Bazaar economy

from Wikipedia, the free encyclopedia
This article or section needs to be revised: The introduction lacks the clarification that this is a thesis and thus a word creation by Hans-Werner Sinn that is neither generally recognized nor used as a term; Incidentally, the execution is essay-like and lengthy, thus encyclopaedically undesirable ( WP: WWNI ), also partly unconfirmed (first section " Rationale ") - WinfriedSchneider ( discussion ) 13:47, Oct. 4, 2017 (CEST)
Please help to improve it , then remove this checkmark.

The bazaar economy is an economic hypothesis . It states that in certain national economies , especially in Germany, the share of domestic added value in industrial production, the so-called vertical range of manufacture , continues to decline over time and, in return, the share of intermediate consumption from abroad increases, which is particularly evident in Show export sector . Parallel to this hypothesis, there is talk of pathological export booms after Germany has over-specialized and is concentrating too much added value in exports to the detriment of the domestic sectors, i.e. value added in exports increases faster than overall economic value added.

In the event that the hypothesis of the bazaar economy and the pathological export boom should apply, this means that (a) the added value in exports develops very quickly and (b) the export quantities also increase very quickly in relation to this added value. Very rapid value creation in exports and very rapid growth in export volumes are predominantly assessed as negative.

The hypothesis aroused public interest particularly in the discussion about the title of export world champion , which the German trade in goods had proclaimed for itself until 2008.

Reason

As a justification for his hypothesis, the economist Hans-Werner Sinn explains that in Germany there were high and rigid wages for simple work that did not yield to international low-wage competition. One can best understand the argument if one first looks at the reaction of a well-functioning economy with flexible wages to international low-wage competition (fall of the Iron Curtain , integration of ex-communist countries into world trade ). Such an economy would close down some of the labor-intensive domestic sectors (e.g. textiles or leather) and replace them with imports . The capital , skilled labor and unskilled labor are released and migrate to the capital and knowledge-intensive export sectors. Because of the higher capital intensity of production in these sectors, with rigid wages unemployment would arise because not all ordinary workers are taken along. But in a well-functioning economy, unemployment is avoided by falling wages, because falling wages slow down structural change and slow down the replacement of simple work by machines in all sectors. There is only a moderate destruction of the added value in the domestic sectors, which is overcompensated by the increase in the added value in exports. If, in contrast to this development, wages for simple work are rigid, the brake on structural change is blocked. The domestic sectors are being excessively eroded and too much capital and skilled labor are being exported, implying an excessive shift in value added from the domestic sectors to the export sectors. The share of added value in exports in the gross domestic product rises and a pathological export boom develops, which goes hand in hand with unemployment, because more simple workers are laid off in the domestic sectors than can be hired in export sectors. The national product , i.e. the sum of the added value of all sectors, is shrinking against the trend, because less is generated in export than is lost in the domestic sectors.

The excessive structural change has a horizontal and a vertical component. Firstly, too much capital is migrating from traditional sectors such as textile or leather production to modern sectors such as automobile construction or the chemical industry. Second, too much capital migrates from the customer-remote and labor-intensive production stages of the export industry to the customer-oriented and capital-intensive final stages of this industry (bazaar effect). The consequence is that the added value in export develops in excess and the share of domestic added value in the export volumes falls. Taken together, this implies an excessive inflation of export volumes, which outstrips the excessive inflation of added value in exports.

reception

The bazaar economy hypothesis is controversial. First, the empirical data of the hypothesis are controversial, second, the interpretation of the data in terms of an actual division of labor as a “bazaar” economy and finally the assessment of the location qualities of Germany.

The Advisory Council on the Assessment of Macroeconomic Development summarizes the bazaar economy thesis as follows: Although the increased exports reflect the high performance of German export companies, they do not reflect the performance of the German export economy, since domestic value creation is falling and instead, more and more foreign inputs are being used. The Council of Economic Experts regards this thesis as empirically refuted for the 1990s under review. “On the one hand, the domestic added value shares from export activities have decreased, and on the other hand, the volume effect of the strong increase in exports, especially since the mid-1990s, has increased the added value induced by exports in the economy as a whole and in manufacturing relative to that of the other economic sectors increased. ”Between 1991 and 2002, the foreign share of added value in German exports rose from 26.7 percent to 38.8 percent. Despite falling domestic value added shares, domestic value added increased because exports had risen sharply during this period. The number of employees in the manufacturing sector generally fell in the 1990s. The number of export-dependent workers in the manufacturing sector rose between 1995 and 2000, contrary to the trend. "At least with a view to the export activities of the manufacturing industry, it could be shown that the fears of negative consequences for domestic employment have not been confirmed, but on balance additional jobs have been generated."

Peter Bofinger and Rudolf Hickel contradict the bazaar hypothesis (see web links), pointing out that although the added value in exports per piece has decreased, the number of pieces has increased so much that it has increased domestic added value in exports.

