nep-int New Economics Papers
on International Trade
Issue of 2019‒03‒04
twenty papers chosen by
Luca Salvatici
Università degli studi Roma Tre

  1. Exports, Jobs, Growth! Congressional Hearings on US Trade Agreements By Jieun Lee; Iain Osgood
  2. GVC journeys: Industrialisation and Deindustrialisation in the Age of the Second Unbundling By Toshihiro Okubo; Richard Baldwin
  3. A Gravity Model Estimation of the Bi-Directional Relationship between International Trade and Migration By Rosmaiza A. Ghani; Michael P. Cameron; William Cochrane; Matthew Roskruge
  4. The Impact of Trade Conflict on Developing Asia By Abiad, Abdul; Baris, Kristina; Bertulfo, Donald Jay; Camingue-Romance, Shiela; Feliciano, Paul Neilmer; Mariasingham, Joseph; Mercer-Blackman , Valerie; Bernabe, John Arvin
  5. Micro-mechanisms behind declining labour shares: Market power, production processes, and global competition By Mertens, Matthias
  6. B for Brexit: A Survey of the Economics Academic Literature By Campos, Nauro F
  7. The impact of Brexit on Francophone Africa By Kohnert, Dirk
  8. Foreign economic activity as a source of economic growth By Knobel, Alexander (Кнобель, Александр); Spartak, Andrey (Спартак, Андрей); Baeva, Marina (Баева, Марина); Zaitsev, Yury (Зайцев, Юрий); Levashenko, Antonina (Левашенко, Антонина); Loshchenkova, Anna (Лощенкова, Анна); Ponomareva, Olga (Пономарева, Ольга); Proka, Ksenia (Прока, Ксения)
  9. Thoughts on the demise of FDI By Davies, Ronald B.
  10. The special issue on FDI and multinational corporations: An introduction By Harms, Philipp; Wacker, Konstantin
  11. Regional Variations in Exporters'Productivity Premium: Theory and Evidence By Toshihiro Okubo; Eiichi Tomiura
  12. International Relocation of Production and Growth By Alcalá, Francisco; Solaz, Marta
  13. Food security and the functioning of wheat markets in Eurasia: A comparative price transmission analysis for the countries of Central Asia and the South Caucasus By Svanidze, Miranda; Götz, Linde Johanna; Đurić, Ivan; Glauben, Thomas
  14. Is Employment Globalizing? By Chen, Liming; Felipe, Jesus; Kam, Andrew J.Y.; Mehta, Aashish
  15. Asia’s Industrial Transformation: The Role of Manufacturing and Global Value Chains (Part 2) By Felipe, Jesus
  16. Stalled Racial Progress and Japanese Trade in the 1970s and 1980s By Batistich, Mary Kate; Bond, Timothy N.
  17. Trade and globalization: events of the past thirty years and further evolutionary trajectories By Knobel, Alexander (Кнобель, Александр); Aliev, Timur (Алиев, Тимур); Pyzhikov, Nikita (Пыжиков, Никита); Flegontova, Tatiana (Флегонтова, Татьяна);
  18. Testing the Smile Curve: Functional Specialisation in GVCs and Value Creation By Roman Stöllinger
  19. Essays on modern economic issues in international trade, exchange rates and housing By Shaar, Karam
  20. Asia’s Industrial Transformation: The Role of Manufacturing and Global Value Chains (Part 1) By Felipe, Jesus

  1. By: Jieun Lee (University of Michigan); Iain Osgood (University of Michigan)
    Abstract: Who testifies on US trade agreements before Congress and what do they say? We examine the content of Congressional testimony on US trade agreements, and the selection process which determines who testifies in the first place. We find that testimony is systematically tilted towards a sunny view of tradeÕs positive economic effects, while import competition and offshoring are generally downplayed. We argue that tradeÕs supporters strategically frame their motives for supporting trade agreements, and that pro-trade committee chairsÕ decisions on who testifies further skew testimony away from the distributive consequences of globalization within the United States. Congressional hearings on trade agreements therefore represent a key site where the influence of dominant pro-trade interests is both revealed and reinforced.
