Changes in Competitive Strength and Export Shares of Major Industrial Countries

Abstract

THE PRINCIPAL AIM of this paper is to consider the extent to which changes in any one exporting country's share in the total of manufactured goods exported by a number of countries can be accounted for statistically by changes in the competitive strength, as measured by some price index, of that country. The method adopted is somewhat unusual.' The customary and direct approach to such a problem is to correlate the variations in the amount of a single country's exports for a number of years with concurrent or preceding variations in its price level, relative to prices abroad, and any other relevant factors. This approach has the merit of revealing the differences between the price elasticities of world demand for the exports of different countries, but it tends to take account of simultaneous or short-run reactions only. In the present paper, however, export changes between a given pair of years are correlated, for a number of countries, with price changes between the same pair of years. This approach can yield only a "normal" or average elasticity of substitution in world demand between the exports of different countries, not strictly applicable to the exports of any individual country, but it has the merit of being capable-if the time interval chosen is a long one-of reflecting fairly long-run reactions. It is clear that changes in country shares in the export trade are not entirely determined by changes in competitiveness, however measured;