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The paper develops a simple three-sector model of a developing country with nominal wage rigidity, in which one sector is thought of as the primary sector and the other two are sectors in which the country can diversify. The paper then analyzes the relationship between the market structure of the nonprimary sectors and equilibrium adjustments to shocks in the primary sector. In particular, the paper examines under what conditions the country should promote one nonprimary sector over another. Among other things, it argues that developing countries should promote those sectors that are more integrated with the outside world.
Foreign exchange rates --- Monetary policy --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Exchange rates --- Fixed exchange rates --- Flexible exchange rates --- Floating exchange rates --- Fluctuating exchange rates --- Foreign exchange --- Rates of exchange --- Econometric models. --- Rates --- Exports and Imports --- Labor --- Macroeconomics --- Wages, Compensation, and Labor Costs: General --- Aggregate Factor Income Distribution --- Labor Economics: General --- Trade: General --- Labour --- income economics --- International economics --- Wages --- Income --- Real wages --- Exports --- Labor economics --- Indonesia
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The paper examines the implications of lower trade barriers for sectoral diversification and macroeconomic stability in developing economies with a large primary goods sector. It shows that lower trade barriers can have ambiguous effects on macroeconomic stability. It shows also that diversification, in the form of equal distribution of resources between nonprimary sectors, may be counterproductive. In fact, investment in the nonprimary sector with lower trade barriers unambiguously enhances macroeconomic stability in a developing economy that is subject to substantial primary shocks.
Developing countries -- Commercial policy -- Econometric models. --- Electronic books. -- local. --- Non-tariff trade barriers -- Developing countries -- Econometric models. --- Commerce --- Business & Economics --- International Commerce --- Non-tariff trade barriers --- Econometric models. --- Developing countries --- Commercial policy --- Non-tariff distortions of trade --- Nontariff trade barriers --- Emerging nations --- Fourth World --- Global South --- LDC's --- Least developed countries --- Less developed countries --- Newly industrialized countries --- Newly industrializing countries --- NICs (Newly industrialized countries) --- Third World --- Underdeveloped areas --- Underdeveloped countries --- Protectionism --- Tariff --- Exports and Imports --- Labor --- Macroeconomics --- Monetary Policy --- Economic Integration --- Open Economy Macroeconomics --- Trade Policy --- International Trade Organizations --- Wages, Compensation, and Labor Costs: General --- Aggregate Factor Income Distribution --- Trade: General --- International economics --- Labour --- income economics --- Trade barriers --- Wages --- Real wages --- Income --- Exports
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