Choosing trade partners to avoid falling behind
Date
2019
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Abstract
Recent studies find that firms obtain higher prices and higher productivity by exporting to richer and more distant destinations. This study initiates a discussion of the country-level impact of trade partners (export destinations) on economic growth. In an econometric analysis, I find that low- and middle-income countries grow more slowly when they compete against high-income countries in the same markets. In a case study, I examine how Mexico’s disappointing economic growth is partly explained by its concentration of exports to the U.S. market where it faced competition with similar goods from China. These conditions were not faced by higher-growth Malaysia and Turkey.