The fallacy of composition argument
1992; Elsevier BV; Volume: 36; Issue: 4 Linguagem: Inglês
10.1016/0014-2921(92)90062-2
ISSN1873-572X
AutoresRiccardo Faini, Fernando Clavijo, Abdel Senhadji-Semlali,
Tópico(s)Global Trade and Competitiveness
ResumoThe constraints imposed upon LDCs' export growth by international demand have been the subject of a long-standing controversy. In this paper we present estimates of manufactures export demand functions for 23 LDCs. We focus first on the constraints that the international environment imposes upon export growth for an individual LDC. To this purpose the small country hypothesis of an infinitely elastic export demand is tested and the claim that supply factors play a determinant role in affecting export performances is then assessed. We turn next to the constraints on global LDC growth and ask whether exports from LDCs complete mostly with Northern products or are better substitutes with exports from other LDCs. This allows us to assess the heuristic value of Cline's (1982) remark that a generalized outward shift in the LDCs' export supply schedule would be associated with an important decline in prices and would undermine the success of a widespread export-led strategy. We find that for a representative LDC a large share, almost 80 percent, of the benefits of devaluation on export revenues are made to vanish when other LDCs' competitors pursue similar policies.
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