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Developing Country Exports of Manufactures: Moving Up the Ladder to Escape the Fallacy of Composition?

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  • Arslan Razmi

    ()
    (University of Massachusetts Amherst)

  • Robert Blecker

    (American University)

Abstract

The possible existence of a "fallacy of composition" in the simultaneous pursuit of export-led growth by developing countries has received relatively little attention in economic literature. This lack of attention becomes even more apparent in the domain of empirical studies of manufactured exports. This essay seeks to fill this gap. It develops a data set consisting of 10 industrial and 18 developing countries. Carefully designed relative price indices are constructed to capture price and quantity determinants of industrialized country demand for developing country exports. Export equations are then estimated for individual countries. The estimated coe±cients suggest that most developing countries that report significant price effects compete with other developing country exporters, and not with manufacturers in the industrial countries. The panel estimates provide further support in addition to indicating that differences in the nature of competition among developing countries and between developing and industrial countries underline the need to take into account these nuances of international competition. The overall results suggest major policy concerns for developing countries as they simultaneously attempt to export their way to growth through price- and wage-based competition. JEL Categories: F02, F14, F19

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Bibliographic Info

Paper provided by University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2005-02.

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Date of creation: Feb 2005
Date of revision: May 2006
Handle: RePEc:ums:papers:2005-02

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Keywords: Fallacy of composition; export-led growth; adding-up constraints; external demand; manufactured exports; intra-developing country competition; Bewley transformation; wage suppres- sion.;

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Citations

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Cited by:
  1. William MILBERG & Deborah WINKLER, 2011. "Economic and social upgrading in global production networks: Problems of theory and measurement," International Labour Review, International Labour Organization, vol. 150(3-4), pages 341-365, December.
  2. Khan, Haider A, 2010. "Development Strategies: Lessons from the Experiences of South Korea, Malaysia, Thailand and Vietnam," Working Paper Series UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).
  3. Khan, Haider A., 2011. "Lessons from Korean development experience," MPRA Paper 39387, University Library of Munich, Germany.
  4. Tronzano, Marco, 2010. "Reassessing the Dynamic Links between Trade and Growth: New Empirical Evidence from India - Un riesame delle relazioni tra commercio estero e crescita economica:nuova evidenza empirica per l’India," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 63(2), pages 217-244.
  5. Robert A. Blecker & Arslan Razmi, 2009. "Export-led growth, real exchange rates and the fallacy of composition," Working Papers 2009-22, American University, Department of Economics.
  6. Khan, Haider, 2013. "Industrialization and Development Strategies in the 21st Century: Towards Sustainable Innovation Systems," MPRA Paper 50168, University Library of Munich, Germany.
  7. Khan, Haider, 2013. "Bangladesh: Towards a Non-partisan Search for a Pro-people National Political Economic Strategy during Crisis," MPRA Paper 49518, University Library of Munich, Germany.
  8. Porcile, Gabriel & de Souza, Alexandre Gomes & Viana, Ricardo, 2011. "External debt sustainability and policy rules in a small globalized economy," Structural Change and Economic Dynamics, Elsevier, vol. 22(3), pages 269-276, September.
  9. Razmi, Arslan, 2007. "Pursuing manufacturing-based export-led growth: Are developing countries increasingly crowding each other out?," Structural Change and Economic Dynamics, Elsevier, vol. 18(4), pages 460-482, December.
  10. Saygılı, Hülya & Saygılı, Mesut, 2011. "Structural changes in exports of an emerging economy: Case of Turkey," Structural Change and Economic Dynamics, Elsevier, vol. 22(4), pages 342-360.
  11. Rodrigo Zeidan & Marcelo Resende, 2009. "Measuring Market Conduct in the Brazilian Cement Industry: A Dynamic Econometric Investigation," Review of Industrial Organization, Springer, vol. 34(3), pages 231-244, May.
  12. Giorgia Giovannetti & Marco Sanfilippo, 2009. "Do Chinese Exports Crowd-out African Goods? An Econometric Analysis by Country and Sector," The European Journal of Development Research, Palgrave Macmillan, vol. 21(4), pages 506-530, September.

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