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The Rise of China and India and the Commodity Boom: Economic and Environmental Implications for Low-Income Countries

Listed author(s):
  • Coxhead, Ian

    (U of Wisconsin and Norwegian University of Life Sciences)

  • Jayasuriya, Sisira

    (La Trobe U)

The rapid growth of China and, more recently, of India, is having major effects on every facet of the global economy. The supply of labor-intensive manufactured exports (from China in particular) has been accompanied by a huge expansion in their imports both of raw materials and of skill-intensive manufactured parts and components. This 'offshoring' of intermediates production by large, labor-abundant economies has economic and environmental implications for other developing economies drawn into their trade networks. We sketch a trade-theoretic model showing how the growth of the 'giants' generates adjustment pressures on their trading partners and competitors among developing economies. We discuss in particular how differences in relative factor endowments of resource-rich economies can produce quite different outcomes in the context of product fragmentation and expanding commodity trade. We also explore the effects on production, trade, environment and prospects for future growth, recognizing that commodity extraction and production can have strong environmental impacts, particularly in the context of weak institutions and other market failures. We illustrate these different impacts by considering the cases of Indonesia, Malaysia and Thailand and highlight implications for growth, development and policy.

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File URL: http://www.aae.wisc.edu/pubs/sps/pdf/stpap528.pdf
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Paper provided by University of Wisconsin, Agricultural and Applied Economics in its series Staff Paper Series with number 528.

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Date of creation: Jul 2008
Handle: RePEc:ecl:wisagr:528
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  1. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "The rise of offshoring: it's not wine for cloth anymore," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 59-102.
  2. Auty, Richard M., 2001. "The political economy of resource-driven growth," European Economic Review, Elsevier, vol. 45(4-6), pages 839-846, May.
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  7. Willenbockel, Dirk, 2007. "The Impact of China's Import Demand Growth on Sectoral Specialization in Brazil: A CGE Assessment," MPRA Paper 6200, University Library of Munich, Germany.
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  10. Athukorala, Prema-chandra & Yamashita, Nobuaki, 2006. "Production fragmentation and trade integration: East Asia in a global context," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 233-256, December.
  11. 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.
  12. Graham, Margaret B. W., 2006. "Comment: Exploring the Context of Use," Enterprise & Society, Cambridge University Press, vol. 7(03), pages 456-461, September.
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  14. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
  15. Coxhead, Ian & Li, Muqun, 2008. "Prospects for Skills-Based Export Growth in a Labour-Abundant, Resource-Rich Economy: Indonesia in Comparative Perspective," Staff Paper Series 524, University of Wisconsin, Agricultural and Applied Economics.
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