Import-oriented growth
The term import-oriented growth describes the effects of a one-sided (concentrated) growth of an economy in the standardized foreign trade model in the direction of its imported goods. Import-oriented and export-oriented growth describes the effects of international growth effects on an observed economy. It is also called import-heavy growth or import-substituting growth . The counterpart is export-oriented growth.
classification
The standard model of a trading economy is preceded by two models for interpreting international trade for an economy and for the world economy. On the one hand the Ricardo model and on the other the Heckscher-Ohlin model . Like all models, these are also only simplified representations of reality. In practice, a mixture of both models is often used. Although the two models differ from each other, they still have something in common:
- The production capacity of an economy can be represented by a transformation curve
- The production possibilities determine the relative supply structure of a country
- The world trade balance is determined by the relative world demand and the relative world supply
They can therefore be viewed as special cases of the standard model of a trading economy.
The standard model of trading is essentially based on four relationships:
- Relationship between the transformation curve and the relative supply curve
- Relationship between relative price and relative demand
- Determination of the world equilibrium through world supply and world demand
- Effects of the terms of trade on a nation's welfare
Basic assumptions of the standard model
The above relationships are modeled on the following assumptions
Assumptions:
- two countries
- two homogeneous goods
- full employment
- No creditor-debtor relationships / barter economy
- Transport costs are neglected
- Production factors labor and capital with a substitutional production function
- Demand preferences are taken into account
- Money only serves as a medium of exchange (simplest interpretation gold standard)
- Neoclassical idea of price determination in competitive markets
- No external effects
- Free trade, d. H. no tariffs or other trade barriers
- Complete factor mobility in the respective country
- Factor mobility between countries
Relationship between growth and shifts on the transformation curve
According to the premises mentioned above, every economy produces only two goods with certain production factors available to it. The possible combinations of different production variants can be mapped as a transformation curve. Every combination of production gives the economy the same benefit, one speaks here of indifferent benefit. If an economy experiences economic growth, the transformation curve shifts outwards. The growth can result from obtaining increased resources e.g. B. through the development of new raw material sources or supply agreements or through the more efficient use of existing resources through technological innovations.
Assuming that an economy improves its output of goods in a sector due to the reasons mentioned above, the transformation curve shifts outwards on one side. In the following example, the transformation curve shifts outwards on the one hand for textile production (a) and on the other hand for food production (b).
Such one-sided growth is also known as distorted growth. As a result, the economy experiences increased production, i.e. growth in favor of the good, which has also experienced one-sided growth in its favor.
Relative supply and terms of trade
If a sector in an economy experiences growth , for whatever reason, the economy also produces more goods in this sector (here textiles). The increase in this good domestically also results in an increase in the global supply of textiles, provided that the economy under consideration engages in foreign trade, which is assumed in the foreign trade model. In reality there is trade between the different countries of the world, since there are obvious reasons for foreign trade. (e.g. the use of comparative cost advantages or the supply of resources that are not or only insufficiently available in one's own country) This one-sided shift also has the consequence that production in other sectors declines. So more of one good and less of the other good is produced not only relatively, but also in real terms. There is a specialization, which can be seen in the graphic below.
The increased world supply (in our example of textiles) has the consequence that the relative price for textiles falls. If the relative price of a good (which is preferably produced in the economy to be considered) falls, this is tantamount to a deterioration in the terms of trade at home and an improvement in the real exchange ratios abroad, unless foreign countries also prefer to produce textiles.
On the basis of these relationships, it can be said that for the domestic terms of trade and the relative supply (and thus also for the world market supply, the world market demand and the resulting world market price) it does not matter in which country a good experiences concentrated growth .
Concentrated growth that leads to an increase in the relative supply of a good (which does not preferentially produce domestically) has the consequence that the price of the preferentially produced good increases domestically and consequently improves the terms of trade domestically - that is to say exactly the opposite effect. Here, too, it does not matter in which country the growth takes place. This relationship is explained in the graphic below.
Import-oriented growth
In the standard model of a trading economy, it is by definition meaningful and also necessary that the countries of our earth trade; d. i.e. that they import and export goods . If there is a one-sided (distorted) growth on the world market in favor of the good that an economy under consideration imports (for whatever reasons), the conditions improve in favor of the importer in accordance with the laws of relative supply and the terms of trade. This means that the price of the good purchased on the world market is favorable for the economy. In many cases, the economy experiences a general upswing if the imported goods are required for further processing or refinement through innovative, labor-intensive or capital-intensive processes, which in turn can be offered more cheaply domestically or on the world market. This fact is known as import-oriented growth.
The general rule:
- Import-oriented growth in general improves a country's real exchange ratios at the expense of the rest of the world
- Export-oriented growth worsens the terms of trade for one country and improves it in favor of the rest of the world.
supporting documents
- ↑ P. Krugman, M. Obstfeld; International economy. 7th edition, Munich a. a., 2006
- ^ Rose / Sauernheimer; Foreign Trade Theory. 12th edition, Munich a. a., 2005
- ↑ P. Krugman, M. Obstfeld; International economy. 7th edition, Munich a. a., 2006
- ↑ P. Krugman, M. Obstfeld; International economy. 7th edition, Munich a. a., 2006
- ↑ P. Krugman, M. Obstfeld; International economy. 7th edition, Munich a. a., 2006
- ↑ P. Krugman, M. Obstfeld; International economy. 7th edition, Munich a. a., 2006
- ↑ Eibner, W .; Application-oriented foreign trade: theory & politics. Munich, 2006
- ↑ P. Krugman, M. Obstfeld; International economy. 7th edition, Munich a. a., 2006
literature
- P. Krugman, M. Obstfeld: International Economy. 7th edition, Munich a. a., 2006
- Rose / Sauernheimer: Theory of foreign trade. 12th edition, Munich a. a., 2005
- Eibner, W .: Application-Oriented Foreign Trade: Theory & Politics. Munich, 2006