代写留学生论文Trade Policy, Growth and Economic Development
References
Textbooks:
Appleyard, D. and Field, A. (2005), International Economics, McGraw-Hill Ch. 11 and 19
Husted, S. and Melvin, M. (2007), International Economics, Addison-Wesley Ch. 10
Krugman, P. and Obstfeld, M. (2006) International Economics Addison-Wesley Ch. 9
Articles:
Winters, L. Alan (2004), “Trade Liberalisation and Economic Performance: An Overview,” Economic Journal Vol. 114, pp F4-F21.
Outline
Static or Dynamic Comparative Advantage
Trade and Growth
Economic Development and Growth
Limitations of Trade Liberalisation
Declining Terms of Trade?
Comparative Advantage – Static or Dynamic?
Standard comparative advantage theory assumes that relative factor endowments are static by nature….
but….factor endowments can change over time and both technology and tastes can change so…..
Comparative advantage can also change over time
Trade and Growth
It is commonly agreed that trade can be an engine for growth by
Expanding markets
Improving efficiency by competition
Encouraging inward investment
Does more liberal trade always lead to export led growth? Or…..
Can trade actually make matters worse?
Growth of Factors of Production
In the absence of technical progress growth can only come from:
Increases in labour inputs
Increases in capital inputs
Increases in labour inputs occur naturally through increased population, particularly in developing countries…but
Without technical progress increases in welfare per capita can only occur through increases in capital inputs relative to labour
Growth of Factors of Production
History suggests that in ‘developed’ countries the stock of capital increased faster than population….
Partly because population did not grow very fast (death rates remained high in much of the 19th century)…..and
Partly because rates of investment were high by the standards of the time
In current developing countries death rates have declined because of medical advances but birth rates have declined more slowly
Labour availability has therefore grown and (in the absence of reduced population growth) standards of living can only rise through
Higher rates of investment and/or
Technical progress
Technical Progress
Empirical evidence suggests that technical progress is critical for increases in real per capita income
Technical progress occurs when increased output can be obtained from given capital and labour inputs
Hicks suggested that there were three types of technical progress
Implications for Trade
Neutral technical progress will not affect trading patterns
Labour saving technical progress in an economy exporting labour intensive goods will lead to import substitution (trade reducing)
but this may eventually result in a change in comparative advantage and therefore in trading patterns
Capital saving technical progress in such an economy will lead to export expansion (trade increasing)
But….relative factor prices may change
Effects of Technical Progress
All kinds of technical progress push out the production possibility frontier
In the absence of trade all types of technical progress improve a country’s overall welfare
What is the best foreign trade strategy to promote technical progress?
Economic Development and Trade
Technical progress is critical for development – how is this best achieved?
Import substitution industrialisation strategies were adopted by many economies in the 1960s because….
Economists believed that greater self sufficiency would strengthen linkages with other sectors and …..
make the economy less vulnerable to external shocks (e.g. fluctuations in commodity prices) and….
conserve scarce supplies of foreign exchange and….
diversify the economic base leading to technical progress
Import Substitution or Export Led Growth?
Import substitution did lead to the development of new industries but…
Many were established behind high tariff barriers and were not competitive internationally either in price or quality
Relatively few countries were able to make the shift from protected domestic markets to competitive exports and…..
Import substitution industries required imported machinery and spare parts but where would the foreign exchange come from to pay for them?…..exports?
Import Substitution or Export Led Growth?
Development of export industries allows market expansion and the potential to specialise
Competition in export markets promotes technical progress
Development of export markets encourages inward foreign direct investment (FDI) to augment scarce local capital resources
So ….is trade liberalisation the answer to development? or….
Is the important distinction between inward and outward looking economies?
The NICs and the Asian ‘miracle’
During the 1980s some Asian economies achieved rapid economic growth through export expansion
The ‘newly industrialising countries’ (NICs) started with South Korea, Singapore, Taiwan and Hong Kong
More recently similar rapid growth has spread to Malaysia, China, Thailand, Philippines and Indonesia but…
Setback of the ‘Asian financial crisis’ of 1997 - liberalised currency and capital markets are vulnerable to speculation
Can the positive experience be repeated elsewhere?
Limitations of Trade Liberalisation
Static comparative advantage does not always correspond with dynamic comparative advantage
Were the NICs special cases?
South Korea and Taiwan received massive aid from the US, benefited from proximity to Japan and emerging export industries received active government support
The Asian financial crisis showed the success of some economies (particularly Indonesia) to be quite fragile
Liberalisation in Sub-Saharan Africa and Latin America has been much less successful
What are the Problems with Static Comparative Advantage?
Static resource allocation does not provide a good guide in a period of rapid structural change – changing tastes and factor endowments
Trade may exacerbate existing income disparities between countries - gains from trade may be unequally shared
Static comparative advantage suggests concentration on primary commodity exports with relatively inelastic demand - declining terms of trade
‘Immiserising growth’ can occur for large countries where increased production may cause reduced prices
代写留学生论文Terms of Trade
Commodity Terms of Trade (CTOT)
CTOT = Px/Pm where
Px is index of export prices
Pm is index of import prices
Do terms of trade for developing countries decline on a long term basis?
Linked with debates on
Primary commodity prices versus manufactured goods prices (Prebsich-Singer thesis)
Developing country manufactures prices versus developed country manufactures prices
Declining Terms of Trade
Declining terms of trade can be offset with increasing productivity through technical progress but….
Are the export industries of the poorest developing countries those that exhibit technical dynamism?
What are the incentives for technical progress in these industries?
Growth of purchasing power of developing country exports (Income Terms of Trade - ITOT) varies markedly between regions
Index of Purchasing Power of Developing Country Exports (1980 = 100)
Policy Implications
Need to diversify exports from primary commodities to manufactures - but will this work?
Need to build technological capacity to produce more sophisticated manufactures -
change static comparative advantage
identify potential comparative advantage
take actions to transform potential comparative advantage into actual comparative advantage
Need to improve productivity to counter negative trend in CTOT and increase export volume
Conclusions
Some trade can make everyone better off
Some economies have benefited considerably from trade related growth
Some countries do not gain proportionately from trade and some may even lose so….
Complete liberalisation is not necessarily the answer for all countries
Attempts to change comparative advantage may be important