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 Microtechnology industry is hiring – positive developments of past years continue
09.04.2018 | IVAM Fachverband für Mikrotechnik

nachricht RWI/ISL-Container Throughput Index with minor decline on a high overall level
20.03.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung

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: Ten-year anniversary of the Neumayer Station III

The scientific and political community alike stress the importance of German Antarctic research

Joint Press Release from the BMBF and AWI

The Antarctic is a frigid continent south of the Antarctic Circle, where researchers are the only inhabitants. Despite the hostile conditions, here the Alfred...

Im Focus: Ultra ultrasound to transform new tech

World first experiments on sensor that may revolutionise everything from medical devices to unmanned vehicles

The new sensor - capable of detecting vibrations of living cells - may revolutionise everything from medical devices to unmanned vehicles.

Im Focus: Flying Optical Cats for Quantum Communication

Dead and alive at the same time? Researchers at the Max Planck Institute of Quantum Optics have implemented Erwin Schrödinger’s paradoxical gedanken experiment employing an entangled atom-light state.

In 1935 Erwin Schrödinger formulated a thought experiment designed to capture the paradoxical nature of quantum physics. The crucial element of this gedanken...

Im Focus: Nanocellulose for novel implants: Ears from the 3D-printer

Cellulose obtained from wood has amazing material properties. Empa researchers are now equipping the biodegradable material with additional functionalities to produce implants for cartilage diseases using 3D printing.

It all starts with an ear. Empa researcher Michael Hausmann removes the object shaped like a human ear from the 3D printer and explains:

Im Focus: Elucidating the Atomic Mechanism of Superlubricity

The phenomenon of so-called superlubricity is known, but so far the explanation at the atomic level has been missing: for example, how does extremely low friction occur in bearings? Researchers from the Fraunhofer Institutes IWM and IWS jointly deciphered a universal mechanism of superlubricity for certain diamond-like carbon layers in combination with organic lubricants. Based on this knowledge, it is now possible to formulate design rules for supra lubricating layer-lubricant combinations. The results are presented in an article in Nature Communications, volume 10.

One of the most important prerequisites for sustainable and environmentally friendly mobility is minimizing friction. Research and industry have been dedicated...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

Our digital society in 2040

16.01.2019 | Event News

11th International Symposium: “Advanced Battery Power – Kraftwerk Batterie” Aachen, 3-4 April 2019

14.01.2019 | Event News

ICTM Conference 2019: Digitization emerges as an engineering trend for turbomachinery construction

12.12.2018 | Event News

 
Latest News

Additive manufacturing reflects fundamental metallurgical principles to create materials

18.01.2019 | Materials Sciences

How molecules teeter in a laser field

18.01.2019 | Life Sciences

The cytoskeleton of neurons has been found to be involved in Alzheimer's disease

18.01.2019 | Health and Medicine

VideoLinks
Science & Research
Overview of more VideoLinks >>>