Catching Up or Falling Behind
Chapter 6: Sources of Export Growth: A Constant Market Share Analysis
Export growth in any country could come from the demand side as well as the supply side. To investigate the sources of export growth, it is necessary to examine both the export markets’ changing conditions and the export country’s relative competitiveness, defined as its domestic supply relative to supply from its competitors. One of the tools for analyzing sources of growth is the “constant market share” (CMS), first introduced by Tyszynski (1951), who calculated what the hypothetical share of a country’s exports in the world market would have been if its market share in each commodity group had remained constant over time. The difference between the hypothetical and the initial market shares is the change in the market share for that country. The residual term, which is the difference between the final and the hypothetical market shares, is the competitiveness effect. CMS analysis was further developed by Leamer and Stern (1970). They decomposed the sources of export growth (greater than the world trend) into a commodity composition effect, a market distribution effect, and a competitiveness effect. The commodity composition effect is used to measure whether the growth in exports is due to the changing commodity composition of exports as market demand for various commodities changes dynamically from time to time. The market distribution effect measures whether the growth is due to the changing export destinations as some markets grew rapidly whereas others became stagnant. The competitiveness effect is used to measure whether the growth in exports is due to the...
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