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The impact of labor costs on manufactured exports in developing countries : an econometric analysis

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  • Riveros, Luis A.

Abstract

This paper estimates export supply elasticities in 20 countries using an empirical model in which manufactured exports are a function of the price of exports, the price of imported inputs, and labor costs relative to the price of home goods. The export supply equation is completed with a variable identifying manufacturing capacity and a variable associated with the role of internal absorption. After testing for simultaneity, the paper concludes that half of the countries must be treated as large countries - thus estimating the export supply function through two-stage least squares. Also explored are other sources of endogeneity of right-hand side variables - the price of imported inputs, labor costs, and manufacturing capacity. It is found that in many cases the estimates change significantly as a result of this procedure. In general, the conclusions underscore the impact on exports of domestic economic policies - for example, promoting investment and productive capacity and keeping factor markets free of significant distortions.

Suggested Citation

  • Riveros, Luis A., 1989. "The impact of labor costs on manufactured exports in developing countries : an econometric analysis," Policy Research Working Paper Series 204, The World Bank.
    • Handle: RePEc:wbk:wbrwps:204
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    References listed on IDEAS

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    1. Morris Goldstein & Mohsin S. Khan, 2017. "Income and Price Effects in Foreign Trade," World Scientific Book Chapters, in: TRADE CURRENCIES AND FINANCE, chapter 1, pages 3-81, World Scientific Publishing Co. Pte. Ltd..
    2. Haynes, Stephen E & Stone, Joe A, 1983. "Specification of Supply Behavior in International Trade," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 626-632, November.
    3. Morris Goldstein & Mohsin S. Khan, 2017. "The Supply and Demand for Exports: A Simultaneous Approach," World Scientific Book Chapters, in: TRADE CURRENCIES AND FINANCE, chapter 2, pages 83-104, World Scientific Publishing Co. Pte. Ltd..
    4. Jaime R. Marquez & Caryl McNeilly, 1986. "Can debtor countries service their debts? Income and price elasticities for exports of developing countries," International Finance Discussion Papers 277, Board of Governors of the Federal Reserve System (U.S.).
    5. Moran, Cristian, 1988. "A Structural Model for Developing Countries' Manufactured Exports," The World Bank Economic Review, World Bank, vol. 2(3), pages 321-340, September.
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    Cited by:

    1. Jose Guilherme Reis & Gonzalo Varela, 2015. "Travel Channel Meets Discovery Channel or How Tourism Can Encourage Better Export Performance and Diversification in Nepal," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 16(2), pages 183-208, September.
    2. Gwo-Hshiung Tzeng & Chi-Yo Huang, 2012. "Combined DEMATEL technique with hybrid MCDM methods for creating the aspired intelligent global manufacturing & logistics systems," Annals of Operations Research, Springer, vol. 197(1), pages 159-190, August.

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