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A real imports of capital and intermediate goods declinedsharply for highlyindebted countries in the 1980s, theseeconomies were faced with the need tosubstitute previouslyimported factors of production with domestic capital andlabor. The study empirically analyzes the degree of importdependence of twelve developing countries. Estimates of theshort-run elasticity of substitution characterize bothimported capital and intermediate goods to behave likecomplements in the production process in the developingcountries. Long-run substitution elasticites differconsiderably among the group of economies, especially forimported machinery and equipment. The results indicate thatinward-oriented strategies have not achieved the aim ofreducing the import dependence of the developing economies.In order to visualize theimplications of the differingdegree of import dependence, a partial equilibriumeconometric model is used to analyze the reaction of thetrade account on external shocks and domestic policies inColumbia and Ecuador. Simulations show that the dependenceon imported production means can transform an "adjustmentwith growth" of the external account intoan "adjustment orgrowth" controversy.
List of contents
1. Introduction.- 1.1. The debt crisis, imports, and growth.- 1.2. Structure of the study.- 2. The importance of imported factors of production in developing countries.- 2.1. Introductory remarks.- 2.2. The composition of imports.- 2.3. Factors impeding perfect import substitutability.- 2.4. Capital goods.- 2.5. Intermediate goods.- 2.6. Development strategies and the role of imports.- 2.7. Summary.- 3. Import models: issues and problems.- 3.1. Introduction.- 3.2. The theoretical background: imports and growth.- 3.3. The standard import function, foreign exchange availability, and disaggregate import analyses.- 3.4. Empirical studies of imports as factors of production in developing countries.- 3.5. Concluding remarks.- 4. Macroeconomic production functions and elasticities of substitution between imported and domestic factors of production.- 4.1. Introduction.- 4.2. Aggregate production functions and the elasticity of substitution.- 4.3. The nested production function.- 4.4. Summary.- 5. Estimation of elasticities of substitution between domestic and imported means of production.- 5.1. Introductory remarks.- 5.2. Measurement of the domestic price of imported goods.- 5.3. Imported and domestically produced capital goods.- 5.4. Imported intermediate goods.- 5.5. Summary and interpretation of the empirical results.- 6. Imports, growth, and the trade balance: two case studies.- 6.1. Basic remarks about the framework.- 6.2. The Columbian model.- 6.3. The Ecuadorian model.- 6.4. Concluding remarks about the simulations.- 7. Conclusion.- 7.1. Summary of findings.- 7.2. Import vulnerability reconsidered.- Appendices.- A. Statistical tables.- B. The cost function and conditional factor demands for a CES production function.- B.1. Derived factor demands.- B.2. The cost function.- C. Data sources and computational notes.- C.1. Industrial production and price statistics.- C.2. Trade data.- C.3. National income accounting statistics.- C.4. Specific variables used in Chapter 5.- C.4.1. Implicit average effective import taxes.- C.4.2. Real import capacity.- C.4.3. Interest rates.- C.5. Variable defmitions and sources, Chapter 6.- C.6. Computational notes.- References.
