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This PDF is a selection from an out-of-print volume from the NationalBureau of Economic Research
Volume Title: Imports of Manufactures from Less Developed Countries
Volume Author/Editor: Hal B. Lary
Volume Publisher: NBER
Volume ISBN: 0-870-14485-5
Volume URL: http://www.nber.org/books/lary68-1
Publication Date: 1968
Chapter Title: Front matter, preface, tables of content
Chapter Author: Hal B. Lary
Chapter URL: http://www.nber.org/chapters/c4976
Chapter pages in book: (p. -19 - 0)
$8.50
IMPORTS OF MANUFACTURES
FROM LESS DEVELOPED
COUNTRIES
HAL B. LARY
Mr. Lary's study takes as its pointof departure the assumption that, ifthe less developed countries are to earnforeign exchange in amounts commen-surate with their needs for growth,they will have to achieve a rapid in-crease in exports of manufactures tothe developed countries. By definition,the less developed countries have littleaccumulated capital or technical skill.Any comparative advantage they mayattain in manufacturing for export,apart from strongly resource-based in-dustries, is therefore likely to be in"labor-intensive manufactures"—i.e.,those which require large inputs of un-skilled labor compared with bothhuman capital (or skills) and physicalcapitaL
The author distinguishes betweenlabor-intensive and capital-intensiveindustries on the basis of value addedby manufacture per employee. Thus,IMPORTS. OF the higher the value added per em-ployee, the more intensive the industryin human and physical capital com-bined; the lower the value added perI"i /\1\l 1.1 'iT 14J ES employee, the more labor-intensive theindustry. The pattern of industry onthis basis proves to be very similarFROM LESS from country to country, even from
the
richest to the poorest.Imports of labor-intensive manu-
factures from less developed countriesare found to have the following char-acteristics: (1) The trade is relatively
C small, accounting in for less than10 per cent of total imports by devel-oped from less developed countries.(2) It is highly concentrated by origin,destination, and product. It hasfl B L grown very rapidly in recent years,
(Continued on back flap)
NATIONAL BUREAU OF ECONOMIC RESEARCHSTUDIES IN INTERNATIONAL ECONOMIC RELATIONS 4
---
Imports of Manufactures
from
Less Developed Countries
NATIONAL BUREAU OF ECONOMIC RESEARCH
Studies in International Economic Relations
1. PROBLEMS OF THE UNITED STATES ASWORLD TRADER AND BANKER Hal B. Lary
2. PRICE AND QUANTiTY TRENDS IN THEFOREIGN TRADE OF THE UNITED STATESRobert E. Lipsey
3. MEASURING TRANSACTIONS BETWEENWORLD AREAS Herbert B. WOolley
4. IMPORTS OF MANUFACTURES FROMLESS DEVELOPED COUNTRIES Hal B. Lary
HAL B. LARY
Imports of Manufacturesfrom
Less Developed Countries
NATIONAL BUREAU OF ECONOMIC RESEARCHNEW YORK 1968
Distributed by COLUMBIA UNIVERSITY PRESSNEW YORK AND LONDON
Copyright © 1968 by National Bureau of Economic ResearchAll Rights Reserved
L.C. Card No. 67—28434Printed in the United States of America
NATIONAL BUREAU OF ECONOMIC RESEARCH1967
OFFICERS
Arthur F. Burns, ChairmanTheodore 0. Yntema, Vice ChairmanJohn R. Meyer, PresidentDonald B. Woodward, TreasurerGeoffrey H. Moore, Director of ResearchDouglas H. Eldridge, Executive Director
Hal B. Lary, Associate Director of ResearchVictor R. Fuchs, Associate Director of
ResearchMark S. Reinsberg, Director of
Publications
DIRECTORS AT LARGE
Joseph A. Beirne, CommunicationsWorkers of America
Wallace J. Campbell, Foundation forCooperative Housing
Erwin D. Canham, Christian ScienceMonitor
Solomon Fabricant, New York UniversityFrank W. Fetter, Dartmouth CollegeMarion B. Folsom, Eastman Kodak Co.Crawford H. Greenewalt, E. 1. du Pont
de Nemours & Co.Gabriel Hauge, Manufacturers Hanover
Trust Co.Walter W. Heller, University of MinnesotaAlbert J. Hettinger, Jr., Lazard Frères and
Co.Donald B. Woodward,
Harry W. Laidler, League for IndustrialDemocracy
John R. Meyer, Harvard UniversityGeoffrey H. Moore, National Bureau of
Economic ResearchCharles G. Mortimer, General Foods Corp.J. Wilson Newman, Dun & Bradstreet, Inc.George B. Roberts, Larchmont, N.Y.Robert V. Roosa, Brown Brothers
Harriman & Co.Boris Shishkin, American Federation of
Labor and Congress of Industrial Organ-izations
Gus Tyler, International Ladies' GarmentWorkers' Union
Joseph H. Willits, Lan ghorne, Pa.A. W. Jones and Co.
