Export Diversification and Economic Growth

Export Diversification and Economic Growth One of the earliest ideas in the theory of economic development is that the degree of specialization or diversification of a countrys production and trade structure is important for its economic development (Wim Naudà © and Riaan Rossouw, 2008). But, the question whether developing countries should diversify their export production to achieve economic growth or rather specialise in order to achieve comparative advantage has been a debatable issue. Some researchers find that export diversification is better for economic growth in developing countries as their dependence on primary commodity production and exports leaves them vulnerable to commodity shocks, price fluctuations and declining terms of trade, especially since the income elasticity of the demand for primary commodities is low (Prebisch, 1950; Singer, 1950 and Rosenstein-Rodan, 1943). While others advocate for specialisation, for example, from Adam Smiths recognition of the importance of the division of labour and specializ ation for economic growth and development, to the standard Heckscher-Ohlin Samuelson (HOS) model of international trade, the position in neoclassical economics has been that countries should specialize in producing and exporting according to their comparative advantage (Wim Naudà © and Riaan Rossouw, 2008). Thus, many theories are based on; Should developing countries focus on diversifying their export basket or should they rather specialise their exports according to their existing comparative advantage? 2.1. Definitions Export diversification, by definition is the changing of a countrys export structure. This can be attained by changing the existing basket of commodities or by embellishing them through innovation and technology. Dennis and Shepherd (2007) define export diversification as widening the range of products that a country exports. As a matter of fact, export diversification can take two forms, namely, horizontal and vertical. Export diversification has different dimensions and can be analysed at different levels (Ali et al., 1991). Herzer and Nowak-Lehnmann (2006) explain that export diversification can occur either horizontally or vertically. Horizontal diversification causes changes in the primary export mix in order to reduce the effect of the fluctuation of global commodity prices. It also implies that the number of export sectors has increased. This reduces the dependency on a few sectors to lead export-oriented growth (Marianne Matthee and Wim Naudà © (May 2008). It brings forth stabilisation in export earnings (Al-Marhubi, 2000). If growth is to be achieved though horizontal export diversification, a country can either enlarge the share of products with increasing growth rates in export earnings, or it can add new products based on the growth rates of world prices (Ali et al., 1991). On the other hand, vertical diversification involves contriving further uses for existing and new innovative commodities by means of value-added ventures such as processing and marketing (Poverty and Development Division, United Nation, June 2004). Vertical diversification occurs when the export mix of a country shifts from primary products to manufactured products. The production of primary exports does not result in as many spill-overs as the production of manufactured exports (Marianne Matthee and Wim Naudà ©, May 2008). In the latter, externalities on, for example, knowledge and new technologies are created. These externalities benefit other economic activities (possibly creating horizontal diversification) and improve the ability of all industries to compete internationally (Chuang, 1998; Al-Marhubi, 2000; Herzer and Nowak-Lehnmann, 2006). Vertical export diversification also contributes to stabilisation in export earnings, as the prices of manufactured exports do not fluctuate as much as those of primary exports (Ali et al., 1991). If growth is to be achieved though vertical export diversification, a country can either introduce, expand value-added activities, or it can choose new products based on their value-added potential (Ali et al., 1991). Hausmann et al. (2005) conclude that the composition of a countrys exports matter, as countries that produce higher productivity goods experience greater export performance and are subsequently able to benefit more from the gains of globalisation. Both horizontal and vertical diversification can be favourable for a countrys economic growth; however their performance would vary in terms of technological, managerial and marketing skills. Vertical diversification policy, compared to horizontal diversification policy, requires more advanced technology, skills and initial capital investment than horizontal diversification policies do. In result of that, vertical diversification may produce greater dynamic externalities than that of horizontal diversification. 2.2 Theoretical Review There are many theoretical reasons, put forward by researchers, which says that export diversification leads to higher per capita income growth. Because of fluctuations in export, many developing countries opt for export diversification. As mentioned is made above, this instability arises as commodity products are often subject to very volatile market prices so that countries that are dependent on these commodities may suffer from export instability (Heiko Hesse, 2008). As a result of the stated instability, risk-averse firms might not invest in the country which can create macroeconomic uncertainty and in turn can be disadvantageous for long run economic growth. To prevent this instability many countries have liberalised trade. Michaely (1958) studied export and import concentration using GINI co-efficient on the dataset for 44 countries and 150 Standard International Trade Classification commodities and notes that countries with more diversified export structure are more developed in terms of income per capita, and more industrialized in terms of primary commodity share in total export. Export diversification could therefore help to stabilize export earnings in the longer run (Ghosh and Ostry, 1994); Bleaney and Greenaway, (2001)). According to structural models of economic development, countries should diversify from primary exports into manufactured exports in order to achieve sustainable growth (Chenery, 1979 and Syrquin, 1989). However, the concept of export diversification seems to contradict trade theory, especially Ricardos theory of comparative advantage where a country should specialise (Salvatore, 1998). Ricardo laid emphasis on the role of specialization in international trade and increases total productivity. According to him, export is said promote economic growth by specialising in sectors in which a country has a comparative advantage. In the same way, Helpman and Krugman (1985) pointed out that greater economies of scale due to increased exports can lead to an increase in the productivity level. In spite of the relationship identified between trade and productivity, the impact of specialization on the long run growth remained uncertain to many scholars. Sachs and Warner (1997), for example, identified a negative impact of a comparative advantage in raw materials on economic growth. More recently diversification and specialization has been studied as the part endogenous outcome of a countrys stage of development (e.g. Acemoglu and Zilibotti, 1997; Imbs and Wacziarg, 2003). This theory is based on countries production and therefore has an effect on their export, as there is a relationship between production and export. Ramacharan (2006) finds that a one standard deviation increase in diversification is associated with about a 0.81 standard deviation increase in the level of credit to the private sector. Thus, diversifying the sectoral composition of the economy, will benefit financial development, which in turn, as shown by Chang (1991) may allow countries to engage in more specialization of exports, given that developed financial markets may provide insurance against risk. This analysis may lead one to conclude that countries export structure may go through phases, from less diversified to more diversified, followed by a phase of less diversification and more sp ecialization, as the financial sector development deepens (Saint-Paul, 1992). Diversifying the production structure of the domestic economy may therefore be a requirement for export diversification and later export specialization. Another theory has been put forward by Marianne Matthee and Wim Naudà © which states that, this trend in trade has led to spatial inequality. This is so because, with trade liberalisation, small local businesses suffer which can result in a decrease in Gross Domestic Product (GDP) and eventually economic growth. Marianne Matthee and Wim Naudà © (May 2008) mentioned that in a more open economy with firms being able to export more, local firms become less reliant on the local market with a subsequent reduction in the forces of agglomeration. Furthermore, not all developing countries will gain with high export as their location can be an important determinant for their export propensity. But, export diversification contributes to growth in a country (Herzer and Nowak-Lehnmann, 2006) and many studies have proven so on a country level. Related to export diversification, there could be knowledge spill-overs from new techniques of production, new management, or marketing practices, potentially benefiting other industries (Amin Gutierrez de Pineres and Ferrantino, 2000). Producing a growing basket of export commodities can be seen to have an active effect of export diversification on higher per capita income growth. Agosin (2007) develops a model of export diversification and growth where countries with low technological frontier widen their comparative advantage by imitating and adapting existing products. Furthermore, models in the product cycle literature (Vernon, 1966; Krugman, 1979; Grossman and Helpman, 1991) obtain diversity of export products by the North innovating and the South predominantly imitating and exporting the products from cheap labour countries.

