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Productivity and externalities: models of export-led growth

In: Modeling Developing Countries' Policies in General Equilibrium

Author

Listed:
  • Jaime de Melo
  • Sherman Robinson

Abstract

In developing countries, successful export-led growth (ELG) industrialization has been associated with rapid structural change and productivity growth. There are major difficulties in explaining this performance using a standard neoclassical growth model. To develop a more satisfactory framework, we start from empirical and theoretical work with models incorporating externalities. We develop a simple analytical model with an export externality that captures the large increase in both total factor productivity and trade share associated with ELG. A second model is developed to decompose growth into various components: (i) factor accumulation, (ii) a factor reallocation effect from moving factors from low to high productivity sectors, (iii) an export externality effect arising from exporting light and heavy manufactures and (iv) an import externality effect arising from importing capital goods (heavy manufactures). The second model is implemented with data for an archetype semi-industrial country. In addition to accounting for the higher total factor productivity growth observed in countries pursuing ELG strategies, the model captures the patterns of structural change experienced by such countries better than simpler neoclassical models without disequilibrium features or externalities.

Suggested Citation

  • Jaime de Melo & Sherman Robinson, 2015. "Productivity and externalities: models of export-led growth," World Scientific Book Chapters, in: Modeling Developing Countries' Policies in General Equilibrium, chapter 3, pages 43-70, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814494816_0003
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    More about this item

    Keywords

    Applied General Equilibrium Models; Trade Policy; Computable General Equilibrium; Archetypes;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F00 - International Economics - - General - - - General
    • F01 - International Economics - - General - - - Global Outlook
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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