DIRECTORS BY UNIVERSITY APPOINTMENT
Francis M. Boddy, MinnesotaArthur F. Burns, ColumbiaLester V. Chandler, PrincetonMelvin G. deChazeau, CornellWalter D. Fisher, NorthwesternR. A. Gordon, CaliforniaHarold M. Groves, WisconsinGottfried Haberler, Harvard
Douglas G. Hartle, TorontoMaurice W. Lee, North CarolinaLloyd G. Reynolds, YaleTheodore W. Schultz, ChicagoRobert M. Solow, Massachusetts Institute
of TechnologyWillis J. Winn, Pennsylvania
DIRECTORS BY APPOINTMENT OF OTHER ORGANIZATIONS
Thomas D. Flynn, American Institute ofCertified Public Accountants
Nathaniel Goldfinger, American Federa-tion of Labor and Congress of IndustrialOrganizations
Harold G. Haicrow, American FarmEconomic Association
Walter E. Hoadley, American FinanceAssociation
Douglass C. North, Economic HistoryAssociation
Murray Shields, American ManagementAssociation
Willard L. Thorp, American EconomicAssociatiOn
W. Allen Wallis, American StatisticalAssociation
Theodore 0. Ynterna, Committee for Economic Development
DIRECTORS EMERITI
Percival F. Brundage.Shepard Morgan
Harry Scherman George SouleJacob Viner
SENIOR RESEARCH STAFF
Moses AbramovitzGary S. BeckerArthur F. BurnsPhillip Cagan -James S. EarleySolomon Fabricant
Milton FriedmanVictor R. FuchsRaymond W. GoldsmithJack- M. GuttentagDaniel M. HollandF. Thomas Juster
C. Harry KahnJohn W. KendrickIrving B. KravisHal B. LaryRobert E. LipseyJohn R. Meyer
Jacob Minceruse MintzGeoffrey H. MooreRobert P. ShayGeorge J. StiglerNorman B. Ture
Victor Zarnowitz
RELATION OF THE DIRECTORS TO THEWORK AND PUBLICATIONS OF THE
NATIONAL BUREAU OF ECONOMIC RESEARCH
1. The object of the National Bureau of Economic Research is to ascertain andto present to the public important economic facts and their interpretation ina scientific and impartial manner. The Board of Directors is charged with theresponsibility of ensuring that the work of the National Bureau is carried onin strict conformity with this object.
2. To this end the Board of Directors shall appoint one or more Directors ofResearch.
3. The Director or Directors of Research shall submit to the members of theBoard, or to its Executive Committee, for their formal adoption, all specificproposals concerning researches to be instituted.
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6. No manuscript may be published, though approved by each member of thespecial committee, until forty-five days have elapsed from the transmittal ofthe summary and report. The interval is allowed for the receipt of any memo-randum of dissent or reservation, together with a brief statement of his reasons,that any member may wish to express; and such memorandum of dissent orreservation shall be published with the manuscript if he so desires. Publicationdoes not, however, imply that each member of the Board has read the manu-script, or that either members of the Board in general, or of the special com-mittee, have passed upon its validity in every detail.
7. A copy of this resolution shall, unless otherwise determined by the Board, beprinted in each copy of every National Bureau book.