Neil Postman Essay -- essays research papers

Throughout the span of the past few weeks I have traversed the globe, visiting several countries and regions, only to realize that although new methods develop, language as a way of expressing ones self has remained the most effective. Despite this fact, language still has its pitfalls. Neil Postman, in his essay “Defending Against the Indefensible,'; outlines seven concepts that can be used to aid a student in better understanding the language as a means of communication. He describes how modern teaching methods leave a student vulnerable to the “prejudices of their elders';, further stating that a good teacher must always be skeptical. He urges teachers of all subjects to break free from traditional teachings as well as “linguistical tyranny';   Ã‚  Ã‚  Ã‚  Ã‚  His first principle regards the process of definition. As I sit in an every day classroom I notice several things. Many, if not all student simply nod their heads while a teacher explains, be it a theory in Math, or a formula in Science. Not once have I encountered a student willing to raise their hand and question the definition, or meaning that a teacher has rambled off to them. Neil Postman states his feelings on this best when he writes, “ It is a form of stupidity when to accept without reflection someone else’s definition.'; He wants people to realize that definitions are not god given, and that to question the validity is acceptable. Upon looking in a dictionary at any word you will see that all have several meanings. The same may apply to our lives, while one definition may apply to you another may not.   Ã‚  Ã‚  Ã‚  Ã‚  The ability to question a definition is a crucial part of communication. For example: in the practice of law a case might call for someone to define the freedom of press, and that very definition may mean two completely different things to two different people. Postman’s first principle was one that I feel needed to be addressed. Too often our teachers impose the same definition they learned, valid, or not. If one is not allowed to defend a definition, especially an unjust one, then communication becomes more difficult.   Ã‚  Ã‚  Ã‚  Ã‚  “All the knowledge one could ever attain is by asking questions, so logically these questions should be properly formed.'; Postman&... ...  Ã‚  Ã‚  Ã‚  Ã‚  A metaphor, used as a communication skill, is best described in a political way. Think of Reagan’s Voodoo economics, or Bill Clinton building a bridge to the 21st century. Politicians can easily scam an ignorant voter, should one not understand a metaphor. For example: Clinton refers to building a bridge, but does not tell us with which tools he intends to build it with. This particular concept is valid alone for the above reason. Whether you are talking to a teacher or watching television, metaphors need to understand.   Ã‚  Ã‚  Ã‚  Ã‚  The fifth concept is that of reification. This means confusing words with things. We falsely associate simple words with things they don’t even resemble. This occurs many times when we communicate. Sometimes used to exaggerate the importance of a detail when telling a story, or trying to increase the appeal of consumer goods. Postman wants reification to be taught in school so students may see the inner workings of it. Reification is a very potent thing in every day life, and the study of reification in school is an admirable thing. Students should be made wary of advertising gimmicks.