The Institute of German Economy also denies the bazaar economy hypothesis, but in its own study refers to an existing bazaar effect. It explains that although the share of imported goods and services in exports has increased in Germany, this is completely normal in a world of increasing division of labor. In addition, the contribution of exports to the domestic gross value added has nowhere risen as strongly as in Germany, which is based on the strong competitiveness of German industry. In the past few years, wage costs have barely increased and the local conditions have improved significantly compared to countries such as France , Great Britain and Italy . Therefore, Germany is by no means a bazaar economy, believes the institute. However, the IW Cologne does not doubt the effect of the international division of labor on the vertical range of manufacture of the industry (s). In line with Sinn's remarks, the IW Cologne attests an increase in the growth rate of export-induced imports (export-dependent intermediate imports from abroad) in Germany, Sweden, the Netherlands and Italy. For Germany, the Ifo Institute and the IW Cologne rate this development as relatively high in an international comparison. However, this employment-threatening development has so far been overcompensated by the growth in export-induced added value. The Institute of German Economy concludes: “The fact that the products of the local factories can keep up so well on the world market despite the high labor costs is due not least to the fact that companies can buy inexpensive intermediate inputs in low-wage countries. Seen in this way, the label bazaar economy should be understood more as a compliment for a successful international division of labor than as a criticism of the location Germany (Germany). "

The Federal Statistical Office has also dealt with the Basarthesis: “Even if one assumes that the import share of exports had a dampening effect on GDP in the period 1995 to 2002, this was overcompensated by the positive effect of the strong increase in export demand for domestic products . ”According to the Federal Office, the share of exports from domestic added value increased between 1995 and 2002 from 70.3% to 61.2%. The share of value added generated for export goods in economic output even rose from 16.2% to 20.8% between 1995 and 2002.

The DIW comes to the conclusion that Germany is a winner of globalization. The assertion that added value is increasingly being shifted from Germany to more competitive countries is wrong, according to an analysis by the DIW. The value added in Germany takes (both in absolute terms and relative to gross domestic product) because of foreign trade and increasingly stable economic development in Germany.

On October 17, 2005, the Handelsblatt criticized Sinn's hypothesis of a bazaar economy under the heading “Sinn's fairy tale from the bazaar” as false and dangerous. The author Olaf Storbeck refers to the studies of the Expert Council and the Federal Statistical Office.

In his book Die Basarökonomie , published in 2005, Sinn accused all of these critics of misinterpreting his thesis. He did not determine the decline in domestic export value added compared to the overall economic value added, but a decrease in domestic export value added per export unit, and this is clearly proven by the empirical facts.

According to the Friedrich-Ebert-Stiftung , the model assumption on which the bazaar economy thesis is based, that rigid (too high) wages cause an export boom, is theoretically and practically implausible. The obvious alternative explanation is that Germany suffers from the Dutch disease , namely that super-competitive export sectors lead to an appreciation of the currency via the exchange rate mechanism and thus to a cheaper import, whereby domestic market-oriented production sectors lose competitiveness.

International comparison

USA, Japan and Germany

Exports and export surpluses in relation to GDP

The figure shows exports in relation to the respective GDP for the triad countries , i.e. the three largest economies in the world , as well as net exports in relation to GDP. Rising export quotas indicate increasing trade interdependencies in the world ( globalization ).

According to this, Germany leads the way in the ratio of exports of goods and services to GDP; Germany also has a considerable export surplus (exports minus imports). However, since the balance of exports and imports must be of the same size as the capital flow , but with opposite signs , this permanent export surplus also reflects the permanent capital inflow in the form of foreign exchange. Sinn interprets this balance sheet equation of the national accounts as if it weakens domestic investment and thus the domestic demand for labor.

The US, on the other hand, has been in the red for years in foreign trade (goods and services combined). Accordingly, the United States is experiencing a significant outflow of capital. In this respect, this is the opposite of the German situation.

The import quota (imports in relation to GDP) results in the figure as the difference between export and net export quota.

China bazaar economy

China has a large foreign trade surplus with the USA, but a large foreign trade deficit with Japan, South Korea and Taiwan. The latter two economies in turn obtain many intermediate products from Japan. China, with its cheap labor, is used to process primary products that originally come from Japan, undergo initial further processing in South Korea and Taiwan, are then fully completed in the low-wage country of China and then delivered to the USA or the EU.

literature

  • Christian Müller and Torsten Sundmacher (2006): Basar Economy . Economics studies (WiSt), 35th year, pp. 217–220.
  • Hans-Werner Sinn (2005): The bazaar economy. Econ publishing house. ISBN 343018536X
  • Hans-Werner Sinn (2006): The German Riddle: Why We Are Export World Champions and Bottom At The Same Time, Perspektiven der Wirtschaftsppolitik, Blackwell Publishing, vol. 7 (1), pp. 1-18.
  • Hans-Werner Sinn (2006): The Pathological Export Boom and the Bazaar Effect: How to Solve the German Puzzle, in: The World Economy, Blackwell Publishing, vol. 29 (9), pages 1157-1175, 09
  • Lester Thurow (2004): The future of the world economy. Translated from the English by Bernd Rullkötter. Campus-Verlag Frankfurt, New York. ISBN 3-593-37401-3

Web links

supporting documents

  1. ↑ Export world champion Germany - temporary title? ( Memento of November 15, 2010 in the Internet Archive ) - PDF from the Federal Statistical Office
  2. ↑ a b Expert Council for the Assessment of Overall Economic Development , Annual Report 2004/05 , pp. 481–482, Rn 467
  3. ↑ Council of Experts for the Assessment of Overall Economic Development, Annual Report 2004/05 , pp. 480–481
  4. ↑ (IW Cologne 2005, final report)
  5. ↑ Institut der deutschen Wirtschaft , actually a compliment ( memento of the original from July 14, 2014 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / www.iwkoeln.de
  6. ^ German Institute for Economic Research , weekly report by DIW Berlin 40/04, Germany is not a bazaar economy
  7. ↑ handelsblatt.com: Sinns Märchen vom Basar , accessed on March 9, 2011
  8. ↑ The bazaar economy. Germany: Export World Champion or Bottom ?; e.g. introduction
  9. ^ Friedrich Ebert Foundation , Michael Dauderstädt, Are our wages too high? Sleepless nights in the bazaar economy , February 2006, p. 7