April 28 lecture notes

April 28 lecture notes - A Lection Notes A Export promotion...

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April 28, 2011 Lection Notes A.)Export promotion as a strategy for growth a. Increased exports can support increased employment and wage incomes (plus reinvestment in human capital) b. Increased exports and imports can increase competition at home c. Can contribute to improved technological efficiency i. Innovation ii. Absorption of new technology B.)Externality a. As a result, exports are seen as an example of positive externality because they generate additional gains on supply side of economy, (supply curve shifts to the right – see slide #29 for supply and demand curve), allows them to expand production at existing prices, b. Problems: i. Not all export sectors are associated with the presence of positive externalities 1. Absent in the case of primary products (cotton, minerals) which are the main exports of developing economies 2. Mostly associated with manufacturing sectors less prominent in developing countries ii. There are necessary prerequisites for the externalities to work 1. Complementarities: human capital and infrastructure iii. Cannot spontaneoulsy generate manufacturing sectors within which to take advantage of externalities C.)Problems with export promtion as a strategy for growth: a. Declining terms of trade (price of export/price of imports) i. Some evidence to suggest that the prices of products manufactured by the develoong ountires declining in relation to products imported from developed countries ii. Developed economies “dominate” international markets
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1. Tariffs, import quotas, and “forced” VERs on textiles, footwear, leather goods, agricultural products a. Average tariff on industrial goods fell from 40 to 4 percent from 1935 to 1995 b. But agricultural tariffs still average 62% iii. Absence of externalities D.)Trade liberalization a. There is some evidence tha low and middle income coutnires which had relatively free trad had higher average economic growth that those that followed import substituting industrialization. i.
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April 28 lecture notes - A Lection Notes A Export promotion...

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