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Developing Country Exports of Manufactures: Moving Up the Ladder to Escape the Fallacy of Composition?

Arslan Razmi () and Robert Blecker ()
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Arslan Razmi: University of Massachusetts Amherst

UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics

Abstract: The possible existence of a "fallacy of composition" in the simultaneous pursuit of export-led growth by developing countries has received relatively little attention in economic literature. This lack of attention becomes even more apparent in the domain of empirical studies of manufactured exports. This essay seeks to fill this gap. It develops a data set consisting of 10 industrial and 18 developing countries. Carefully designed relative price indices are constructed to capture price and quantity determinants of industrialized country demand for developing country exports. Export equations are then estimated for individual countries. The estimated coe±cients suggest that most developing countries that report significant price effects compete with other developing country exporters, and not with manufacturers in the industrial countries. The panel estimates provide further support in addition to indicating that differences in the nature of competition among developing countries and between developing and industrial countries underline the need to take into account these nuances of international competition. The overall results suggest major policy concerns for developing countries as they simultaneously attempt to export their way to growth through price- and wage-based competition. JEL Categories: F02, F14, F19

Keywords: Fallacy of composition; export-led growth; adding-up constraints; external demand; manufactured exports; intra-developing country competition; Bewley transformation; wage suppres- sion. (search for similar items in EconPapers)
Date: 2005-02, Revised 2006-05
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Related works:
Journal Article: Developing Country Exports of Manufactures: Moving Up the Ladder to Escape the Fallacy of Composition? (2008) Downloads
Working Paper: Developing Country Exports of Manufactures: Moving Up the Ladder to Escape the Fallacy of Composition? (2006) Downloads
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