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Manufactured exports and terms of trade of developing countries: Evidence from Sri Lanka

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  • Prema-Chandra Athukorala

Abstract

Terms of trade implications of diversification into manufactured exports in a traditional primary-exporting country are examined in the light of the Sri Lankan experience over the past two decades. The empirical analysis focuses on trends in both commodity and income terms of trade, employing a methodology which takes care of the 'spurious regression' problem. The results suggest that, contrary to the 'new' terms of trade pessimism, export diversification has brought about significant terms of trade gains for the Sri Lankan economy. Overall, the study casts doubt on the robustness of results coming from analyses of price trends in aggregate manufactured exports and calls for systematic time-profile analyses of the countries which have achieved significant export diversification in order to inform the policy debate.

Suggested Citation

  • Prema-Chandra Athukorala, 2000. "Manufactured exports and terms of trade of developing countries: Evidence from Sri Lanka," Journal of Development Studies, Taylor & Francis Journals, vol. 36(5), pages 89-104.
    • Handle: RePEc:taf:jdevst:v:36:y:2000:i:5:p:89-104
    DOI: 10.1080/00220380008422647
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    References listed on IDEAS

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    1. Athukorala, Prema-chandra & Rajapatirana, Sarath, 2000. "Liberalization and Industrial Transformation: Lessons from the Sri Lankan Experience," Economic Development and Cultural Change, University of Chicago Press, vol. 48(3), pages 543-572, April.
    2. Prebisch, Raúl, 1950. "The economic development of Latin America and its principal problems," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 29973, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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    1. Shouvik Chakraborty, 2012. "Is Export Expansion of Manufactured Goods an Escape Route from Terms of Trade Deterioration of Developing Countries?," Journal of South Asian Development, , vol. 7(2), pages 81-108, October.
    2. Carmen D. Alvarez-Albelo & Monica Pigem-Vigo, 2007. "Quality of Imports Relative to Exports, and the Transmission of Sustained Growth through the Terms of Trade," International Economic Journal, Taylor & Francis Journals, vol. 21(3), pages 381-398.
    3. Thomas H.W. Ziesemer, 2014. "Country terms of trade: trends, unit roots, over-differencing, endogeneity, time dummies, and heterogeneity," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(6), pages 767-796, September.
    4. Muradian, Roldan & O'Connor, Martin & Martinez-Alier, Joan, 2002. "Embodied pollution in trade: estimating the 'environmental load displacement' of industrialised countries," Ecological Economics, Elsevier, vol. 41(1), pages 51-67, April.
    5. Ocampo, José Antonio & Parra, María Angela, 2007. "The dual divergence: growth successes and collapses in the developing world since 1980," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1938.
    6. Herzer, Dierk & Nowak-Lehmann D., Felicitas, 2006. "Export Diversification, Externalities and Growth: Evidence for Chile," Proceedings of the German Development Economics Conference, Berlin 2006 12, Verein für Socialpolitik, Research Committee Development Economics.
    7. D., Ivan, 2017. "Stability of the labour shares: evidence from OECD economies," MPRA Paper 79822, University Library of Munich, Germany.
    8. Ivan D. Trofimov, 2017. "Profit rates in the developed capitalist economies: a time series investigation," PSL Quarterly Review, Economia civile, vol. 70(281), pages 85-128.
    9. Ivan Trofimov, 2021. "Income terms of trade and economic convergence: Evidence from Latin America," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 46(2), pages 41-67, June.
    10. Cem Somel, 2004. "Commodity Chains, Unequal Exchange and Uneven Development," ERC Working Papers 0411, ERC - Economic Research Center, Middle East Technical University, revised Sep 2004.
    11. Trofimov, Ivan D., 2018. "Income terms of trade and economic convergence: Evidence from Latin America," MPRA Paper 87598, University Library of Munich, Germany.
    12. Jörg Mayer, 2002. "The Fallacy of Composition: A Review of the Literature," The World Economy, Wiley Blackwell, vol. 25(6), pages 875-894, June.
    13. Ivan D. Trofimov, 2019. "Stability of Labour Shares: Evidence from OECD Economies," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 17(1), pages 57-89.
    14. Trofimov, Ivan D., 2017. "Profit rates in the developed capitalist economies: a time series investigation," MPRA Paper 79529, University Library of Munich, Germany.
    15. Peter Josef Stauvermann & Ronald Ravinesh Kumar & Syed Jawad Hussain Shahzad & Nikeel N. Kumar, 2018. "Effect of tourism on economic growth of Sri Lanka: accounting for capital per worker, exchange rate and structural breaks," Economic Change and Restructuring, Springer, vol. 51(1), pages 49-68, February.

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