Trade Strategy, Investment, and Exports: Another Look at East Asia

42 Pages Posted: 11 Jun 2000 Last revised: 24 Sep 2010

See all articles by Dani Rodrik

Dani Rodrik

Harvard University - Harvard Kennedy School (HKS); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: November 1995

Abstract

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 favor of exportables. Second, they have been associated from the start with booms in investment. This paper 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 a consequence of the investment boom rather than its instigator. In economies like South Korea and Taiwan, an increase in investment required an increase in imports of capital goods. Since savings rose alongside the desired investment, the investment boom was accompanied by a boom in both exports and imports. Moreover, this could happen with a relatively small change in the relative price of exportables.

Suggested Citation

Rodrik, Dani, Trade Strategy, Investment, and Exports: Another Look at East Asia (November 1995). NBER Working Paper No. w5339. Available at SSRN: https://ssrn.com/abstract=225403

Dani Rodrik (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

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Centre for Economic Policy Research (CEPR)

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