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Trade and Industrialization

Trade and Industrialization Econ 403; International Economic Development Professor Carlos A. Benito Historical Strategies for Industrialization First Stage: Inward Looking: Import-Substitution 1940 to 1960s Latin America First followed by Asia and Middle East.

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Trade and Industrialization

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  1. Trade and Industrialization Econ 403; International Economic Development Professor Carlos A. Benito

  2. Historical Strategies for Industrialization • First Stage: Inward Looking: Import-Substitution • 1940 to 1960s • Latin America First followed by Asia and Middle East. • Second Stage: Outward Looking-Export Promotion • 1970s to now • Asian Tigers First • Taiwan • South Korea • Hong Kong • Singapore

  3. Principles • International Terms of Trade argument: Industrialization • Infant industry argument: Protectionism • Business mode: limited competition • State Run Corporations • Exclusive Licenses to International Corporations

  4. Industrial-Import Substitution Economy Exchange Rate Controls UNCTAD Tariffs/ Quotas Equipment Imports Primary Exports Food Consumption Manufacture Consumption Investment Planning Export Taxes Capital Accumulation Primary GDP Manufacture GDP Natural Resources Labor Capital

  5. Industrial Import-Substitution ModelA stylized interpretation Y(K) p’m>pm Y,X,M (d+c)K M(Y) for pm M(Y) for p’m>pm) K K1 K0 p=f(t) dp/dt > 0 X = pm.M M=m.Y

  6. The import function, M(Y), represents the financial sources for investment in manufacturing capital (In), after depreciation and imports of consumption manufactures (d+c)K. Industrial Import-Substitution ModelA stylized interpretation Y(K) p’m>pm Y,X,M (d+c)K M(Y) for pm M(Y) for p’m>pm) K K1 K0 p=f(t) dp/dt > 0 X = pm.M M=m.Y

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