enclaves, or even sources of polarization, in the economy. An export-led development process requires a number of precondi- tions. First of all, effective linkages need to be generated to diffuse stimuli from the export sector and create responses elsewhere. It is essential that the export sector does not remain an enclave separated from the rest economy (Hirschman, 1958; Meier, 1995). Usually, growth of manufactured exports that utilizes locally produced inputs may pro- vide a strong stimulus for expansion in the input-supplying industries in the economy. When development of the export sector is mainly driven by processing trade, linkages between the export and the non-export sectors are likely to be limited. This may be particularly so when EPZs are used to attract foreign capital. The EPZ may remain as a separate foreign enclave with little impact on the rest of the economy. Balasubramanyam (1988) notes that EPZs represent a move towards freer trade rather than free trade. So they are in the nature of a second-best policy measure, the consequences of which cannot always be expected to be beneficial.
eBook - PDF- Delano Villanueva(Author)
- 2008(Publication Date)
- World Scientific(Publisher)
Chapter 4 Exports and Economic Development ∗ 4.1. Introduction One of the robust empirical determinants of long-term output growth in many countries, particularly the developing ones, has been the whole gamut of outward-looking exchange and trade policies designed to promote the expansion and diversification of the export sector. 1 The explanation why such strategies improve growth performance has, however, proven elusive, despite several formal theoretical models, notably that of Feder (1983). 2 While the conclusion that strong export performance promotes long-run economic growth seems intuitively reasonable, it is a clear implication of the standard neoclassical model that exports cannot exert a sustained long-run effect on the economy’s growth rate . As Lucas (1988, pp. 12–15) puts it, “The empirical connections between trade policies and economic growth that Krueger (1983) and Harberger (1984) document are of evident impor-tance, but they seem to me to pose a real paradox to the neoclassical theory we have, not a confirmation of it.” There is thus a gap between the empirical work on the nexus of export expansion and the economic growth on the one ∗ Reprinted from Staff Papers No. 58, Exports and Economic Development , by the per-mission of the South East Asian Central Banks (SEACEN) Research and Training Centre. Copyright for the year 1997 was obtained by the SEACEN Centre. 1 For a partial survey of the literature, see Khan and Villanueva (1991), and the references cited therein. 2 Feder’s two-sector (exports and nonexports) model has the standard long-run (steady-state) property that the growth rate of aggregate output is equal to the exogenously determined growth rate of the labor force, adjusted for an exogenous rate of labor-augmenting technical change. See Section 4.2. 113 114 Macroeconomic Policies for Stable Growth hand, and standard neoclassical growth theory (Solow, 1956; Swan, 1956) on the other.
No longer available |Learn moreMarket Access, Transparency and Fairness in Global Trade
Export Impact for Good
- International Trade Centre(Author)
- 2010(Publication Date)
- United Nations Publications(Publisher)
In many of the cross-country studies as well as in individual country case studies, however, the relationship between economic growth and trade expansion, particularly export growth, has always been robust and VLJQLÀFDQW )LJXUH VKRZV WKLV UHODWLRQVKLS ZLWK UHVSHFW WR the developing countries in our sample for 1990-2007. 7KHUH LV D KLJKO VLJQLÀFDQW FRUUHODWLRQ EHWZHHQ ORQJWHUP JURZWK RI H[SRUWV DQG *'3 ZLWK D FRUUHODWLRQ FRHIÀFLHQW RI over 0.77. The addition of the usual growth-accounting variables such as growth of labour force, investment rate DQG LQLWLDO *'3 OHYHO RQO PDUJLQDOO UHGXFH WKH FRHIÀFLHQW RI WKH ÀWWHG UHJUHVVLRQ OLQH LQ ÀJXUH EXW WKH UHODWLRQVKLS UHPDLQV KLJKO VLJQLÀFDQW WKH H[SRUW JURZWK FRHIÀFLHQW IDOOV to 0.32 with a t-ratio of 7.4). These results remain robust to the exclusion of observations of highly successful group III countries, or any other one of the three country groupings. In the conventional growth-accounting framework, a positive DQG VLJQLÀFDQW FRHIÀFLHQW RI H[SRUW JURZWK LV QRUPDOO interpreted as highlighting the effect of externalities DVVRFLDWHG ZLWK H[SRUWLQJ DFWLYLWLHV RU WKH JUHDWHU HIÀFLHQF of resource use in the export sector itself (e.g., Fedder, 1982). In the case of the countries confronting mass poverty, however, an even more critical contribution of exports may arise from the fact that they make possible access to new technologies and investment goods via imports. Particularly in the case of Group II countries, where in most cases the primary sector dominates the production and employment in the economy, foreign trade makes it possible to procure valuable manufactured equipment, raw materials and consumer goods through imports. Since the income elasticity of demand for such imports is high, in the early stages of development foreign trade as a share of GDP will inevitably increase. For this process to be viable, exports need to grow at an adequate rate to keep up with import QHHGV $V ÀJXUH VKRZV WKHUH LV KDUGO DQ FRXQWU WKDW has achieved positive long-term growth rates during our observation period without a simultaneous expansion in exports. These results indicate that export growth is a necessary condition for the long-term growth of GDP,
eBook - PDFSpatial Evolution of Manufacturing
Southern Ontario 1851-1891
- James M. Gilmour(Author)
- 2019(Publication Date)
- University of Toronto Press(Publisher)