    Keywords: Congress, trade agreements, Congressional hearings, globalization
    JEL: F13 F50 P16 D72
    Date: 2018–10–26
  2. By: Toshihiro Okubo (Faculty of Economics, Keio University); Richard Baldwin (Graduate Institute, Geneva)
    Abstract: Offshoring and participation in Global Value Chains (GVCs) are critical to understanding the rapid deindustrialisation of G7 nations and the rapid industrialisation of a handful of developing nations. This paper distinguishes between trade in final goods and trade in parts to track the shifting pattern of the location of manufacturing. We introduce a simple empirical measure of comparative advantage in parts on one hand and in final goods on the other. We illustrate how this distinction can help organise thinking on the patterns of industrialisation and deindustrialisation-namely the"GVC journeys" of advanced and emerging economies. We also provide one simple model. The model highlights the interactions of trade costs and the knowledge transfers to accompany offshoring of parts production and assembly, which we call trade-led versus knowledgeled globalisation.
    Keywords: Globalisation, Knowledge-led globalisation, Fragmentation
    JEL: F10 F20
    Date: 2019–01–12
  3. By: Rosmaiza A. Ghani (University of Waikato); Michael P. Cameron (University of Waikato); William Cochrane (University of Waikato); Matthew Roskruge (Massey University)
    Abstract: The relationships between migration and trade are a continuing source of debate in the academic literature. Some studies have found that migration and trade are complements, while other studies have found them to be substitutes. Still other studies have found that there is no statistically significant relationship between them. However, the majority of previous empirical studies have focused on the relationship between trade and migration in either a single country, a single region, or within a single trade agreement. This paper examines the bi-directional relationship between trade and migration using international bilateral trade and migration flows data for 248 countries over the period 1990-2010. We also account for other relevant covariates within a seemingly-unrelated regression gravity model framework. Our findings suggest that trade and migration are complements - larger migration flows are associated with larger trade flows, and vice versa. The relationships with other relevant covariates are as expected, with the exception that distance is positively and statistically significantly related to migration. Although our results do not definitively demonstrate causality, they suggest that, if world trade decreases due to countries acting on current protectionist sentiments, migration flows might also be expected to decline.
    Keywords: international trade; international migration; gravity model
    JEL: F14 F22 O24
    Date: 2019–02–28
  4. By: Abiad, Abdul (Asian Development Bank); Baris, Kristina (Asian Development Bank); Bertulfo, Donald Jay (Asian Development Bank); Camingue-Romance, Shiela (Asian Development Bank); Feliciano, Paul Neilmer (Asian Development Bank); Mariasingham, Joseph (Asian Development Bank); Mercer-Blackman , Valerie (Asian Development Bank); Bernabe, John Arvin (Asian Development Bank)
    Abstract: This paper analyzes the effects of the current trade conflict on developing Asia using the Asian Development Bank’s Multiregional Input–Output Table (MRIOT), allowing us to calculate the impact on individual countries and on sectors within countries. The analysis estimates the direct impact on all tariff-affected goods; uses input–output analysis to estimate indirect effects on gross domestic product (GDP), exports, and employment; and allows for redirection of trade toward other producers using the approach of Feenstra and Sasahara (2017). A full escalation of the bilateral United States (US)–People’s Republic of China (PRC) trade conflict would shave 1% off PRC GDP and 0.2% off US GDP. The rest of developing Asia could see small net gains thanks to trade redirection, particularly in the electronics sector. A trade war in autos and parts would hurt the European Union and Japan. The conflict has substantial negative effects on PRC and US employment, but only minor impacts on current account balances.
    Keywords: exports; input–output; international trade; tariffs; trade conflict; trade redirection
    JEL: E00 F13 F14 O47
    Date: 2018–12–14
  5. By: Mertens, Matthias
    Abstract: This article investigates how changing production processes and increasing market power at the firm level relate to a fall in Germany's manufacturing sector labour share. Coinciding with the fall of the labour share, I document a rise in firms' product and labour market power. Notably, labour market power is a more relevant source of firms' market power than product market power. Increasing product and labour market power, however, only account for 30% of the fall in the labour share. The remaining 70% are explained by a transition of firms towards less labour-intensive production activities. I study the role of final product trade in causing those secular movements. I find that rising foreign export demand contributes to a decline in the labour share by increasing labour market power within firms and by inducing a reallocation of economic activity from nonexporting-high-labour-share to exporting-low-labour-share firms.
