Number: Course: University: Date: How might the type of good exported affect the growth rate of a country? Exporting entails the production of goods and services in one country and trading them in another country through international trade…
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A country may be in a better position to export a certain product or services for various reasons. A country can export products and services if it is the single supplier of a certain product, particularly when it has access to natural resources that other are not endowed with. Some countries are also in a better position to make a certain product at a fairly lower cost than other countries .The reason is that a country may have the absolute advantage in producing a certain product over others. Absolute advantage in international trade implies that a country can produce a product at a cheaper price than others. The concept of balance of trade results from the import export business. Balance of trade is the difference between the quantity of exports and the quantity of imports. When exports exceed imports, trade surplus results while a trade deficit results when the quantity of imports exceeds that of exports. There exist two types of final products for export. Traditional products, which are produced using labour intensive skills, and high-tech products which are made using differentiated intermediate goods (Andersen & Babula, 2008, p. 10). When a country engages in international trade, it registers economic growth especially when its products are in high demand. Factors determining export led growth include demand, competitiveness and the rate of exchange. Growth is initiated by an increase in demand for exports. If the spread effects are potent as the export sector grows so the domestic sectors will too. Spread effects refer to prosperity flowing from exporting products and services in international trade. The competitiveness of a country’s product increases the demand for exports. This implies that the demand for what a country sells increases. Depreciation in the rate of exchange makes exports more competitive, thereby increasing demand. Depreciation of the exchange depends on the elasticity of demand for exports (Felipe, 2010, p. 260). The depreciation of a country’s currency in international trade depends with the changes in demand of a country’s exports. Opening up trade can improve the allocation of resources, eventually changing the production function upwards and increasing the per capita income level. Production function relates the output of a country to the amount of inputs. Input in this case refers to capital and labor as factors of production. Production function also refers to the relationship in which output increases as more units of input are employed in production. There is a relationship between international competitiveness if a country’s export and economic growth. Keynesian perspective explains this kind of growth as being demand-driven and that exports make up the exogenous component of collective demand that propels income growth. Exogenous component in this context refers to external/foreign/international components that drive internal growth of a company. Additionally, a fast growth of exports and output tends to set up a virtuous circle of growth through the connection between output growth and production growth. From a neoclassical endogenous growth point of view, a connection between exports and growth may be vindicated since the opening up of trade may be an incentive to a higher rate of endogenous technological change. A study conducted by Maizels in 1963 established a noteworthy relationship between the relative growth of the prime industrial nations and their share of the global export market in manufactures (Meliciani, 2001, p.
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