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The Fallacy Of Composition: A Review Of The Literature

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Jörg Mayer

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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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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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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Warwick J. McKibbin & K. K. Tang, 2000. "Trade and Financial Reform in China: Impacts on the World Economy," The World Economy, Blackwell Publishing, vol. 23(8), pages 979-1003, 08. [Downloadable!] (restricted)
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  3. 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. [Downloadable!] (restricted)
  4. 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.
  5. Hertel, Thomas W. & Terrie Walmsley, 2000. "China's Accession to the WTO: Timing is Everything," GTAP Working Papers 403, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University. [Downloadable!]
    Other versions:
  6. 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.
  7. Elena Ianchovichina & Will Martin & Emiko Fukase, 2001. "Assessing the Implications of Merchandise Trade Liberalization in China's Accession to WTO," Trade Working Papers 192, East Asian Bureau of Economic Research. [Downloadable!]
  8. Ianchovichina, Elena & Martin, Will, 2001. "Trade liberalization in China's accession to the World Trade Organization," Policy Research Working Paper Series 2623, The World Bank. [Downloadable!]
  9. Arjan Lejour, 2001. "China and the WTO: The Impact on China and the World Economy," Trade Working Papers 207, East Asian Bureau of Economic Research. [Downloadable!]
  10. 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. [Downloadable!] (restricted)
  11. 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. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
  13. 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, Blackwell Publishing, vol. 22(3), pages 379-405, 05. [Downloadable!] (restricted)
  14. 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.
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rod Tyers & Jane Golley & Ian Bain, 2007. "Projected Economic Growth in China and India: The Role of Demographic Change," ANUCBE School of Economics Working Papers 2006-477, Australian National University, College of Business and Economics, School of Economics. [Downloadable!]
  2. Patricio Jaramillo & Sergio Lehmann & David Moreno., 2009. "China, Precios de Commodities y Desempeño de América Latina: Algunos Hechos Estilizados," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 46(133), pages 67-105. [Downloadable!]
  3. Rod Tyers & Jane Golley, 2006. "China's Growth to 2030: The Roles of Demographic Change and Investment Premia," PGDA Working Papers 1206, Program on the Global Demography of Aging. [Downloadable!]
  4. Till Bärnighausen & David E. Bloom, 2009. "Financial incentives for return of service in underserved areas: a systematic review," PGDA Working Papers 1106, Program on the Global Demography of Aging. [Downloadable!]
  5. William Milberg, 2007. "Shifting Sources and Uses of Profits: Sustaining U.S. Financialization with Global Value Chains," SCEPA Working Papers 2007-9, Schwartz Center for Economic Policy Analysis (SCEPA), The New School. [Downloadable!]
  6. Barry Eichengreen & Yeongseop Rhee & Hui Tong, 2004. "The Impact of China on the Exports of Other Asian Countries," NBER Working Papers 10768, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Arslan Razmi & Robert A. Blecker, 2006. "Developing Country Exports of Manufactures: Moving Up the Ladder to Escape the Fallacy of Composition?," Working Papers 2006-06, American University, Department of Economics. [Downloadable!]
    Other versions:
  8. Dhanya V, 2008. "Liberalisation of Tropical Commodity Market and Adding-Up Problem: A Bound Test Approach," Working Papers id:1608, esocialsciences.com. [Downloadable!]
  9. Rod Tyers & Jane Golley, 2006. "China's Growth to 2030: The Roles of Demographic Change and Investment Risk," ANUCBE School of Economics Working Papers 2006-461, Australian National University, College of Business and Economics, School of Economics. [Downloadable!]
  10. Jane Golley & Rod Tyers, 2006. "Demographic Change and the Labour Supply Constraint," ANUCBE School of Economics Working Papers 2006-467, Australian National University, College of Business and Economics, School of Economics. [Downloadable!]
  11. Gayi, Samuel K., 2006. "Does the WTO Agreement on Agriculture Endanger Food Security in Sub-Saharan Africa?," Working Papers RP2006/60, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  12. William Milberg, 2007. "Exporting Processing Zones, Industrial Upgrading and Economic Development: A Survey," SCEPA Working Papers 2007-10, Schwartz Center for Economic Policy Analysis (SCEPA), The New School. [Downloadable!]
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