    Keywords: labour share,market power,labour market distortions,international trade,factor substitution
    JEL: D24 E25 F16 J50 L10 L60
    Date: 2019
  6. By: Campos, Nauro F (Brunel University)
    Abstract: This paper surveys the economics academic literature on Brexit. It is organised in: pillars, channels, and consequences. The two building blocks to understand Brexit are the economic history of the UK-EU relationship and the literature on the political economy of globalisation and populism. The paper then reviews the evidence on the standard mechanisms through which the UK benefited from EU integration (trade, migration and FDI). Next it surveys the short-run effects of the vote and discuss expected long-term consequences of "Brexit proper." It concludes by identifying some main gaps in the economics literature on Brexit.
    Keywords: Brexit, migration
    JEL: F22 F10
    Date: 2019–02
  7. By: Kohnert, Dirk
    Abstract: Whereas the impact of Brexit on Anglophone Africa was a major issue in the controversial British discussions on the pros and cons of Brexit, possible repercussions on French-speaking Africa have been rarely mentioned up to now. If at all, mostly indirect general effects were declared, both concerning the former British Empire in Africa and a fortifori for the former French colonies as well. Yet, the range of possible Brexit effect is impressive. It spreads from direct influence on farm-gate cocoa-prices in the CFA-currency regions and subsequent percussions on the state budget of these countries, over more indirect effects, e.g. on the cooperation between CEMAC, WAEMU and the EU concerning EDF-programs of which Great Britain has been a major contributor so far, as well as enforced re-negotiation of controversial EPAs, to the revival of progressive social networks in Francophone Africa. The latter are already demanding more political and economic sovereignty, for example with respect to the increasingly anachronistic F CFA currency. Yet, in view of the lack of countervailing power of Britain within the EU in the case of Brexit, the murky network of Françafrique could be re-vitalized and consolidated as well. Besides, there could develop also direct effects of the Brexit. For example, on coca-farmers in Francophone West Africa, because their product is traditionally traded in Pound Sterling. Thus, any fall in the value of the Pound Sterling against the Euro once Britain leaves the EU would have damaging consequences, not only for the producers but also for public finances, because cocoa is priced in Sterling and the CFA franc is linked to the Euro. This impacts also on the revival of the long-standing controversy on the ill-adapted and increasingly anachronistic F CFA. African activists already demand a genuine African debate and a referendum on these issues similar to the Brexit vote.
    Keywords: Brexit, UK, EU, Françafrique, post-colonialism, development, international trade, ODA, WAEMU, CEMAC, Sub-Saharan Africa
    JEL: F13 F2 F35 F54 G15 H26 N17 N47 N77 O17 P16 Z13
    Date: 2019–02–18
  8. By: Knobel, Alexander (Кнобель, Александр) (The Russian Presidential Academy of National Economy and Public Administration, Russian Foreign Trade Academy); Spartak, Andrey (Спартак, Андрей) (Russian Foreign Trade Academy); Baeva, Marina (Баева, Марина) (The Russian Presidential Academy of National Economy and Public Administration); Zaitsev, Yury (Зайцев, Юрий) (The Russian Presidential Academy of National Economy and Public Administration); Levashenko, Antonina (Левашенко, Антонина) (The Russian Presidential Academy of National Economy and Public Administration); Loshchenkova, Anna (Лощенкова, Анна) (Gaidar Institute for Economic Policy); Ponomareva, Olga (Пономарева, Ольга) (The Russian Presidential Academy of National Economy and Public Administration); Proka, Ksenia (Прока, Ксения) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The Russian authorities are set an ambitious task of increasing exports and building competitive non-primary sectors. At the same time, it should not be forgotten that foreign economic activity in general and the development of exports in particular cannot by themselves be self-sufficient directions of economic policy, but should work for the main goal - ensuring long-term, sustainable economic growth. At present, the potential contribution of foreign economic activity in the growth of the Russian economy is not fully disclosed. This potential can be achieved by intensifying work in the main areas: export support; deepening cooperation within the EAEU; integration with foreign countries; use of the WTO site in multilateral and plurilateral formats; Introduction of the best world practices and standards. The report shows what additional macroeconomic benefits can be obtained in the coming years, if we consistently carry out work in these areas.
    Date: 2019–01
  9. By: Davies, Ronald B.
    Abstract: This essay addresses the recent deceleration in the pace of global FDI and asks whether multinational corporations are actually in retreat. It identifies the forces that are slowing the expansion of FDI, and sketches the role that multinational corporations will play in the future.
