Speaker
Description
This paper introduces two channels through which exports from commodity-dependent countries towards regional partners might be less affected by Dutch Disease effects than extra-regional exports. The first channel relates to a higher share of technologically more sophisticated products in intra-regional South-South trade, which are less sensitive to cost and price changes. The second channel is related to trade barriers and entry costs faced by extra-regional competitors in the regional market. The two channels are empirically tested through a panel data analysis of manufacturing exports from Latin American countries between 1996 and 2018. The evolution of exports to regional export partners is compared to extra-regional exports. Dutch Disease effects are most pronounced in exports to extra-regional partners, where a one-percent increase in commodity prices leads to a 0.48% decline in manufacturing exports, significantly larger than the 0.31% decline in regional trade. The effect is mainly driven by low-tech exports, which are more negatively affected than medium- and high-tech exports, with an elasticity of -0.95% in extra-regional trade compared to -0.58% in regional trade. The results support both channels, suggesting that technological upgrading and regional trade integration can mitigate the contraction of the manufacturing sector during commodity price booms.
| Keyword | International Trade |
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