The Bazaar Economy Hypothesis Revisited. A New Trade-Related Measure for Germany's International Openness
AbstractIn this paper we argue that traditional measures of openness of an economy usually overstate the actual degree of openness. This is due to the fact that traditional export or import shares are measured as a share of the gross domestic product. The former are expressed in gross terms, the latter in value added terms. In this way the actual interdependences between economies are overstated. We develop a new value based openness indicator that includes interregional and inter-industrial dependencies. Based on a Leontief production system and input-output tables we argue that export-induced imports of intermediate parts must be subtracted of the value of exports in order to obtain the real value added in the export sector. The same reasoning applies to the import side. We use these measures of actual openness to calculate openness indicators for Germany using GTAP data. We show that traditional measures of openness exaggerate the actual openness and argue that these new indicators are an important contribution to the debate about the German “bazaar economy”.
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Bibliographic InfoArticle provided by Duncker & Humblot, Berlin in its journal Applied Economics Quarterly.
Volume (Year): 57 (2011)
Issue (Month): 1 ()
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Web page: http://www.duncker-humblot.de
Find related papers by JEL classification:
- C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
- E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- F15 - International Economics - - Trade - - - Economic Integration
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
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