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Monday, 3 November 2008

Is "export led growth" overrated?

Yes. According to this new paper :

Looking into history, especially after the successful stories of “Asian Tigers”" in which export booms led economic growth for nearly two decades, the idea of “export-led growth” has encouraged many governments to implement various “export-promoting policies”, in the hope of duplicating the success of “Asian Tigers”. Most of those export promotion policies take the forms of subsidies to export activities, devaluation of nominal exchange rate, elimination of import tariffs on imported inputs used in the production of main export goods, etc. However, this paper suggests that productivity in the nontradable sector probably played just as important a role as that in the tradable sector in driving economic growth. “Export-led growth” did not dominate the scene, as many people believed. Countries should, therefore, weight their option before providing special privileges to the export sector. Economic policies that encourage technological improvement in all industries, both tradable and nontradable, such as improving the quality of the population, removing barriers to preventing resources moving more freely to the sectors with a comparative advantage, improving the quality of institutions, etc., appear equally important in driving high economic growth.

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