The Bazaar Economy Hypothesis Revisited
AbstractIn this paper we argue that traditional measures of openness of an economy usually overstate the actual degree. 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 interindustrial 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 InfoPaper provided by Department of Economics, University of Hohenheim, Germany in its series Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim with number 285/2007.
Date of creation: 2007
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Web page: http://www.uni-hohenheim.de/institution/institut-fuer-economics-11
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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 - - Macroeconomics: 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-24 (All new papers)
- NEP-INT-2007-03-24 (International Trade)
- NEP-MAC-2007-03-24 (Macroeconomics)
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