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The Fallacy Of Composition: A Review Of The Literature

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  • Jörg Mayer

Abstract

The paper reviews the literature on the fallacy of composition with an emphasis on labour-intensive manufactures. It briefly addresses the protectionist and the partial-equilibrium versions of the argument before focusing on general-equilibrium considerations and the debate on the manufactures terms of trade of developing countries. The review indicates a potential fallacy of composition problem in labour-intensive manufactures, where competition among different groups of developing countries for export market shares may constitute a new form of the fallacy of composition. The likelihood of a country that exports labour-intensive manufactures to become subject to the fallacy of composition rises with the increasing integration of several strongly populated low-income countries into world markets, while it declines with continuous structural change and favourable aggregate demand conditions particularly in developed and the advanced developing countries.

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Bibliographic Info

Paper provided by United Nations Conference on Trade and Development in its series UNCTAD Discussion Papers with number 166.

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Date of creation: 2003
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Handle: RePEc:unc:dispap:166

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  1. Zhi Wang, 1999. "The Impact of China's WTO Entry on the World Labour-intensive Export Market: A Recursive Dynamic CGE Analysis," The World Economy, Wiley Blackwell, vol. 22(3), pages 379-405, 05.
  2. Athukorala, Premachandra, 1993. "Manufactured exports from developing countries and their terms of trade: A reexamination of the Sarkar-Singer results," World Development, Elsevier, vol. 21(10), pages 1607-1613, October.
  3. Terrie L. Walmsley & Thomas W. Hertel, 2001. "China's Accession to the WTO: Timing is Everything," The World Economy, Wiley Blackwell, vol. 24(8), pages 1019-1049, 09.
  4. Martin, Will & Mitra, Devashish, 2001. "Productivity Growth and Convergence in Agriculture versus Manufacturing," Economic Development and Cultural Change, University of Chicago Press, vol. 49(2), pages 403-22, January.
  5. Ianchovichina, Elena, 2001. "Trade Liberalization in China’s Accession to WTO," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 16, pages 421-445.
  6. Cline, William R., 1982. "Can the East Asian model of development be generalized?," World Development, Elsevier, vol. 10(2), pages 81-90, February.
  7. Warwick J. McKibbin & K. K. Tang, 2000. "Trade and Financial Reform in China: Impacts on the World Economy," The World Economy, Wiley Blackwell, vol. 23(8), pages 979-1003, 08.
  8. Ianchovichina, Elena & Robert McDougall, 2000. "Theoretical Structure of Dynamic GTAP," GTAP Technical Papers 480, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  9. Faini, Riccardo & Clavijo, Fernando & Senhadji-Semlali, Abdel, 1992. "The fallacy of composition argument : Is it relevant for LDCs' manufactures exports?," European Economic Review, Elsevier, vol. 36(4), pages 865-882, May.
  10. Bloch, Harry & Sapsford, David, 2000. "Whither the Terms of Trade? An Elaboration of the Prebisch-Singer Hypothesis," Cambridge Journal of Economics, Oxford University Press, vol. 24(4), pages 461-81, July.
  11. Sapsford, David, 1990. "Primary Commodity Prices and the Terms of Trade," The Economic Record, The Economic Society of Australia, vol. 66(195), pages 342-56, December.
  12. Bleaney, Michael F & Greenaway, David, 1993. "Long-Run Trends in the Relative Price of Primary Commodities and in the Terms of Trade of Developing Countries," Oxford Economic Papers, Oxford University Press, vol. 45(3), pages 349-63, July.
  13. Prema-Chandra Athukorala, 2000. "Manufactured exports and terms of trade of developing countries: Evidence from Sri Lanka," Journal of Development Studies, Taylor & Francis Journals, vol. 36(5), pages 89-104.
  14. Schiff, Maurice, 1995. "Commodity exports and the adding-up problem in LDCs: Trade, investment and lending policy," World Development, Elsevier, vol. 23(4), pages 603-615, April.
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