    Keywords: foreign direct investment,multinational corporations
    JEL: F21 F23
    Date: 2019
  10. By: Harms, Philipp; Wacker, Konstantin
    Abstract: This paper offers an introduction to the special issue on FDI and multinational corporations. It summarizes the contents of the five papers included, and relates them to the recent litera-ture on the subject.
    Keywords: foreign direct investment,multinational corporations
    JEL: F21 F23
    Date: 2019
  11. By: Toshihiro Okubo (Faculty of Economics, Keio University); Eiichi Tomiura (Graduate School of Economics, Hitotsubashi University)
    Abstract: The international trade literature confirms that the average productivity of exporters is higher than that of non-exporters, while economic geography studies establish that urban firms tend to be more productive than rural ones. By introducing region-specific transportation costs in a Melitz-type heterogeneous firm trade model, the theory predicts that the minimum threshold productivity level for export is higher but that for survival by serving the local market is lower in the periphery region than in the core. Using Japanese plant-level panel data, we find evidence supporting the theoretical prediction that exporters in the peripheral regions, especially those distant from the core, have large productivity premiums.
    Keywords: Productivity, transportation costs
    JEL: F1 R12 L25
    Date: 2019–01–07
  12. By: Alcalá, Francisco; Solaz, Marta
    Abstract: The relocation of production and exports from the North to the South has been a central feature of economic globalization. Using data on approximately 5,000 products, this paper describes this process over the 1996-2014 period and assesses its impact on cross-country growth. Although increased competition from lower income countries tended to have a significant negative effect on the previous exporting countries of the relocated products, most rich countries were able to upgrade their export baskets and avoid a negative aggregate impact. A one-standard negative deviation in a country's export relocation index tended to reduce the country's annual growth by 0.3 percentage points at the median country income but had zero impact at the top of the country income distribution. Medium and low income countries were the most negatively affected by the increased competition from their pair countries.
    Keywords: Globalization; growth; offshoring; product shocks; Trade
    JEL: F43 O47
    Date: 2018–12
  13. By: Svanidze, Miranda; Götz, Linde Johanna; Đurić, Ivan; Glauben, Thomas
    Abstract: We investigate wheat price relationships between the import-dependent countries in Central Asia and the South Caucasus and the Black Sea wheat exporters to assess wheat market efficiency which is crucial for ensuring availability and access to wheat and for reducing food insecurity. Results of linear and threshold error correction models suggest strong influence of trade costs on market integration in Central Asia, while those costs are of minor importance in the South Caucasus. In particular, wheat trade in Central Asia is characterized not only by higher transportation costs but also unofficial payments play a large role. In addition, wheat price volatility is substantially higher in the wheat importing countries of Central Asia compared to the South Caucasus. To foster market functioning, wheat trade should be facilitated by policies reducing trade costs. This includes investments in grain market infrastructure, eliminating unofficial payments, but also resolving geopolitical conflicts. However, wheat trade in this region is characterized by large distances, low scope for import diversification and repeated export restrictions by Black Sea exporters. Therefore, trade enhancing policies should be complemented with policies increasing wheat self-sufficiency to enhance food security.
    Keywords: price transmission,wheat market integration,transportation costs,food security,Central Asia,the South Caucasus
    Date: 2019
  14. By: Chen, Liming (Institute of International Economics, Nankai University.); Felipe, Jesus (Asian Development Bank); Kam, Andrew J.Y. (National University of Malaysia); Mehta, Aashish (University of California Santa Barbara)
    Abstract: We investigate the claim that national labor markets have become more globally interconnected in recent decades. We do so by deriving estimates over time of three different notions of interconnection: (i) the share of labor demand that is export induced (i.e., all labor demand created by foreign entities buying products exported by the home country)—we provide estimates for 40 countries; (ii) the share of workers employed in sectors producing tradable goods or services—68 countries; and (iii) the ratio of the number of jobs that are either located in a tradable sector, or that are involved in producing services that are required by these tradable sectors, to all jobs in the economy, which we call the trade-linked employment share—40 countries. Our estimates lead to the conclusion that the evidence of a large increase in the interconnections between national labor markets is far weaker than commonly asserted: levels of interconnectivity, and the direction of changes over time, vary across notions of interconnection and countries. The main reasons for this are labordisplacing productivity growth in tradable sectors of each economy and the diminishing fraction of national labor forces hired into manufacturing jobs worldwide. We also discuss the implications of our results for different policy debates that each of the three measures is associated with: international coordination of macroeconomic policies (export-induced labor demand), currency devaluations (share of workers producing tradables), and education and labor protection (trade-linked share).
