Econ 161 - Lecture 2

Econ 161 - Lecture 2 - GlobalIntegrationofLatinAmerica...

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Unformatted text preview: GlobalIntegrationofLatinAmerica Lecture2 c ⃝ Marc-AndreasMuendler UniversityofCalifornia,SanDiego March31,2011 2.TradePolicyandDevelopmentinLatinAmerica Econ161, c ⃝ M.Muendler TheIdeaofImport-SubstitutionIndustrialization • Import-SubstitutionIndustrialization(ISI)aimstospurinvestmentand technologicalcapabilitiesbyprovidingdomesticproducerswithtem- poraryprotectionfromforeigncompetition – Protectedandthusmoreprofitablehomemarketsareintendedto benefitdomesticentrepreneurship – Thestateisakeyactorinthedevelopmentprocess,fendingoff detrimentalforcesintheworldmarket – Recommendedeconomicpolicytoolsareimportrestrictions,ex- portpromotions,andexchangerateinterventions 2.TradePolicyandDevelopmentinLatinAmerica Econ161, c ⃝ M.Muendler InstrumentsofTradePolicy • Tariff :Pricedistortiontorestrictimports Customsauthoritiesreceiveapercentageofthevalueoftheimportgood (orchargeataxonthevolume) • Exportsubsidy :Pricedistortiontofosterexports Taxauthoritiespayapercentageofthevalueoftheexportgoodtotheproducer • Quota :Quantityrestrictiontorestrictimports Whenproperlydesignedaquotaisaseffectiveasatariffinrestrictingimports. However,thegovernmentusuallydoesnotreceiverevenue 2.TradePolicyandDevelopmentinLatinAmerica Econ161, c ⃝ M.Muendler InstrumentsofTradePolicy,cont’d • Localcontentrule :Requirementthatthegoodssoldtothedomestic marketmustcontainaminimumshareoflocalvalueadded Example. In1956,theBraziliangovernmentbannedallcarimports.Inaddition, anycarsoldontheBrazilianmarkethadtocontain90percentparts(valueadded) thatwereproducedinBrazil. • ‘Behind-the-border’restrictions :Qualityrequirements,environmental standards,laborstandards,procurementrestrictions 2.TradePolicyandDevelopmentinLatinAmerica Econ161, c ⃝ M.Muendler EconomicTermsandConcepts • EconomicGrowth :Increaseinthe(annual)output Y ofaneconomy. Economicgrowthisaprimaryfactorinpovertyreductionandthede- velopmentprocess • Linkages :Input-outputrelationshipsintheproductionprocessthat playanimportantroleinthedevelopmentprocess(Hirschman1968) – Forwardlinkages:Outputrelationshipstocompaniesandsectors locateddownstreamintheproductionprocess – Backwardlinkages:Inputrelationshipstocompaniesandsectors locatedupstreamintheproductionprocess 2.TradePolicyandDevelopmentinLatinAmerica Econ161, c ⃝ M.Muendler DependencyTheory • Beyondnationalendowments,developmentandprogressdependon theeconomicandpoliticalpowerintheglobaleconomy(Ra ´ ulPre- bisch1949) • Industrialcountriesforceeconomiesintheperipheryintounderde- velopmentbyexploitingtheirnaturalresourcesandemployingcheap labor(AndreGundarFrank1967) • Intheperipherycountries,smalleliteswhoownresourcesbenefit frominternationaleconomicintegration(PaulA.Baran1952) 2.TradePolicyandDevelopmentinLatinAmerica Econ161, c ⃝ M.Muendler TheLegacyofImport-SubstitutionIndustrialization • BaranandFrankconcludethatgrowthisnotsustainableinthepe- ripheryaslongasintegrationintotheglobaleconomypersistsand traditionalelitesremaininpower...
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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 2 - GlobalIntegrationofLatinAmerica...

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