Luckily several months later my uncle informed

Dear Academic Standards Committee, My name is Jung-Hyun Shin. Before I start to explain my rapid progression on a high school diploma program, I would like to draw your attention towards my dream career.Ever since I was little, I dreamt of becoming a professional hair stylist. The state of California has plenty of professional hair academies and schools. However, most of them require a high school diploma. Unfortunately, the lack of a diploma was proving to be a big hurdle in reaching my ultimate dream.Luckily, several months later my uncle informed me that there is a really good online high school diploma program offered in the United States. After doing extensive research about this online high school program on Google and Yahoo!, I was quite convinced.I found several testimonies from students claiming that it was a legitimate way of earning a degree. Most testimonies concluded that the course was doable and students can finish the course quickly if they work really hard. Later, I signed up for this online high school diploma course, paid tuition in full and received all study materials/textbooks in the mail from schoolSince I was eager to start hair styling training school in the spring of 2009, I started studying almost everyday. It got to a point where I had only four to five hours of sleep a day. Since I don’t work, I put all my energies into studying for this high school diploma program.My dream career of becoming a professional hair stylist propelled me to go back to high school. The desire to enter Hair Training School in the spring semester was a source of motivation to study everyday. I wanted to earn a high school diploma in order to ultimately meet both admission requirements and an application deadline.Although I was not able to apply to the hair training school for the spring semester, I learnt an important lesson. â€Å"Happy are those who dream dreams and are ready to pay the price to make them come true.† Without having a dream c areer in my mind, I wouldn’t have made the decision to go back to high school to earn a diploma. Since I had a strict deadline in mind to finish a high school diploma course, I could finish several subjects rapidly.To put it simply, some courses such as Orientation, Human Relations, and Consumer Math were easier and took less time to complete because the questions asked in exams were very straightforward. However, some courses like Civics, American History, World History and Earth Science were rather challenging subjects for me. It was possible to finish Orientation and Human Relations courses in a day. However, the same was not possible for subjects like World History and Earth Science. It took several days and even several weeks for me to finish these subjects.   

The Stereotype of Criminally Disposed People in Poverty

For many years, the issue of criminal disposition has been greatly associated with those who reside in poor neighborhoods. Violence may occur within low income or predominant minority communities but much good has come from neighborhoods such as these. Further, this stereotype has generated much controversy: While some believe that all poor neighborhoods are the worst, indeed not all people who come from poor neighborhoods are not criminally disposed. Because of aspiring individuals who are prosperous today; the impact of crime on some poor communities influence the others to strive to improve their community; and not only does crime come from poor neighborhoods but wealthy communities as well. One argument supporting non criminally†¦show more content†¦In addition, another group is the Community Outreach Program; they mainly focus on keeping young adults and children on track and give them other activities to do to keep them off the streets. The program in D.C participates in many positive activities which helps the participants become more involved in school and less involved with negative energy. With programs such as this violence in poor communities are bound to decrease any time soon. In addition to positive leading groups within poor communities, with the accusation that all people that are poor are criminally disposed, many wealthy people as well have done much crime it just was never exposed as greatly as others. Many murders, and gang affiliation has been associated within wealthy communities and have not been reported. Opponents of these views present many arguments. They claim all gangs derive from minority communities. Also of this view, people associate many murders that are acclaimed to derive from poor communities. Moreover, they think that all people from poor communities are uneducated and therefore don’t know any better and result in a life of violence. However these views can be easily refuted. Many gangs start in other countries such as South America and Asia and then relocate to America. Much affiliation and connection with the gangs that reside in America are based off different countries and followers take with