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An export-oriented strategy figures prominently in most explanations of the East Asian miracle. The export booms in South Korea and Taiwan starting in the early 1960s are anomalous when compared with later export booms in other, non-East Asian countries such as Chile and Turkey. First, these booms have taken place in the context of comparatively small changes in relative prices in favour of exportables. Second, they have been associated from the start with booms in investment. In discussion paper No 1305, Research Fellow Dani Rodrik offers an argument and a formal model to suggest that exports in East Asia may have been driven by an increase in the profitability of investment, with outward orientation as a consequence of the investment boom rather than its instigator. It is argued that export orientation in South Korea and Taiwan may have been the product in large part of an increase in the propensity to invest, brought about by a rise in the profitability of investment. This would explain why the export booms took place despite relatively mild changes in relative prices. It would also explain the joint booms in exports and investment. This is in contrast to the export booms we have observed in the 1980s in countries like Chile and Turkey, where exports have responded primarily to relative-price changes.Trade Strategy, Investment and Exports: Another
Look at East Asia |
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