Export-oriented industrialization

Export-oriented industrialization (EOI) sometimes called export substitution industrialization (ESI), export led industrialization (ELI) or export-led growth is a trade and economic policy aiming to speed up the industrialization process of a country by exporting goods for which the nation has a comparative advantage. Export-led growth implies opening domestic markets to foreign competition in exchange for market access in other countries.

However, this may not be true of all domestic markets, as governments may aim to protect specific nascent industries so they grow and are able to exploit their future comparative advantage and in practice the converse can occur. For example, many East Asian countries had strong barriers on imports from the 1960s to the 1980s.

Reduced tariff barriers, a fixed exchange rate (a devaluation of national currency is often employed to facilitate exports), and government support for exporting sectors are all an example of policies adopted to promote EOI and, ultimately, economic development. Export-oriented industrialization was particularly characteristic of the development of the national economies of the developed East Asian Tigers: Hong Kong, Singapore, South Korea, and Taiwan in the post-World War II period.

Export-led growth is an economic strategy used by some developing countries. This strategy seeks to find a niche in the world economy for a certain type of export. Industries producing this export may receive governmental subsidies and better access to the local markets. By implementing this strategy, countries hope to gain enough hard currency to import commodities manufactured more cheaply elsewhere.[1]

In addition, a recent mathematical study shows that export-led growth is where wage growth is repressed and linked to the productivity growth of non-tradable goods in a country with under-valued currency. In such a country, the productivity growth of export goods is greater than the proportional wage growth and the productivity growth of non-tradable goods. Thus, export price decreases in the export-led growth country and makes it more competitive in international trade.[2][3]

  1. ^ Goldstein, Joshua S., and Jon C. Pevehouse. International Relations. 8th ed. New York: Pearson Longman, 2008.
  2. ^ Ünal, E. (2016) "A Comparative Analysis of Export Growth in Turkey and China through Macroeconomic and Institutional Factors" Evolutionary and Institutional Economics Review. Vol. 13 (1), pp. 57–91. DOI :10.1007/s40844-016-0036-3.
  3. ^ Ünal, Emre (1 June 2016). "A comparative analysis of export growth in Turkey and China through macroeconomic and institutional factors". Evolutionary and Institutional Economics Review. 13 (1): 57–91. doi:10.1007/s40844-016-0036-3. S2CID 156910737.

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