Export Base Model
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This document discusses Douglas North's export-base theory of regional economic growth. It states that North believed regions are open and interconnected, with goods and services flowing between them, and that a region's growth depends on the expansion and success of its export sector. Increased exports lead to increased regional income, production capacity, and overall economic activity. The pillars of the export-base model are that a region shares a common export base and its growth is determined by its export sector's performance. Criticisms include that the model gives undue importance to exports over domestic growth potential and ignores issues like tariffs and government policies.
Export Base Model
- 1. DASTGIRALAM DEPARTMENT OF ECONOMICS ALIGARH MUSLIM UNIVERSITY ALIGARH
- 2. Douglas C. North (born 1920) Believes in role of exogenous factors in Regional Growth Assumed that regions are not closed areas but open Goods and services can flow from one region to another Export is everything, which can be exported Emphasis, particularly on the development of export sectors (multiplier effect)
- 3. Growth of a region depends on its Export Base Export base is largely limited to the expansion of demand in another region Increased export of a region, increases the income of its people Increased income increases the productive capacity and hence expands the economic activities in the region
- 5. Pillars of Export Growth Model: • Area with a common export-base • Regional growth is determined by the success of its export sector • Export-base led absolute and relative income of the region, decides the services and the residential potential of the area
- 6. Increase in the export of a Region may be based on; • Increase in PCI of other region • High income elasticity of exportable items in other regions • If income elasticity is low or negative, export increases because of increase in income and population
- 7. • Depletion of resources in other region with the help of that other regions were producing same goods • Lower delivery cost of exportable items based on improved transport/infrastructure • Based on technological changes, new use of exported items in other region • More production of exportable goods and services in the region led by technological changes
- 8. Criticism: • Undue importance to export sector and ignoring the importance of internal/domestic growth potential of the region • If export earning is used for imports payment, no development will take place • Issues related to tariff, exchange rate and proper government policies may spoil the game