(Resolution adopted October 25, 1926,as revised February 6, 1933, and February 24, 1941)
CONTENTS
Preface xv
1. The Problem and a Summary of Findings 1
Introduction 1
Some Initial Assumptions 1
Focus of the Study: Labor-Intensive Manufactures 3
"The Overspil" View of Exports 6Limitations of Market Size in the Less Developed Countries 7
Proliferation of Small Countries 7Uncertain Prospects for Regional Integration 9
Costs of Excessive Import Substitution 10Regional or International Integration 12Summary of the Study 13
Value Added as a Guide to Factor Intensity 14A Common World Pattern 15Characteristics of the Trade 16Policy Choices and Results 17
2. Factor Intensities in the United States 18The Factor-Proportions Theorem 18Value Added per Employee as a Guide to Factor Intensity in
Manufacturing 20Array of U.S. Industries by Value-Added Criterion 23The Content of Value Added 30
Wages and Human Capital 35Nonwage Value Added and Physical Capital 40
Advertising and Other Influences on Value Added 43Supporting Data from India 46
Indirect Inputs and the Role of Natural Resources 48Resource-Oriented Manufacturing Industries 49
Viii Contents
3. International Comparisons of Factor Intensities 51The Phenomenon of Factor-Intensity Reversals 51
Different Elasticities of Substitution 53The Natural Resource Factor. Again 57
Problems of International Comparison 58Differing Degrees of Market Freedom 59Differences in Statistical Concepts 60Differences in Industries or Products Compared 61
Analysis of Three Summary Groups 62Analysis of Thirteen Main Groups 63Detailed Bilateral Comparisons 72
United States and United Kingdom 73United States and Japan 74United States and India 78
Technological Advance and Factor Intensities: The Case ofCotton Textiles 80
4. Trade in Labor-Intensive Manufactures 86Selection of Labor-Intensive Items 86
Application of Value-Added Criterion 86Summary Statement of Items Selected 88Valuation of Imports C.I.F. and F.O.B. 91
Characteristics of the Trade 93Relative Size of Imports 94Product Composition of the Trade 97Distribution by Importing Countries 99Distribution by Exporting Countries 102Imports from Other Low-Wage Countries 105
Market Potentials 107Past Growth, 1953—65 107Structure of Wages in Less Developed Countries 109Possible Areas of Rapid Growth 114
5. Commercial Policies of Developed Countries 116Tariff Structures: Nominal Versus Effective Rates 116Nontariff Barriers to Imports 122
Restraints on Imports of Cotton Textiles 123Jute, Leather, and Wood Products 125
Contents ix
The Problem of Increased Access to Markets 127The Issue of Preferences 127The Prebisch Proposals 129Australian Preference System 130The "Brasseur Plan" 132Diverse Policies and Common Objectives 133
AppendixesA. Value Added by Manufacture and Related Variables 139B. Bilateral Comparisons of Value Added per Employee 157C. The Selection of Labor-Intensive Manufactures 189D. Statistics of Imports of Labor-Intensive Manufactures by
Developed Countries, 1964 and 1965 215E. Derivation of C.I.F./F.O.B. Conversion Factors 274
Author Index 282
Subject Index 284
TABLES
1. Exports of Developed and Less Developed Countries, 1950and 1965 2
2. Supplementary Detail on Employment and Value Added inU.S. Manufacturing by Main Industry Groups and SelectedSubgroups, 1965 24
3. Partial Breakdown of Value Added in All U.S. Manufactur-ing Enterprises, 1957 34
4. Manufacturing Industries with Exceptionally High NonwageValue Added per Employee (1957) and High AdvertisingExpenditures (1957—58) in Relation to Physical Assets 44
5. Ranking of U.S. and Japanese Industries by Capital IntensityAccording to B. S. Minhas 56
6. Coefficients of Correlation Obtained in Detailed Log Corre-lation Analysis of Value Added, Wage Value Added, andNonwage Value Added per Employee, in the United Statesand the United Kingdom, Japan, and India 75
7. Capital Expenditures, Value Added, and Employment inCotton Weaving Mills (SITC 2211), 1947, 1954, 1958, and1961—65 83
8. Condensed List of Manufactures Selected as Labor-Inten-sive: U.S. Production and Imports and Imports of OtherDeveloped Countries, 1965 89
9. Imports of Textiles, Clothing, and Accessories (IncludingJute Products) by Developed Countries of the OECD fromAsian Countries Other Than Japan, 1963 95
Tables xi
10. Imports of Labor-Intensive Manufactures, Other Manufac-tures, and Unmanufactured Commodities by Developed fromLess Developed Countries, 1965 96
11. Imports of Labor-Intensive Manufactures by Developed fromLess Developed Countries: Distribution Among Four MainGroups of Products in 1965 and Increase from 1964 98
