Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

In Global Trade, Too Much of a Good Thing Can Be a Bad Thing

18.01.2013
A multitude of trade products is good for a country – up to a point

In today’s dynamic global economic environment, companies or countries consider everything when it comes to expanding their economies.

Researchers at the University of Arkansas examined the relationship between products in global trade and the characteristics of a country’s product specialization pattern and discovered that having a multitude of similar products can be beneficial to growth — up to a point, after which the benefit declines.

Raja Kali and Javier Reyes, associate professors in the Sam M. Walton College of Business; Josh McGee, vice president of public accountability at the Laura and John Arnold Foundation and Walton College doctoral graduate of economics; and Stuart Shirrell, a former Bodenhamer Fellow and 2011 magna cum laude graduate of the U of A, performed the study.

The researchers discovered that interaction between products plays an important role in economic growth. In the early stages of product development, these synergies allow for a quick growth rate. Specialization in a certain area, such as electronics, establishes the base for similar products to be developed and exported.

Kali and his colleagues use Ireland as an example of this growth pattern.

“We know that Ireland experienced a trade and economic growth acceleration episode in 1985, and from our data we can examine Ireland’s country-level product specialization before and after the growth acceleration period,” he said.

Ireland experienced increases in its chemical industry, manufactured goods, machinery and transportation and commercial manufacturing, all of which overlapped with food and animal production and crude materials. The researchers believe the inter-related nature of these industries played a key role in Ireland developing new products and expanding its export base.

A contrasting example is Greece, which had a high level of interaction within the manufactured goods industry, did not expand this interaction into other high-density industries. As a result, over the ten-year period studied, 1980-1990, the country experienced a relative decrease in synergies between it’s export products

While inter-relatedness between products can help a country expand its economy, it can also cause an adverse effect, the researchers found.

“Essentially, one could say that too much of a good thing makes you fat and happy, and that ultimately is not so good for a country,” Kali said.

The researchers developed a way of measuring density at the product and country level. Product density is the number of links between a single product and the other products in a country’s export set, divided by the total number of links between that product and every other product, regardless of whether it is in the country’s product set or not. Country density is computed by weighting the density of each product that a country exports.

As density increases, “inertia” becomes stronger, making the jump to new products more difficult. An increase in network proximity more proportionate than product density is required to maintain growth acceleration.

The researchers defined product space as the relatedness between products in global trade. This space can be thought of as a network in which each product represents a node, and the relationships between them represent the linkages. In their study, each country’s network was superimposed on the country’s specialization pattern.

The information allowed the researchers to “measure” the density of the links and to develop a measure of the proximity of the country’s specialization to the products themselves. The proximity of the products indicated how easily a country could move from its current specialization to new products.

The researchers’ study was published in the Journal of Development Economics. The study is available online at http://www.sciencedirect.com/science/article/pii/S0304387812000983.

CONTACTS:
Raja Kali, associate professor, economics
Sam M. Walton College of Business
479-575-6219, rkali@walton.uark.edu
Javier Reyes, associate professor, economics
Sam M. Walton College of Business
479-575-6079, jreyes@walton.uark.edu
Matt McGowan, science and research communications officer
University Relations
479-575-4246, dmcgowa@uark.edu

Matt McGowan | Newswise
Further information:
http://www.uark.edu

More articles from Business and Finance:

nachricht Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)

nachricht Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Neutron star merger directly observed for the first time

University of Maryland researchers contribute to historic detection of gravitational waves and light created by event

On August 17, 2017, at 12:41:04 UTC, scientists made the first direct observation of a merger between two neutron stars--the dense, collapsed cores that remain...

Im Focus: Breaking: the first light from two neutron stars merging

Seven new papers describe the first-ever detection of light from a gravitational wave source. The event, caused by two neutron stars colliding and merging together, was dubbed GW170817 because it sent ripples through space-time that reached Earth on 2017 August 17. Around the world, hundreds of excited astronomers mobilized quickly and were able to observe the event using numerous telescopes, providing a wealth of new data.

Previous detections of gravitational waves have all involved the merger of two black holes, a feat that won the 2017 Nobel Prize in Physics earlier this month....

Im Focus: Smart sensors for efficient processes

Material defects in end products can quickly result in failures in many areas of industry, and have a massive impact on the safe use of their products. This is why, in the field of quality assurance, intelligent, nondestructive sensor systems play a key role. They allow testing components and parts in a rapid and cost-efficient manner without destroying the actual product or changing its surface. Experts from the Fraunhofer IZFP in Saarbrücken will be presenting two exhibits at the Blechexpo in Stuttgart from 7–10 November 2017 that allow fast, reliable, and automated characterization of materials and detection of defects (Hall 5, Booth 5306).

When quality testing uses time-consuming destructive test methods, it can result in enormous costs due to damaging or destroying the products. And given that...

Im Focus: Cold molecules on collision course

Using a new cooling technique MPQ scientists succeed at observing collisions in a dense beam of cold and slow dipolar molecules.

How do chemical reactions proceed at extremely low temperatures? The answer requires the investigation of molecular samples that are cold, dense, and slow at...

Im Focus: Shrinking the proton again!

Scientists from the Max Planck Institute of Quantum Optics, using high precision laser spectroscopy of atomic hydrogen, confirm the surprisingly small value of the proton radius determined from muonic hydrogen.

It was one of the breakthroughs of the year 2010: Laser spectroscopy of muonic hydrogen resulted in a value for the proton charge radius that was significantly...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

ASEAN Member States discuss the future role of renewable energy

17.10.2017 | Event News

World Health Summit 2017: International experts set the course for the future of Global Health

10.10.2017 | Event News

Climate Engineering Conference 2017 Opens in Berlin

10.10.2017 | Event News

 
Latest News

Terahertz spectroscopy goes nano

20.10.2017 | Information Technology

Strange but true: Turning a material upside down can sometimes make it softer

20.10.2017 | Materials Sciences

NRL clarifies valley polarization for electronic and optoelectronic technologies

20.10.2017 | Interdisciplinary Research

VideoLinks
B2B-VideoLinks
More VideoLinks >>>