    Keywords: employment; export induced; globalization; tradable goods; trade-linked employment
    Date: 2018–09–07
  15. By: Felipe, Jesus (Asian Development Bank)
    Abstract: This paper argues that the single most important factor that explains East Asia’s development success was its fast structural transformation toward industrialization, manufacturing in particular. Workers moved out of agriculture into manufacturing, and the sector diversified and upgraded its structure. Manufacturing activities are subject to increasing returns to scale, and many manufacturing goods have high income elasticities of demand. As a consequence, the sector is referred to as the “engine of growth.” It is in the context of industrialization that openness played an important role in East Asia’s success, i.e., the connection between “export-led growth” (the relaxation of the balance-of-payments constraint on foreign exchange) and industrialization. Part 2 of the paper reviews the role of Asia’s developmental states in consciously accelerating industrial development and learning, as well as the region’s mixed experiences with industrial policies. Second, it provides a discussion of how Asian firms hooked up on to global value chains.
    Keywords: capabilities; developmental states; latecomer model; global value chains; industrial policy
    JEL: O10 O14 O25
    Date: 2018–07–25
  16. By: Batistich, Mary Kate (Purdue University); Bond, Timothy N. (Purdue University)
    Abstract: Many of the positive economic trends coming out of the Civil Rights Era for black men stagnated or reversed during the late 1970s and early 1980s. These changes were concurrent with a rapid rise in import competition from Japan. We assess the impact of this trade shock on racial disparities using commuting zone level variation in exposure. We find it decreased black manufacturing employment, labor force participation, and median earnings, and increased public assistance recipiency. However these manufacturing losses for blacks were offset by increased white manufacturing employment. This compositional shift appears to have been caused by skill upgrading in the manufacturing sector. Losses were concentrated among black high school dropouts and gains among college educated whites. We also see a shifting of manufacturing employment towards professionals, engineers, and college educated production workers. We find no evidence the heterogeneous effects of import competition can be explained by unionization, prejudice, or changes in spatial mismatch. Our results can explain 66-86% of the relative decrease in black manufacturing employment, 17-23% of the relative rise in black non-labor force participation, and 34-44% of the relative decline in black median male earnings from 1970-1990.
    Keywords: race, trade, import competition, black-white wage gap, Japan
    JEL: F14 J31 F14 N32 N62
    Date: 2019–02
  17. By: Knobel, Alexander (Кнобель, Александр) (The Russian Presidential Academy of National Economy and Public Administration, Russian Foreign Trade Academy); Aliev, Timur (Алиев, Тимур) (The Russian Presidential Academy of National Economy and Public Administration); Pyzhikov, Nikita (Пыжиков, Никита) (The Russian Presidential Academy of National Economy and Public Administration, Russian Foreign Trade Academy); Flegontova, Tatiana (Флегонтова, Татьяна) (The Russian Presidential Academy of National Economy and Public Administration);
    Abstract: The report analyzes the globalization trends of recent decades and its impact on trade. It is shown, in particular, a significant change in the balance of economic forces between developed and developing countries, while the basic rules and conditions for trade and economic interaction in the world were formed even during the period of dominance of countries with developed economies. As a result, in addition to creating additional resources through more efficient use of existing opportunities from reducing various trade and economic barriers, the period of the end of the 20th - beginning of the 21st century was characterized by the accumulation of significant structural problems. It is demonstrated how regional economic integration in its modern form causes an increase in protectionism instead of the declared liberalization of international trade. The quantitative assessments of the impact on the world economy of the actions of the main world actors in the framework of trade wars that have entered the active phase in 2018 are given. Three options for further developments are proposed.
    Date: 2019–01
  18. By: Roman Stöllinger (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: According to the ‘smile curve hypothesis’ the potential for generating value added varies significantly across the various functions along a firm’s value chain. It suggests in particular that the production stage is the least promising value chain function in the entire manufacturing process. This logic implies that countries specialising as ‘factory economies’ are likely to generate comparatively little value added. To shed light on the relationship between functional specialisation along the value chain and value creation, this paper develops measures for functional specialisation derived from project-level data on greenfield FDI for a global sample of countries. These measures keep the industry and the functional dimension of specialisation strictly apart. They are used to test econometrically the negative relationship between value added creation and functional specialisation in production as predicted by the smile curve hypothesis.
