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Productivity and Externalities: Models of Export-LED Growth

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  • de Melo, Jaime
  • Robinson, Sherman

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.
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Suggested Citation

  • de Melo, Jaime & Robinson, Sherman, 1989. "Productivity and Externalities: Models of Export-LED Growth," CUDARE Working Papers 198501, University of California, Berkeley, Department of Agricultural and Resource Economics.
  • Handle: RePEc:ags:ucbecw:198501
    DOI: 10.22004/ag.econ.198501
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    File URL: http://ageconsearch.umn.edu/record/198501/files/agecon-cal-520.pdf
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    References listed on IDEAS

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    1. Balassa, Bela, 1985. "Exports, policy choices, and economic growth in developing countries after the 1973 oil shock," Journal of Development Economics, Elsevier, vol. 18(1), pages 23-35.
    2. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
    3. Teitel, Simon & Colman Sercovich, Francisco, 1984. "Latin America," World Development, Elsevier, vol. 12(5-6), pages 645-660.
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    Cited by:

    1. Lewis, Jeffrey D. & Robinson, Sherman & Wang, Zhi, 1995. "Beyond the Uruguay Round: The implications of an Asian free trade area," China Economic Review, Elsevier, vol. 6(1), pages 35-90.
    2. Levine, Ross & Renelt, David, 1991. "Cross-country studies of growth and policy : methodological, conceptual, and statistical problems," Policy Research Working Paper Series 608, The World Bank.
    3. Mark Huberty & Georg Zachmann, 2011. "Green exports and the global product space: Prospects for EU industrial policy," Working Papers 556, Bruegel.
    4. Lee, Hiro & Owen, Robert F. & van der Mensbrugghe, Dominique, 2009. "Regional integration in Asia and its effects on the EU and North America," Journal of Asian Economics, Elsevier, vol. 20(3), pages 240-254, May.
    5. Hiro Lee & Michael G. Plummer, 2011. "Assessing the Impact of the ASEAN Economic Community," OSIPP Discussion Paper 11E002, Osaka School of International Public Policy, Osaka University.
    6. Jie He & David Roland-Holst, 2010. "Economic Growth, Energy demand and Atmospheric Pollution: Challenges and Opportunities for China in the future 30 years," Cahiers de recherche 10-11, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
    7. Dani Rodrik, 1993. "Trade and Industrial Policy Reform in Developing Countries: A Review of Recent Theory and Evidence," NBER Working Papers 4417, National Bureau of Economic Research, Inc.
    8. He, Jie, 2005. "Estimating the economic cost of China's new desulfur policy during her gradual accession to WTO: The case of industrial SO2 emission," China Economic Review, Elsevier, vol. 16(4), pages 364-402.
    9. He, Jie, 2010. "What is the role of openness for China's aggregate industrial SO2 emission?: A structural analysis based on the Divisia decomposition method," Ecological Economics, Elsevier, vol. 69(4), pages 868-886, February.
    10. Lewis, Jeffrey D.*Robinson, Sherman, 1996. "Partners or predators? : the impact of regional trade liberalization on Indonesia," Policy Research Working Paper Series 1626, The World Bank.
    11. Renelt, David, 1991. "Economic growth : a review of the theoretical and empirical literature," Policy Research Working Paper Series 678, The World Bank.
    12. Diao, Xinshen & Diaz-Bonilla, Eugenio & Robinson, Sherman & Orden, David, 2005. "Tell me where it hurts, an' I'll tell you who to call," MTID discussion papers 84, International Food Policy Research Institute (IFPRI).
    13. Corbo, Vittorio & Fischer, Stanley, 1995. "Structural adjustment, stabilization and policy reform: Domestic and international finance," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 44, pages 2845-2924 Elsevier.
    14. Xiaoming Zhang & Heng-fu Zou, 1995. "Foreign technology imports and economic growth in developing countries," Policy Research Working Paper Series 1412, The World Bank.
    15. Najia Saqib, 2014. "The Effect of Exchange Rate Fluctuation on Trade Balance: Empirical Evidence from Saudi Arab Economy Classification-JEL:," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 4(1), pages 1-1, February.
    16. Corbo, Vittorio & Fischer, Stanley, 1991. "Adjustment programs and Bank support : rationale and main results," Policy Research Working Paper Series 582, The World Bank.
    17. Lee, Hiro & van der Mensbrugghe, Dominique, 2006. "Deep integration and its impacts on non-members: EU enlargement and East Asia," MPRA Paper 82286, University Library of Munich, Germany.
    18. Larry Westphal, 2002. "Technology Strategies For Economic Development In A Fast Changing Global Economy," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 11(4-5), pages 275-320.

    More about this item

    Keywords

    Production Economics; Public Economics;

    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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