Export Promotion Policies and the Crowding-out Effect in Developing Countries

Author: Ghani, Gairuzazmi

Source: Asian Economic Journal, Volume 20, Number 3, September 2006 , pp. 319-331(13)

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Abstract:

Critics of export promotion policies have pointed out a fallacy of composition, where what is viable for a small country acting in isolation might not be viable when pursued by a group of countries simultaneously. This paper investigates the crowding-out effect of the fallacy of composition; that is, whether developing countries that specialize in exports of manufactured products compete and crowd out one another's exports. The results of fixed-effects panel estimation suggest that developing countries are not crowding out one another's exports. Instead, they are crowding out Western European countries' exports of manufactured products.

Keywords: fallacy of composition; export promotion policies; crowding out; F13; F42; O24

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1467-8381.2006.00238.x

Affiliations: 1: Department of Economics, Faculty of Economics and Management Sciences, Inter-national Islamic University Malaysia, Jalan Gombak, 53100, Kuala Lumpur, Malaysia

Publication date: 2006-09-01