Must-Read: Ricardo Hausmann: The Import of Exports

Photo of container stacks and port cranes by Andrey Kuzmin,

Must-Read: There is an interesting argument to be made here about how the speed of innovation in a sector is related to the extent of the market and thus of potential competition. And there is a very interesting argument made here about the export sector as the key link:

Ricardo Hausmann: The Import of Exports: “To pay for what they want from out-of-towners…

…they must sell them some of the things that they do know how to make…. The goods and services that a place can sell to non-residents have a disproportionate impact on its quality of life–and even its viability. A mining town becomes a ghost town when the mine closes, because the grocery store, the pharmacy, and the movie theater no longer have the capacity to buy the ‘imported’ food, medicine, and films they need. In contrast to non-tradable activities, a place’s export activities need to be pretty good to convince out-of-town customers–who have ample other options–to buy…. The higher the productivity and the quality of export activities, the higher the wages they can pay and still remain competitive….

To survive and thrive, societies need to pay special attention to those activities that produce goods and services they can sell to non-residents. Indeed, the need to act on new export opportunities and remove obstacles to success is probably the central lesson from the East Asian and Irish growth miracles.
Non-tradable activities are akin to a country’s sports leagues: different people like different teams. Those engaged in tradable activities are like the national team: we should all root for them–and organize ourselves to make sure they succeed.

November 30, 2015


Brad DeLong
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