Productivity, Competitiveness and Incomes in Asia - an Evolutionary Theory of International Trade

Abstract

The authors of this book link productivity change, trade competitiveness, networks of interaction and cooperation and income growth in developing Asian countries with the complex evolutionary processes of economic development and international trade. They take an innovative approach to simulating the complex micro-dynamics of competitiveness in order to distinguish those trade-related microeconomic dynamics and institutional reforms vital to leading countries out of institutional and poverty traps.

Real competitiveness changes in six countries (Bangladesh, India, Indonesia, Nepal, Pakistan and Thailand) are measured from 1991 to 2000 with detailed international export unit value comparisons, to detect structural changes towards technology and knowledge intensive goods in trade patterns. No significant structural change was detected in the six countries during that period.

Evolutionary trade theory is presented in two models and is calibrated with transaction and trade data form West Bengal and Nepal. One model is driven by firms' ability to trade for productivity and to increase unit value. The other model reveals that lower transport costs - resulting from investment in transport and institutional reforms related to the investment and trade environment - result initially in small productivity differences that can be amplified in a non-linear evolutionary system and eventually lead to a spatial restructuring of the system, and to a structural change in the trade patterns. The models in this path-breaking book can be used to explore the impact of a variety of interventions and policies.

Keywords: Asia, Competitiveness, Developing countries, (Evolutionary)Trade theory, Institutions, Networks, Productivity, Quality growth, Spatial structure, Unit labor costs

JEL Classification: E11, F10, F14, O12, O33, O47