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 How long do firms live? Research finds patterns of company mortality in market data
02.04.2015 | Santa Fe Institute

nachricht Innovation among SMEs continues to fade
25.02.2015 | KfW

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: Astronomers reveal supermassive black hole's intense magnetic field

Astronomers from Chalmers University of Technology have used the giant telescope Alma to reveal an extremely powerful magnetic field very close to a supermassive black hole in a distant galaxy

Astronomers from Chalmers University of Technology have used the giant telescope Alma to reveal an extremely powerful magnetic field very close to a...

Im Focus: A “pin ball machine” for atoms and photons

A team of physicists from MPQ, Caltech, and ICFO proposes the combination of nano-photonics with ultracold atoms for simulating quantum many-body systems and creating new states of matter.

Ultracold atoms in the so-called optical lattices, that are generated by crosswise superposition of laser beams, have been proven to be one of the most...

Im Focus: UV light robot to clean hospital rooms could help stop spread of 'superbugs'

Can a robot clean a hospital room just as well as a person?

According to new research out of the Texas A&M Health Science Center College of Medicine, that is indeed the case. Chetan Jinadatha, M.D., M.P.H., assistant...

Im Focus: Graphene pushes the speed limit of light-to-electricity conversion

Researchers from ICFO, MIT and UC Riverside have been able to develop a graphene-based photodetector capable of converting absorbed light into an electrical voltage at ultrafast timescales

The efficient conversion of light into electricity plays a crucial role in many technologies, ranging from cameras to solar cells.

Im Focus: Study shows novel pattern of electrical charge movement through DNA

Electrical charges not only move through wires, they also travel along lengths of DNA, the molecule of life. The property is known as charge transport.

In a new study appearing in the journal Nature Chemistry, authors, Limin Xiang, Julio Palma, Christopher Bruot and others at Arizona State University's...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

HHL's Entrepreneurship Conference on FinTech

13.04.2015 | Event News

World Conference On Regenerative Medicine 2015: Registration And Abstract Submission Now Open

25.03.2015 | Event News

University presidents from all over the world meet in Hamburg

19.03.2015 | Event News

 
Latest News

Engineer Improves Rechargeable Batteries with MoS2 Nano 'Sandwich'

17.04.2015 | Power and Electrical Engineering

Comparing Climate Models to Real World Shows Differences in Precipitation Intensity

17.04.2015 | Earth Sciences

A blueprint for clearing the skies of space debris

17.04.2015 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>