What makes exports boom?

Export supply responsiveness is of central concern to the World Bank and its client countries. In the past fifteen years the success of structural adjustment programs has depended significantly on the extent to which strong export responses have followed commercial policy reforms and devaluation. Where responses have been strong, countries have been able to move past balance of payments crises and get on with the business of recovery and growth. Strong export responses have also enabled countries to quickly reap the efficiency gains associated with larger trade volumes, to draw on a richer menu of intermediate goods, and to improt capital goods that embody new technologies. Although much of the adjustment to the debt crisis has now been accomplished, it remains an important problem in many countries. Further, the ease with which countries will absorb negative external shocks in the future will hinge partly upon the ease with which they can induce their producers to reallocate production from domestic to foreign markets. Unfortunately, export supply responses are not well understoood. Seemingly similar reform packages have generated a large range of export responses in different countries and time periods. Studies attempting to explain the export growth puzzle using macroeconomic or sectoral data on trade flows have met with little success. Hnece policymakers have faced substantial uncertainty whether a given reform package will, for their country, generate the needed response. To obtain a fresh perspective on the determinants of export supply response, a recently completed World Bank project examined the microeconomic foundations of industrial export booms in Colombia, Mexico, and Morocco. For each country, plants were followed through time, and their decisions to begin exporting, cease exporting, or adjust their export volumes were analyzed in detail. The results summarized in this book, shed substantial new light on the fundamental question of what makes exports grow.