Mara A. Rovayo A.
June, 2006
1 /17
CONTENTS
1. Introduction
2. History
3. Theory
4. Conclusion: Advantages and Disadvantages
5. References
2 /17
INTRODUCTION
3 /17
History
Region A
Other Regions World demand
Natural Resources
Capital and
Market
labor
infrastructure
=
ECONOMIC GROWTH OF REGION A 4 /17
EXPORT-BASE THEORY: Bases
5 /17
(Figure from: Mulkey, 2000)
6 /17
EXPORT-BASE THEORY:
Two sectors
7 /17
EXPORT-BASE THEORY:
Two sectors
z 1 and 2 together:
3) Y = Yx + (c q) Y
4) (1 c + q) Y = Yx
z Divide both sides by (1- c + q)
5) Y= 1 / (1 c + q) Yx
Export multiplier
1 / (1 c + q)
8 /17
EXPORT-BASE THEORY:
Export Multiplier
Export
Yx Business
Y = YL + Yx
Local
Business
(c-q) Y
qY
9 /17
EXPORT-BASE THEORY:
Example
z Region A
z Propensity to consume (c) = 0,7
z Propensity to import (q) = 0,35
z Export multipliers = 1,54
10 /17
EXPORT-BASE THEORY:
Example
Leaking
Resources?
14 /17
CONCLUSIONS:
Strengths of the theory
16 /17
THANK YOU FOR YOUR ATTENTION!
17 /17