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  • Concept of Immiserising Growth of An Economy by Professor Jagdish Bhagwati-Explained! PDF

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    Professor Jagdish Bhagwati introduced the concept of immiserising growth, which refers to an increase in a country's exports of a commodity leading to such deterioration in its terms of trade that there is a net decline in export earnings and social welfare. For a country to experience immiserising growth, its export growth must be more than proportional, the export commodity's supply must be price inelastic, and the share of that commodity in world markets must be large enough to depress prices. The demand for the commodity abroad must also be price inelastic. Developing countries are more prone to suffering deteriorating terms of trade through export expansion due to inelastic demand for their commodity exports.

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    Professor Jagdish Bhagwati introduced the concept of immiserising growth, which refers to an increase in a country's exports of a commodity leading to such deterioration in its terms of trade that there is a net decline in export earnings and social welfare. For a country to experience immiserising growth, its export growth must be more than proportional, the export commodity's supply must be price inelastic, and the share of that commodity in world markets must be large enough to depress prices. The demand for the commodity abroad must also be price inelastic. Developing countries are more prone to suffering deteriorating terms of trade through export expansion due to inelastic demand for their commodity exports.

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    212 views5 pages

    Concept of Immiserising Growth of An Economy by Professor Jagdish Bhagwati-Explained! PDF

    Uploaded by

    Ravi Kumar
    Professor Jagdish Bhagwati introduced the concept of immiserising growth, which refers to an increase in a country's exports of a commodity leading to such deterioration in its terms of trade that there is a net decline in export earnings and social welfare. For a country to experience immiserising growth, its export growth must be more than proportional, the export commodity's supply must be price inelastic, and the share of that commodity in world markets must be large enough to depress prices. The demand for the commodity abroad must also be price inelastic. Developing countries are more prone to suffering deteriorating terms of trade through export expansion due to inelastic demand for their commodity exports.

    Copyright:

    © All Rights Reserved
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    of 5

    5/8/2015

    ConceptofImmiserisingGrowthofanEconomybyProfessorJagdishBhagwatiExplained!

    ConceptofImmiserisingGrowthofanEconomyby
    ProfessorJagdishBhagwatiExplained!
    by Uttam Mehra

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    ThisconceptwasfirstintroducedbyProfessorJagdishBhagwati.Immiserisinggrowthreferstothat
    situationwhereanincreaseinacountrysexportcommodityleadstosuchdeteriorationinitstermsof
    tradethatthereisanetdeclineinitsexportearningsandsocialwelfare.
    Wehaveseenabovethat,givendemandschedulesofgoodsXandYandotherassumptionslike
    competitivemarkets,arelativereductioninthecostofproductionoflabourintensivecommodityXin
    labourabundantC1leadstoafallintheproductpriceratio(PX/PY).Itmeanstosaythatthereis
    deteriorationintermsoftrade(TT)ofC1.
    Followingconditionsmustbesatisfiedforacountrytoexperienceimmiserisinggrowth.
    i.Itsgrowthshouldbecharacterisedbyamorethanproportionateincreaseintheproductionofits
    exportcommodity.
    ii.Thesupplyofitsexportcommodityshouldbepriceinelasticsothatitiswillingtoexportmoreeven
    atreducedprice.
    iii.Theshareofitsexportcommodityinthetotalsupplyininternationalmarketsshouldbelarge
    enoughtodepressitsinternationalprice.Thisconditionappliesirrespectiveofwhetherthecountryin
    questionislargeorsmallorwhetheritisrichorpoor.
    Whatmattersisitsshareinthetotalworldexports,andtherelevantelasticitysofsupplyanddemand
    foritsexportcommodity.
    Thedemandforthiscommoditybytheimportingcountriesshouldbepriceinelasticsothatwithan
    increaseinthevolumeofexports,thereisanetdeclineintheexportearningsoftheexporting
    country.
    Beforetrade,theexportingcountrymustalreadybeheavilyengagedintrade,sothatthedeclinein
    itswelfareonaccountofdeteriorationinitstermsoftraderesultsinlossesthataremorethanthe
    additiontoitsgainsfromadditionaltrade.
    Itisseenthatdevelopingcountriesaremorepronetosufferingfromdeteriorationintermsoftrade
    withanexpansionintheirexports.
    http://www.shareyouressays.com/103196/conceptofimmiserisinggrowthofaneconomybyprofessorjagdishbhagwatiexplained

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    ConceptofImmiserisingGrowthofanEconomybyProfessorJagdishBhagwatiExplained!

    Thisisbecauseamajorportionoftheirexportscomprisemainlymineralsandotherprimaryproducts
    whichtendtohaveinelasticdemandinthedevelopedcountries.
    Inaddition,thedevelopedcountrieshavebeenabletocreatesyntheticsubstitutesforanumberof
    theseproducts.
    Theconceptofimmiserisinggrowth,introducedbyProfessorJagdishBhagwati,referstothat
    situationwhereanincreaseinacountrysexportcommodityleadstosuchdeteriorationinitstermsof
    tradethatthereisanetdeclineinitsexportearningsandsocialwelfare.

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