Export-oriented growth
Export-oriented growth (also export-based growth) is characterized by an expansion of production within an economy . This shifts disproportionately in favor of the export good compared to the import good for a given price ratio. Furthermore, export-oriented growth is the counterpart to import-oriented growth .
Alternative definition
Export-oriented growth is "growth in which the production capacities of the economy increase more rapidly for their original export goods than for those goods that compete with imports."
growth
In the present case, economic growth could result from:
- different resources
( Heckscher-Ohlin model )
or
- different labor productivity
( Ricardo model )
have arisen.
This is reflected in capacity increases or productivity increases. Capacity increases can be in the form of new or due to a higher supply of raw materials as well as investments in new machines. Caused by more efficient production systems, learning effects of employees or new production-related innovations, productivity increases arise.
The Heckscher-Ohlin model and the Ricardo model are combined because they have a lot in common and thus better explain the effects and relationships of foreign trade.
Assumptions of the Standard Model of Foreign Trade
- For a better understanding and simplification, only two countries and two goods - according to the Ricardo model - are considered in the following. These two countries represent the whole world and trade in their goods.
- The relative supply of the economy is represented by the transformation curve and derives the relative world supply (RS) taking into account the rest of the world and its relative market supply curves.
- The demand in the national economy is described by the preferences of the consumers and derives the relative world demand (RD) taking into account foreign countries and their market demand curves.
- For the sake of simplification, we assume a customer.
Transformation curve
All production possibilities of an economy are represented by a transformation curve. Various production combinations are possible along this curve. On the one hand, the economy can decide to produce only the imported goods, only to produce the export goods, or a combination in between. In the present case, the economy produces both goods. This curve is usually concave.
Effects of export-oriented growth
Transformation curve
The transformation curve is shifting outwards as a result of economic growth. In the present case, it shifts more towards the export good than towards the import good. This is also known as one-sided growth towards the export good. As a result, production increases, for a given price ratio, of the export goods and that of the imported goods decreases.
World supply
Due to the increase in the production of export goods within the economy compared to imports, the relative world supply increases. With otherwise constant conditions, this leads to a right shift in the curve of the relative market supply.
Relative price
Due to the change in the standard model of foreign trade (relative world supply), as described above, the relative price of the export good falls in world trade equilibrium.
Terms of Trade
The terms of trade (real exchange ratios) worsen because of the lowering of the relative price of the export good at home. Whereas abroad the terms of trade are rising.
Welfare
A lowering of the domestic terms of trade also leads to a deterioration in domestic welfare .
Economic growth
In extreme cases, an extreme increase in export-oriented growth could theoretically lead to such a sharp drop in the terms of trade that in the end the economy would “do worse than without any growth”. This exceptional case is called impoverishment growth.
example
There are two economies on the world market, each producing two goods, with the following data:
| Name of the economy | produced good 1 | produced good 2 |
|---|---|---|
| X | Automobiles | Food |
| Y | Food | Automobiles |
In accordance with the requirements of the standard model of foreign trade, the national economy X exports automobiles to the national economy Y, since in the national economy X a process innovation has occurred with regard to the production facilities for automobile production. As a result, the productivity of automobile production increases. And this economy therefore increasingly prefers the production of automobiles in comparison to food production, with a constant price ratio.
As a result, there is an export-oriented growth in the case of the economy X with regard to the export of automobiles.
Effects on economy X:
| Impact on... | change |
|---|---|
| Transformation curve | is increasingly shifting towards automobiles |
| relative world supply (RS) | ↑ Shift the RS to the right |
| relative price | ↓ |
| Terms of Trade | ↓ by lowering the relative price |
| Welfare | ↓ by worsening the terms of trade |
Individual evidence
- ^ Paul R. Krugman, Maurice Obstfeld: Internationale Wirtschaft: Theory and Politics of Foreign Trade , 7th edition, Pearson Studium, Munich 2006, p. 150.
- ^ Paul R. Krugman, Maurice Obstfeld: Internationale Wirtschaft: Theory and Politics of Foreign Trade , 7th edition, Pearson Studium, Munich 2006, p. 138.
swell
- Paul R. Krugman, Maurice Obstfeld: International Economy: Theory and Politics of Foreign Trade. , 7th edition, Pearson Studium, Munich 2006, ISBN 3-8273-7199-6 , p. 128 ff.
- Gustav Dieckheuer: Dynamic Aspects of Foreign Trade: International Trade and Economic Integration , www.uni-muenster.de, March 21, 2008, Muenster 2006, p. 32 ff.