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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

Trade and Industrialization

Econ 403;

International Economic Development

Professor Carlos A. Benito

historical strategies for industrialization
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
principles
Principles
  • International Terms of Trade argument: Industrialization
  • Infant industry argument: Protectionism
  • Business mode: limited competition
    • State Run Corporations
    • Exclusive Licenses to International Corporations
industrial import substitution economy
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

industrial import substitution model a stylized interpretation
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

industrial import substitution model a stylized interpretation6

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