Trade Strategy, Investment and Exports: Another Look at East Asia

Dani Rodrik

No 1305, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The export booms in South Korea and Taiwan starting in the early 1960s are anomalous when compared with later export booms in other, non-East Asian countries such as Chile and Turkey. First, these booms have taken place in the context of comparatively small changes in relative prices in favour of exportables. Second, they have been associated from the start with booms in investment. This paper offers an argument and a formal model to suggest that exports in East Asia may have been driven by an increase in the profitability of investment, with outward orientation a consequence of the investment boom rather than its instigator. In economies like South Korea and Taiwan, an increase in investment required an increase in imports of capital goods. Since savings rose alongside the desired investment, the investment boom was accompanied by a boom in both exports and imports. Moreover, this could happen with a relatively small change in the relative price of exportables.

Keywords: East Asia; Investment; Trade Policy (search for similar items in EconPapers)
JEL-codes: F14 F43 O53 (search for similar items in EconPapers)
Date: 1995-11
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Citations: View citations in EconPapers (34)

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