12. Imports of Labor-Intensive Manufactures by Individual De-veloped Countries from Less Developed Countries in 1965:Ratio to Imports of Similar Items from All Sources, Per-centage Distribution Among Importing Countries, and In-crease from 1964 100
13. Imports of Labor-Intensive Manufactures by Developed fromLess Developed Countries in 1965: Percentage DistributionAmong Importing Countries by Four Main Groups ofProducts 101
14. Imports of Labor-Intensive Manufactures by Developed fromLess Developed Countries by Four Main Groups of Productsand by Countries of Origin: Value in 1965 and Increasefrom 1964 103
15. Imports of Labor-Intensive Manufactures by DevelopedCountries from Less Developed Countries and from OtherLow-Wage Countries, 1965 106
16. Imports of Manufactures by Developed from Less DevelopedCountries: Imports in 1960 and 1965 and Balassa's Projec-tionsfor 1975 110
17. Imports by Developed Countries from Less DevelopedCountries in 1965: Selected Product Groups by Stage ofManufacture 117
18. Nominal Tariff Rates and Estimated Effective Rates onImports of Selected Intermediate Products and FinishedManufactures by the United States, the European EconomicCommunity, and Japan 120
A-i. Variables Used in Analysis of Wages and Skills in U.S.Manufacturing Industry 142
xii Tables
A-2. Variables Used in Analysis of Nonwage Value Added andPhysical Assets per Employee in 122. (Three-digit) U.S.Manufacturing Industries, 1957 . 146
A-3. Variables Used in Analysis of Nonwage Value Added andProductive Assets in Indian Manufacturing Industry, 1961 151
A-4. Linearity and Bartlett Tests for Comparisons of NonwageValue Added and Net Physical Capital per Employee in theUnited States and India 156
B-i. Variables Used in Comparison of Value Added per Em-ployee in the United Kingdom and the United States, 1958 161
B-2. Variables Used in Comparison of Value Added per Em-ployee in Japan and the United States, 1962 168
B-3. Variables Used in Comparison of Value Added per Em-ployee in India (1961) and the United States (1963) 179
B-4. Linearity and Bartlett Tests for Bilateral Comparisons ofValue Added per Employee 188
C-i. Selection of Labor-Intensive Manufactures Figuring in Im-ports of Developed from Less Developed Countries 191
D- 1. Textiles, Clothing, and Accessories . 218
D-2. Other Light Manufactures, Except Food 232
D-3. Labor-Intensive Food Manufactures 256
D-4. Labor-Intensive Industrial Materials 264
E-1. Derivation of Estimated Freight and Insurance Charges forPresent Analysis from Tariff Commission Study 275
CHARTS
1. Wage and Nonwage Value Added per Employee in U.S.Manufacturing by Major Industry Groups, 1965 21
2. Average Annual Earnings and the "Occupational Index" in59 Industry Groups in the United States, 1960 38
3. Average Annual Earnings and "Expected" Hourly Earningsin 59 Industry Groups in the United States, 1959 39
4. Nonwage Value Added and Net Physical Assets per Employeein U.S. Manufacturing by 122 Three-Digit Industries, 1957 42
5. Nonwage Value Added and Net Productive Assets per Em-ployee in 115 Manufacturing Industries, India, 1961 47
6. Hypothetical Illustration of Factor-Intensity Reversals withConstant Elasticity of Substitution Between Capital and Labor 54
7. Summary Analysis of Value Added by Manufacture in TwentyCountries: Three Groups of Manufacturing Industry Exclud-ing Food, Beverages, and Tobacco 64
8. Value Added per Employee in Thirteen Industry Groups, NineCountries 67
9. Average Annual Wage in Thirteen Industry Groups, ElevenCountries 68
10. Nonwage Value Added per Employee in Thirteen IndustryGroups, Nine Countries 69
11. Value Added per Employee in 103 Manufacturing Industries,the United Kingdom and the United States 74
12. Value Added per Employee in 178 Manufacturing Industries,Japan and the United States 76
xiv Charts
13. Value Added per Employee in 117 Manufacturing Industries,India and the United States 79
14. Imports of Labor-Intensive Manufactures by Developed fromLess Developed Countries, 1953—65 108
PREFACE
This study stems from my participation in one of the consultative groupspreceding the United Nations Conference on Trade and Development in1964 and, more specifically, from Geoffrey H. Moore's suggestion thatI explore further some of the impressions which I then formed with regardto exports of manufactures by less developed countries. The task haslasted longer than either. of us foresaw, largely because it has taken ona dual nature, being not only an analysis of trends in the trade but alsoan empirical investigation, across industries and countries, of factor in-tensities in manufacturing.
