The Bazaar Economy Hypothesis Revisited
Anselm Mattes () and
No 285/2007, Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim from Department of Economics, University of Hohenheim, Germany
In this paper we argue that traditional measures of openness of an economy usually overstate the actual degree. This is due to the fact that traditional export or import shares are measured as a share of the gross domestic product. The former are expressed in gross terms, the latter in value added terms. In this way the actual interdependences between economies are overstated. We develop a new value based openness indicator that includes interregional and interindustrial dependencies. Based on a Leontief production system and input-output-tables we argue that export-induced imports of intermediate parts must be subtracted of the value of exports in order to obtain the real value added in the export sector. The same reasoning applies to the import side. We use these measures of actual openness to calculate openness indicators for Germany using GTAP data. We show that traditional measures of openness exaggerate the actual openness and argue that these new indicators are an important contribution to the debate about the German “bazaar economy”.
JEL-codes: C67 E20 F15 F41 (search for similar items in EconPapers)
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