Exports, Foreign Technology Imports, and Long-run Growth

Heng-Fu Zou ()

No 477, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: A possible reason for the success of the export-oriented economies such as the East Asian "Tigers" is that exports enabled those countries to finance the accumulation of foreign technology and capital. This paper examines the theoretical foundations of this hypothesis. In an intertemporal optimization framework we divide a developing country's capital accumulation into two parts: traditional home-produced capital and imported foreign capital and technology. Exports are the means of financing the purchase of the latter. We show that an increase in exports leads to more home capital more foreign capital and more output in the long run. In addition export subsidies raise the long-run balanced growth rate while a terms-of-trade deterioration lowers the growth rate.

Date: 1996
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