5
$\begingroup$

For a course in international trade, our professor touched on the idea of immiserizering growth. He emphasized that immiserizing growth was a theoretical outcome from specialization of trade and did not provide the class with examples on the global market.
What are some real world examples of immizerizing growth?

$\endgroup$
2
$\begingroup$

The concept of immiserizing growth describes a situation where a mainly exporter country that grows, finds itself worse-off because the terms of trade (relative prices) change too much against it.

Immiserizing growth has generated some theoretical interest in the past, and various situations have been determined under which such a phenomenon may arise, enhancing the original contributions by
Johnson, Harry G. 1955. "Economic Expansion and International Trade," Manchester School 23, pp. 95-112
and
Bhagwati, Jagdish. 1958. "Immiserizing Growth: A Geometrical Note," Review of Economic Studies 25, (June), pp. 201-205.

I do not know of any real-world example though. On the contrary some studies have been conducted which have estimated the critical values for the variables of a real-world economy, in order for it to face the possibility of immiserizing growth-and these thresholds are not observed in practice.

As an example, Ramon Lopez (1991), in "Microeconomic Distortions: Static Losses and their Effect on the Efficiency of Investment", studying the economy of Chile for the period 1974-1989, estimated that, under full employment, the critical tariff rate for the prospect of immiserizing growth to arise would be $185$%, while with unemployment, it would be $260$%, which are too high compared to observed tariff rates.

The real concern about International Trade is its distributional effects inside each country, i.e. whether it creates "misery" for part of the population, while benefiting some other part. This is also "immiserizing growth" (for some of the citizens) but not in the sense meant by the scholars that originally coined the term.

| improve this answer | |
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.