Econ 161-Lecture 8

Econ 161-Lecture 8 - GlobalIntegrationofLatinAmerica...

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Unformatted text preview: GlobalIntegrationofLatinAmerica Lecture8 c Marc-AndreasMuendler UniversityofCalifornia,SanDiego April21,2011 8.ComparativeAdvantage,ProductivityChange,andGrowth Econ161, c M.Muendler TradeandDevelopment Classictradetheoryadequatetoinvestigatewelfareimpactsoftrade forgivenproductionstructure Tradetheorywithexternaleconomiesofscaleadequatetoinvesti- gatewelfareimpactsoftraderestrictionsorpromotionforgivenpro- ductioncostschedule Tradehasdistributionalconsequenceswithinaneconomy Doestradeaffectthegrowthpath,andifso,how? 8.ComparativeAdvantage,ProductivityChange,andGrowth Econ161, c M.Muendler UnbalancedGrowthchangingTrade Inclassictradetheory,growthchangestrade buttradedoesnotchangegrowth Inclassictradetheory,productivityisafundamentalandtradedoes notaltertheproductionpossibilities Inclassictradetheory,unbalancedgrowthalterstheopportunitycost andthereforethetradepattern. Inaddition,growthaffectstheToTandthereforethegainsfromtrade 8.ComparativeAdvantage,ProductivityChange,andGrowth Econ161, c M.Muendler TradechangingGrowth? Whenthereareexternaleconomiesofscale,tradepromotionorre- strictionschangeworldwidedivisionofproduction Similarly,whenthereare dynamic economiesofscalefromresearch anddevelopment,tradealtersworldwideproductiondivision Whenthereislearning-by-doing,tradeaffectsgrowthandcancause alock-inofthetradepattern Foreigncompetitionintheproductmarketmaydisciplinemanage- ment,raisingefficiency,oreroderents,stiflinginnovation 8.ComparativeAdvantage,ProductivityChange,andGrowth Econ161, c M.Muendler TradeandProductivityGrowth:WhichWay? Trademayormaynotalterproductionpossibilities. Empiricalevidenceismixed Acrosscountries,fastergrowingeconomiesareassociatedwith highertradeopenness(Sachs&Warner1995) Withincountries,neitherlearning-by-exporting(Clerides,Lach& Tybout1998),norspill-oversfromforeigninvestment(Aitken& Harrison1999),norforeigncompetitionperpetuallypushgrowth (Muendler2004) Cross-countryevidencemaynotidentifyacausallink 8.ComparativeAdvantage,ProductivityChange,andGrowth Econ161, c M.Muendler TradechangingGrowth:ExternalEconomies Externaleconomiesaccruewithagglomerationorlearningbydoing Similartostaticexternaleconomies, dynamic externaleconomiesof scaleprovidearationaleforinfant-industryprotection Ifsomeindustriesexhibitstrongerpotentialforgainsfromlearningby doing,acountrymaygrowfasterbyrestrictingforeigncompetitionin high-potentialindustries Thegainsfromownfastergrowth,however,mustbesetagainstthe opportunitycost:foregonegainsfromtradeandtheforegoneterms- of-tradegainsinthepresenceoffastergrowingtradingpartners 8.ComparativeAdvantage,ProductivityChange,andGrowth Econ161, c M.Muendler AlternativeRemediestoExternalEconomies Exportsubsidiesorexportprocessingzonescanpromoteindustries (atthecostofworseningToT) Subsidiesforresearchanddevelopmentcanreducecostsfordomes- ticproducersofadvancedcommodities JorgeSabato(born1924inRojas,BuenosAires):HeadoftheArgentineNational...
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This note was uploaded on 08/14/2011 for the course ECON 161 taught by Professor Muendler during the Spring '11 term at San Diego.

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Econ 161-Lecture 8 - GlobalIntegrationofLatinAmerica...

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