Tuesday, November 30, 2010

Self Discovery in Togo- Not binding?

Self-discovery refers to the process of identifying industries with potential but as of yet unrealized comparative advantage. Private entrepreneurs may be reluctant to accept the risks involved in developing new products or industries if they fear that others will quickly imitate their activity and eliminate the profits necessary to offset the initial investments and risks. Historical export data from the country in question, as well as in other countries at similar income levels, can be used to infer likely opportunities for export diversification and growth (Klinger and Lederman 2006, Hausmann et al. 2005, Hausmann and Klinger 2006, and Klinger and Lederman 2006). This literature uses the concept of revealed comparative advantage (RCA) over time, e.g. changes in export composition between different periods, to assess the dynamism of a country’s exports. Exports of particular commodities can also be assessed in terms of their growth potential, by examining the income levels of other countries that export this and similar products. That is, products typically exported by high-income countries are assumed to be more beneficial for generating growth than products typically exported by low-income countries.

The turnover in exports suggests that self-discovery is not a binding constraint to growth in Togo. About 20 percent of Togo’s exports comprising 31 product groups at the 3-digit SITC level have emerged only since 2000, suggesting that some innovation is taking place. Exports of this group have increased 14.5 percent between 1992-96 and 2002-06. The “implied income” associated with this export basket, when looking at other countries exporting the same products, was 30 percent above that of the traditional exports of Togo.
-Togo - Reviving the traditional sectors and preparing for the future : an export-led growth strategy - country economic memorandum

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