Featured Research

from universities, journals, and other organizations

In global trade, too much of a good thing can be a bad thing

Date:
January 17, 2013
Source:
University of Arkansas, Fayetteville
Summary:
Researchers examined the relationship between products in global trade and a country’s product specialization pattern and found that a multitude of similar of products can be beneficial to growth, but after a point, the benefit begins to decline.

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.


Story Source:

The above story is based on materials provided by University of Arkansas, Fayetteville. Note: Materials may be edited for content and length.


Journal Reference:

  1. Raja Kali, Javier Reyes, Joshua McGee, Stuart Shirrell. Growth networks. Journal of Development Economics, 2013; 101: 216 DOI: 10.1016/j.jdeveco.2012.11.004

Cite This Page:

University of Arkansas, Fayetteville. "In global trade, too much of a good thing can be a bad thing." ScienceDaily. ScienceDaily, 17 January 2013. <www.sciencedaily.com/releases/2013/01/130117105657.htm>.
University of Arkansas, Fayetteville. (2013, January 17). In global trade, too much of a good thing can be a bad thing. ScienceDaily. Retrieved August 27, 2014 from www.sciencedaily.com/releases/2013/01/130117105657.htm
University of Arkansas, Fayetteville. "In global trade, too much of a good thing can be a bad thing." ScienceDaily. www.sciencedaily.com/releases/2013/01/130117105657.htm (accessed August 27, 2014).

Share This




More Science & Society News

Wednesday, August 27, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

WHO Calls for Ban on E-Cigarette Sales to Minors

WHO Calls for Ban on E-Cigarette Sales to Minors

AFP (Aug. 26, 2014) The World Health Organization called Tuesday on governments should ban the sale of e-cigarettes to minors, warning that they pose a "serious threat" to foetuses and young people. Duration: 01:44 Video provided by AFP
Powered by NewsLook.com
ICREACH: NSA Built A Google Of Americans' Info

ICREACH: NSA Built A Google Of Americans' Info

Newsy (Aug. 26, 2014) The Intercept published an article Monday profiling what the online publication called NSA's very own Google of personal data. Video provided by Newsy
Powered by NewsLook.com
Does Medical Marijuana Reduce Painkiller Overdose Deaths?

Does Medical Marijuana Reduce Painkiller Overdose Deaths?

Newsy (Aug. 26, 2014) A new study found fewer deaths from prescription drug overdoses in states that have legalized medical marijuana. But experts disagree on the results. Video provided by Newsy
Powered by NewsLook.com
Breakingviews: India Coal Strained by Supreme Court Ruling

Breakingviews: India Coal Strained by Supreme Court Ruling

Reuters - Business Video Online (Aug. 26, 2014) An acute coal shortage is likely to be aggravated as India's supreme court declared government coal allocations illegal, says Breakingviews' Peter Thal Larsen. Video provided by Reuters
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins