Exports, Foreign Direct Investment and Economic Development by Xiaolan Fu (auth.)

By Xiaolan Fu (auth.)

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Sample text

However, in an empirical assessment of the trade impact on labour market adjustment, Greenaway et al. (1999) found both import and export intensities to have exerted a negative impact on employment growth in the UK since 1980. 3 Empirical studies on exports and productivity Empirical studies at the micro level using firm- or plant-level data also yield a mixed bag of results. Most of the studies find that the productivity of exporters is higher than that of the non-exporters. The causal relationship between exports and productivity growth, however, needs further examination as the higher productivity of exporters may reflect the self-selection of more efficient producers in the highly competitive export markets.

It is essential that the export sector does not remain an enclave separated from the rest economy (Hirschman, 1958; Meier, 1995). Usually, growth of manufactured exports that utilizes locally produced inputs may provide a strong stimulus for expansion in the input-supplying industries in the economy. When development of the export sector is mainly driven by processing trade, linkages between the export and the non-export sectors are likely to be limited. This may be particularly so when EPZs are used to attract foreign capital.

In a two-good, two-factor, two–country model, opening up of international trade will encourage trading countries to increase the production of the good which uses their abundant factor intensively in the production process. As a result, trade increases the price of the nation’s abundant and cheap factor and reduces the price of its scarce and expensive factor. In the developing countries, labour is often the abundant factor. Opening up to trade will increase the real wage of labour and reduce the real income of owners of capital.

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