II Export-base theory and general economic growth Export-base theory of regional economic growth is applicable only to areas that are export-orientated and that meet the following requirements: suffer from no population pressure problems; have an absence of inhibiting traditions; have grown up within a framework of capitalist institutions responding to profit-maximizing opportunities in which factors of production have been relatively mobile. The central premise of this theory is that a region's export sector is the key factor in promoting economic growth and in determining the nature of that growth. A successful export sector sets in motion a cumulative multiplier mechanism which expresses itself in growth of the other sectors of the economy and in a general increase in prosperity. The growth stimulated by the export sector may eventually cause other sectors of the The first two conditions are recognized by Melville Watkins, A Staple Theory of Economic Growth, The Canadian Journal of Economics and Political Science 29 (May, 1963): 143. The first and third conditions are recognized by Douglas North, Location Theory and Regional Economic Growth, Regional Development and Planning, eds. John Friedmann and William Alonso (Cambridge, Mass.: The MIT Press, 1964), p. 240. 12 1 1 economy to develop to the point where the export sector no longer acts as the major stimulant to growth. This is not a deterministic theory. Inevitability of events is neither implicitly nor directly stated. Regions whose growth commences with the sale of primary or other commodities in foreign or other regional markets may remain conspicuously backward and unprosperous. The literature of export-base theory, however, does set down the likely conditions for successful economic growth. In the first place the export sector must be successful, meaning that demand for a region's staple or staples must be considerable, long-lived, and growing.
eBook - PDFMoney, Banking and Financial Markets in Central and Eastern Europe
20 Years of Transition
- R. Matousek(Author)
- 2010(Publication Date)
- Palgrave Macmillan(Publisher)
The deterioration in terms of trade for developing countries, espe- cially in Latin America, Africa, and parts of Asia, proved detrimental to the development ambitions of the exporters of primary goods. The possibility of growth via primary goods has been discounted since the 1960s. After the Second World War almost all countries that exported primary goods experienced a decline in economic growth. In many years, in many countries, the economic growth was, in fact, negative in part due to the abovementioned problem and in part due to a substantial increase in the population growth rate and hence the ensuing population increase. The outcome put a damper on the value of exports as the growth engine. In response to the writings of scholars such as Prebisch (1959), many underdeveloped countries decided against trade with the former colonial powers of the West, and curtailed their exports as much as possible. Instead, the domestic production of industrial products was encouraged and government support, aid, and policy shifted towards import substitution. During this period, however, there were yet others who advocated export-led growth (Maizels 1968). The issue raised by Maizels (1968) might have been the main problem that Prebisch was trying to combat – Maizels wrote about the ‘Sterling-based’ countries, which were all former colonies of England. Shahdad Naghshpour and Bruno S. Sergi 181 9.2 Literature review Since the last decade of the twentieth century, the idea of export-led growth has re-emerged; however, this time round the emphasis has been on the industrial production of consumer goods that are of interest to developed nations. By then there was no doubt about the consequences of specialising in primary goods and depending on revenues from them to achieve economic growth. Trade causes benefits and losses to par- ticipating countries.
eBook - PDF- Dominick Salvatore(Author)
- 2014(Publication Date)
- Wiley(Publisher)
They also advocated reforms of the present international economic system to make it more responsive to the special needs of developing countries. In this chapter, we will examine all of these topics. In Section 8.2, we illustrate the effect of a change in factor endowments on the nation’s production frontier and growth. In Section 8.3, we examine the relevance of international trade theory in the process of economic development. Section 8.4 then examines the contribution that international trade can make to economic development. Section 8.5 deals with the terms of trade and their effect on growth and development. Section 8.6 examines immiserizing growth; Section 8.7 deals with the relationship between export instability and economic development; Section 8.8 discusses the choice of development strategy through import substitution or through exports. Section 8.9 examines the move toward trade liberalization in developing countries. Finally, Section 8.10 reviews the major problems facing developing countries today. 8.2 GROWTH AND DEVELOPMENT OVER TIME Over time, nations grow through increases in the size in their labor force (L), the accumulation of capital (investments), including human capital (K), and improvements in technology or technical progress (T). An increase in the Chapter Eight Growth and Development with International Trade 195 endowment of labor and capital and/or technical progress over time causes the nation’s production frontier to shift outward. The type and degree of the shift depend on the rate at which L, K, and T grow. We will examine growth for a nation producing two commodities (commodity X, which is L intensive, and commodity Y, which is K intensive) under constant returns to scale and with technology remaining constant. If L and K grow at the same rate, the nation’s production frontier will shift out evenly in all directions at the rate of factor growth.
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