Trade Strategy, Investment, and Exports: Another Look at East Asia
The export booms in South Korea and Taiwan starting in the early 1960s are anomalous when compared with later export booms in other, non-East Asian countries such as Chile and Turkey. First, these booms have taken place in the context of comparatively small changes in relative prices in favor of exportables. Second, they have been associated from the start with booms in investment. This paper offers an argument and a formal model to suggest that exports in East Asia may have been driven by an increase in the profitability of investment, with outward orientation a consequence of the investment boom rather than its instigator. In economies like South Korea and Taiwan, an increase in investment required an increase in imports of capital goods. Since savings rose alongside the desired investment, the investment boom was accompanied by a boom in both exports and imports. Moreover, this could happen with a relatively small change in the relative price of exportables.
|Date of creation:||Nov 1995|
|Date of revision:|
|Publication status:||published as Rodrik, Dan. "Trade Strategy, Investment And Export: Another Look At East Asia," Pacific Economic Review, 1997, v2(1,Feb), 1-24.|
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- Dani Rodrik, 1994. "Getting Interventions Right: How South Korea and Taiwan Grew Rich," NBER Working Papers 4964, National Bureau of Economic Research, Inc.
- Alwyn Young, 1993. "Lessons from the East Asian NICs: A Contrarian View," NBER Working Papers 4482, National Bureau of Economic Research, Inc.
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