Trade liberalization and premature deindustrialization in Colombia

Mateo Hoyos López

doi:10.1186/s40008-017-0095-6

Abstract

This work analyzes the phenomenon of premature deindustrialization for Colombia and for other seven Latin American countries. Through a Koyck transformation model for the Colombian case, and a panel data fixed effects model for the complete sample of eight Latin American countries, this work documents that the fall in the average effective tariff in the region is the main economic explanation of the premature reduction in the manufacturing share. Also, it provides evidence that relates negative performance of manufacturing to foreign investment flows and to Dutch disease. On the other hand, taking into account the importance of manufacturing on productive sophistication and economic development, this work applies product space methodology in order to determine strategic manufacturing sectors for the establishment of a selective industrial policy for the Colombian case. As a result, the sectors that must be encouraged by the Colombian State are manufactured intermediate goods, mainly goods in the chemical industry.

Highlights

Despite the recent boom of economic growth in Colombia, explained mainly by the period of high prices in commodities of mining and energy, the country is still far from the income of developed countries
In 2014, while USA had a GDP per capita of more than fifty thousand dollars, Colombia presented a GDP per capita of less than eight thousand dollars
The ordinary least squares (OLS) estimation shows that the coefficient of average effective tariff (AET) is positive

Summary

Introduction

Despite the recent boom of economic growth in Colombia, explained mainly by the period of high prices in commodities of mining and energy, the country is still far from the income of developed countries. In 2014, while USA had a GDP per capita of more than fifty thousand dollars, Colombia presented a GDP per capita of less than eight thousand dollars.. There are serious criticisms to the GDP as a measure of well-being, this difference expresses a disturbing contrast that must be studied in detail. While this divergence between the USA and Colombia is of old date, there are countries that in the last 50 years have managed to close the income gap, leaving behind other developing economies. In 1960 Korea had a GDP per capita smaller than the Colombian, but in 1990 the Asian country was already richer. The literature says that the set of policies used by the Asian country, which caused this economic “miracle” or late industrialization process, were very

Methods

Results

Conclusion