    Keywords: functional specialisation, global value chains, smile curve, factory economy, greenfield FDI
    JEL: L23 F20
    Date: 2019–02
  19. By: Shaar, Karam
    Abstract: The common theme of the three papers in this thesis is the focus on the impact of data choices on empirical research in Economics. Such choices can be about the source of data; should we source the data from country A or country B in a bilateral trade relation? Is there a way to reconcile the discrepancies in international trade data? In investigating the impact of exchange rate on trade, should we choose high-frequency or low-frequency data? What does the choice of a certain frequency imply for the econometric analysis? In assessing the impact of housing wealth on household consumption, what are the benefits of choosing household-level data? How can we take advantage of aggregate data on house prices to circumvent the endogeneity arising from household-specific confounding factors? This thesis shows that data choices can strongly affect our conclusions regarding several modern economic issues. The first paper is titled ‘Reconciling International Trade Data.’ International trade data are filled with discrepancies–where two countries report different values of trade with each other. We develop an index for ranking countries’ data quality based on the following notion: the more a country’s reports on bilateral trade differ from the corresponding reports of its partners, the more likely it is a low-quality reporter. We calculate the comparative quality for each country’s imports and exports separately for every year from 1962 to 2016. We reconcile international trade data through picking the value reported by the country with higher quality in every bilateral flow. The findings include: (a) global trade was under-reported by roughly 5% over the past five years as countries with low data quality under-report both, their imports and exports; (b) erroneous reporting is prevalent among low-quality reporters; (c) importers’ data are less likely to be in error; (d) the level of development and corruption are possible determinants of trade data quality; (e) low-quality reporters are 14% more open to trade using reconciled data than using self-reported data (f) China tends to under-report its exports and over-report its imports, while there is only a small difference between US self-reported and reconciled data. The reconciled trade dataset is made freely available for future studies to use. The second paper is titled ‘Why You Should Use High Frequency Data to Test the Impact of Exchange Rate on Trade.’ The paper suggests that testing the impact of exchange rate on trade should be done using high frequency data. Using different data frequencies for identical periods and specifications between the US and Canada, the paper shows that low frequency data suppresses and distorts the evidence of the impact of exchange rate on trade in the short-run and the long-run. The third paper is titled: ‘Housing Leverage and Consumption Expenditure: Evidence from New Zealand Microdata.’ The paper investigates how household debt affects the marginal propensity to consume out of housing wealth. The paper uses New Zealand household-level data on spending, income, and debt over the period 2006–2016. The main empirical challenge is to identify exogenous variation in house prices to determine how consumption evolves with movements in household wealth. This identification problem is complicated by the presence of unobserved household characteristics that are correlated with housing wealth. The paper uses a detailed house sale dataset to derive local average house prices and use it as an instrument. The empirical results show that the estimated elasticity of consumption spending to housing wealth is about 0.22%. In dollar terms, the average marginal propensity to consume out of a one-dollar increase in housing wealth is around 2.2 cents. The empirical results confirm that household indebtedness, especially mortgage debt, acts as a drag on consumption spending, not only through the debt overhang channel, but also through influencing the collateral channel of the housing wealth effect.
    Keywords: International trade, Trade data frequency, Housing and leverage,
    Date: 2019
  20. By: Felipe, Jesus (Asian Development Bank)
    Abstract: This paper argues that the single most important factor that explains East Asia’s development success was its fast structural transformation toward industrialization, manufacturing in particular. Workers moved out of agriculture into manufacturing, and the sector diversified and upgraded its structure. Manufacturing activities are subject to increasing returns to scale, and many manufacturing goods have high income elasticities of demand. For these reasons, manufacturing is referred to as the “engine of growth.” It is in the context of industrialization that openness played an important role in East Asia’s success, i.e., the connection between “export-led growth” (the relaxation of the balance-of-payments constraint on foreign exchange) and industrialization. Part 1 of the paper documents the extent of structural transformation in developing Asia. Second, it analyzes the relationship between the exportled growth model (i.e., the relaxation of the balance-of-payments constraint on foreign exchange) and industrialization. Finally, it reviews the industrialization experiences of Japan and the Republic of Korea, and discusses the recent deindustrialization debate.
    Keywords: balance-of-payment constraint; deindustrialization; engine of growth; export-led growth; industrialization; manufacturing; structural transformation
    JEL: O10 O14 O25
    Date: 2018–07–25

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