Download Colombia`s Evolution in the Product Space Colombia 1975

The future of export led
growth
Eduardo Zepeda
Carnegie Endowment for International Peace
United nations Development Programme
29 June 2009
The facts
Exports have grown faster than income.
• Growth is correlated with exports.
• Even for countries with a stable exports-togdp ratio, exports tend to grow faster than
gdp
• The change in exports is positively
correlated with gdp, even if we exclude
exports from gdp
Export Growth and Output Growth, 1960-2004
Source: Growth-Led Exports: Implications for the Cross-Country Effects of Shocks to Potential Output. Joseph E. Gagnon The
.
Berkeley Electronic Journal of Macroeconomics, vol. 8 (2008), pp. 1-28
The case for export led growth
• The static argument:
• Exports shift resources according to
comparative advantage
• Exports shift resources from non tradables
to tradables
• From low to high productivity activities
The case for export led growth
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The dynamic argument:
Transfer of technology
Economies of scale
Learning by doing
FDI plays a key role
The case for export led growth
• The development argument:
• By favoring the use of resources according
to their availability,
• export-led-growth is likely to increase the
demand for unskilled labor
• thereby improve distribution and reduce
poverty
The policy implications
• Export led growth has been widely
embraced structural adjustment strategies
• It has been used as an argument for
• trade liberalization
• concessions to foreign direct investment
• overall pro-market policies
• (some financial and monetary implications
will be discussed later)
Export led growth, the issues :
• Heterogeneity of results
• Mexico, Malaysia, Hong Kong and Thailand
have a similar average export/GDP ratio (10%),
but average growth rates are about 4% for
Mexico and between 6 and 7% for the later
three. (Data are for 1960-2004)
• Uruguay and Egypt have the same export ratio
(5%), but the first has an average growth rate of
2% compared to 5% for the second.
Heterogeneity of results
• Between 1960 and 2004:
• Mexico, Malaysia, Hong Kong and Thailand
have a similar average export/GDP ratio (10%),
but average growth rates are about 4% for
Mexico and between 6 and 7% for the later
three.
• Uruguay and Egypt have the same export ratio
(5%), but the first has an average growth rate of
2% compared to 5% for the second.
Heterogeneity of results
Export Growth and Output Growth, 1960-2004
Source: Growth-Led Exports: Implications for the Cross-Country Effects of Shocks to Potential Output. Joseph E. Gagnon The
.
Berkeley Electronic Journal of Macroeconomics, vol. 8 (2008), pp. 1-28
Heterogeneity of results
• Haussman, Hwang, Klinger, Rodrick have
shown the importance of
– what you export and
– what exports you choose to promote
For the income and development outcome
Colombia’s Evolution in the Product Space
Colombia 1975
Source: Achieving Export-Led Growth in Colombia R Hausmann, B Klinger. CID Working Paper No. 182, 2008
Malaysia’s Evolution in the Product Space
Malaysia 1975
Source: Achieving Export-Led Growth in Colombia R Hausmann, B Klinger. CID Working Paper No. 182, 2008
Malaysia’s Evolution in the Product Space
Malaysia 2000
Source: Achieving Export-Led Growth in Colombia R Hausmann, B Klinger. CID Working Paper No. 182, 2008
Colombia’s Evolution in the Product Space
Colombia 2000
Source: Achieving Export-Led Growth in Colombia R Hausmann, B Klinger. CID Working Paper No. 182, 2008
A Visual Representation of the Product Space
Source: Achieving Export-Led Growth in Colombia R Hausmann, B Klinger. CID Working Paper No. 182, 2008
A Visual Representation of the Product Space
Source: Achieving Export-Led Growth in Colombia R Hausmann, B Klinger. CID Working Paper No. 182, 2008
Undue specialization in export
markets
• Promotion of exportables by small-farm
producers (fruits, vegetables, flowers)
• Last year dramatic changes in prices of wheat,
rice, maize, etc. had an important impact
• Valdes and Foster analyze the case of Chile and
argue that those in exportables and non-trables
loose, but those that remain in import competing
goods gained.
• Underscoring the importance of the domestic
market and diversification
Distribution and poverty
• More often than not, trade liberalization
(export promotion) have concentrated
income
• The impact on poverty is small (Brazil,
Madagascar, Mexico, etc.)
• Vulnerability to price changes
The impact of the crisis
• The crisis:
– Fall in exports
– Protectionism (tariffs, non-tariff protection,
subsidies, discrimination vs imports)
– Over-reacting
• Export led-growth recovery path?
– Not very likely
– Neither marginal
Growing through the crisis
• We might turn to Growth-led-exports
– We might consider increasing developing countries’
domestic demand
• A successful export led-growth strategy includes
industrial policy
• Alternative sources of export growth:
– South-south
Concluding remarks
• Export led growth, still an option
• Combine with the promotion of domestic
market
• Avoid vulnerability (agriculture), promote
diversification
• Restore selective industrial policy
• Articulate economic and social policies