SAMVAD: International Journal of Management

Open Access Open Access  Restricted Access Subscription Access

From Vanilla to Immiserizing Growth, Better Economy and Worse Living Conditions: A Case of Madagascar


Affiliations
1 Student in International Studies, University of Denver, 2201 Gaylord Street, Denver, CO 80208, United States
2 International Review of Business and Economics, Campus Box 77, P. O. Box 173362, College of Business, Metropolitan State University of Denver, Denver, CO 80217-3362, United States
 

This paper aims to explain and test Jagdish Bhagwati’s theory on Immiserizing Growth, focusing on export elasticity of demand. The Immiserizing Growth Hypothesis refers to the phenomenon when a country’s economic growth through international trade harms its citizens’ welfare because its Terms of Trade (TOT) deteriorate from increased exports (Bhagwati, 1958). Since then, other scholars have argued the theory lacks real-world consideration and finds almost no real-world case where the theory holds (Pryor, 2007). The core of Bhagawati's theory is not just the relationship between the Gross Domestic Product (GDP) growth and increase in the poverty rate, but also how the deterioration of TOT and increasing trade cause Immiserizing Growth. How does the elasticity of a country’s export sector affect that country’s TOT? Does Dr. Bhagwati’s causation still stand today? The paper's first section explains Bhagwati’s theory in detail and examines past publications and studies on Immiserizing Growths. Then, the study applies the approach to Madagascar’s economy from 1993 to 2008, excluding fiscal years 2002 and 2003 due to election violence. The case study hopes to establish causality between export supply inelasticity and the occurrence of Immiserizing Growth using empirical data. Lastly, the paper concludes with potential future case study plans and impacts.


Keywords

Country Study: Madagascar, Economic Growth and Terms of Trade, Immiserizing Growth Theory
User
Notifications
Font Size

  • BBC News. (2018). Madagascar profile-Timeline. BBC News. Available from: https://www.bbc.com/news/ world-africa-13864364.

  • Bhagwati, J. (1958). Immiserizing growth: A geometrical note. The Review of Economic Studies, 25(3), 201-205. https://doi.org/10.2307/2295990.

  • Central Intelligence Agency. Madagascar. In The World Factbook-Madagascar. Central Intelligence Agency. Available from: https://www.cia.gov/the-world-factbook/ countries/madagascar/.

  • Chang, G. H. (1991). Immiserizing growth in centrally planned economies. Journal of Comparative Economics, 15(4), 711-717. https://doi.org/10.1016/0147-5967(91) 90009-I.

  • Chang, G., Yang, S., & Chang, K. (2018). The immiserizing growth during the period of china’s cultural revolution. The Chinese Economy, 51(5), 387-396. https://doi.org/10 .1080/10971475.2018.1479605.

  • Dollar, D., & Kraay, A. (2002). Growth is good for the poor. Journal of Economic Growth (Boston, Mass.), 7(3), 195-225. https://doi.org/10.1023/A:1020139631000.

  • Fosu, A. K. (2017). Growth, inequality, and poverty reduction in developing countries: Recent global evidence. Research in Economics, 71(2), 306-336. https://doi.org/10.1016/j.rie.2016.05.005.

  • Johnson, H. G. (1967). The possibility of income losses from increased efficiency or factor accumulation in the presence of tariffs. The Economic Journal, 77(305), 151-154. https://doi.org/10.2307/2229373.

  • Liu, B., Yeo, S., & Donaldson, J. A. (2019). Exploring the causes of immiserizing growth: a comparison of pathways. In Immiserizing Growth. Oxford University Press. https://doi.org/10.1093/oso/9780198832317.003.0005.

  • Pryor. (2007). Immiserizing growth as seen by Bhagwati, Samuelson and others. The Journal of Economic Education, 38(2), 208-214. https://doi.org/10.3200/ JECE.38.2.208-214.

  • Shaffer, Kanbur, R., & Sandbrook, R. (2019). Immiserizing growth: When growth fails the poor. Oxford University Press. https://doi.org/10.1093/oso/9780198832317.001.0001.

  • Steavenson, W. (2019). PHOTOS: Vanilla Boom Is Making People Crazy Rich - And Jittery - In Madagascar. NPR. Available from: https://www.npr.org/sections/goatsandsoda/2019/09/15/757899271/photos-vanilla-boom-is-making-people-crazy-richand-jittery-in-madagascar.

  • UN Comtrade: International Trade Statistics. Madagascar Trade Data. Retrieved March 3, 2022, Available from: from https://comtrade.un.org/data/.

  • WITS Data. Trade Statistics by Country. Retrieved February 28, 2022, Available from: https://wits.worldbank.org/countrystats.aspx?lang=en.

  • World Bank. Madagascar | Data. Available from: https://data.worldbank.org/country/madagascar


Abstract Views: 275

PDF Views: 136




  • From Vanilla to Immiserizing Growth, Better Economy and Worse Living Conditions: A Case of Madagascar

Abstract Views: 275  |  PDF Views: 136

Authors

Tianyue (Steven) Gu
Student in International Studies, University of Denver, 2201 Gaylord Street, Denver, CO 80208, United States
Kishore G. Kulkarni
International Review of Business and Economics, Campus Box 77, P. O. Box 173362, College of Business, Metropolitan State University of Denver, Denver, CO 80217-3362, United States

Abstract


This paper aims to explain and test Jagdish Bhagwati’s theory on Immiserizing Growth, focusing on export elasticity of demand. The Immiserizing Growth Hypothesis refers to the phenomenon when a country’s economic growth through international trade harms its citizens’ welfare because its Terms of Trade (TOT) deteriorate from increased exports (Bhagwati, 1958). Since then, other scholars have argued the theory lacks real-world consideration and finds almost no real-world case where the theory holds (Pryor, 2007). The core of Bhagawati's theory is not just the relationship between the Gross Domestic Product (GDP) growth and increase in the poverty rate, but also how the deterioration of TOT and increasing trade cause Immiserizing Growth. How does the elasticity of a country’s export sector affect that country’s TOT? Does Dr. Bhagwati’s causation still stand today? The paper's first section explains Bhagwati’s theory in detail and examines past publications and studies on Immiserizing Growths. Then, the study applies the approach to Madagascar’s economy from 1993 to 2008, excluding fiscal years 2002 and 2003 due to election violence. The case study hopes to establish causality between export supply inelasticity and the occurrence of Immiserizing Growth using empirical data. Lastly, the paper concludes with potential future case study plans and impacts.


Keywords


Country Study: Madagascar, Economic Growth and Terms of Trade, Immiserizing Growth Theory

References





DOI: https://doi.org/10.53739/samvad%2F2022%2Fv24%2F169607