The work on factor intensities may be the more interesting, and nodoubt the more debatable, part of the study with respect to its implica-tions for economic theory and also with respect to the tools of analysisemployed. The use of value added by manufacture per employee as aguide to relative inputs of labor and capital permits a unified treatmentof both physical and human capital and exploits a rich body of data fromthe various national censuses of manufacture, the potentialities of whichfor research on this topic have, to the best of my knowledge, largelypassed unnoticed.
The analysis of past trends and other features of the trade leads,I believe, to more hopeful conclusions than most other studies regardingthe potentialities of exports of manufactures by less developed to devel-oped countries. In accord with the National Bureau's research objectives,the study seeks to illuminate but not to espouse policies. It will be evi-dent, I trust, that the basic conditions for the successful growth of thetrade include a receptive and cooperative attitude on the part of the im-porting countries and "outward-looking" policies on the part of the lessdeveloped countries—that is, a readiness on both sides to share in theinternational division of labor among countries at varying levels of eco-nomic development. If these conditions are not met, only meager resultscould be expected from various policy prescriptions now in the limelight,
xvi Preface
notably the extension of tariff preferences by developed countries to lessdeveloped countries or the formation among the latter of regional com-mon markets.
It is hoped that this study will be useful to the United States and othercountries in evaluating their past performance as importers and exportersand in developing policies conducive to the future growth of a segmentof world trade which, though still small, is of considerable importanceto the economic prospects of the larger and poorer part of the world'spopulation.
Various members of the National Bureau's staff have been most help-ful in reviewing drafts of the study and in advising on specific questions.They include in particular members of the staff reading committee forthe project—Victor R. Fuchs, Robert E. Lipsey, and Ilse Mintz—andalso Irving B. Kravis and H. G. Georgiadis. My thanks for valuablecriticism and suggestions are also due to Joseph A. Beirne, GottfriedHaberler, Boris Shishkin, and Willard L. Thorp of the National Bureau'sBoard of Directors. Among those who assisted in the project, Peter Laoand Ludmila Monkevic demonstrated skill and perseverance in extractingand coordinating production and trade data from disparate sources.Stephen Pappayliou and Nadeschda Bohsack assisted in this work duringpart of the time. Merle Yahr joined the project at a late stage, but still intime to make a much appreciated contribution in evaluating the statisticalresults and in improving the analysis. Irving Leveson, in connection withhis participation in the National Bureau's study of the service industries,prepared the correlations of "expected" and actual earnings in Chapter 2.
Among those outside the National Bureau to whom thanks are due forcomments and suggestions, I should particularly mention Maxwell R.Conklin, Chief of the Industry Division, Bureau of the Census, andEdward A. Robinson and Willis K. Jordan, members of that Division,though they may consider that my response to some of their criticismsof Chapters 2 and 3 has been defensive rather than positive. The samegeneral absolution from responsibility for the final results needs to bemade in recording my thanks to various other readers of an early draftof the report, including Robert E. Asher, Brookings Institution; DonDaly, Economic Council of Canada; William Diebold, Jr., Council onForeign Relations; Francesco Forte, University of Turin; Finn Gunde-lach, General Agreement on Tariffs and Trade; Gary Hufbauer, Uni-versity of New Mexico; Jacob J. Kaplan, Consultant; Hirotaká Kato,Kanagawa University; Julius L. Katz, U.S. Department of State; CharlesP. Kindleberger, M.I.T.; Ian M. D. Little, OECD; Gardner Patterson,
Preface xvii
General Agreement on Tariffs and Trade; Walter S. Salant, BrookingsInstitution; David J. Steinberg, Committee for a National Trade Policy;Robert W. Stevens, Indiana University; Raymond Vernon, HarvardUniversity; and Helen Waehrer, New York University.
We were fortunate in entering into an arrangement with the StatisticalOffice of the United Nations for processing the import statistics of thedeveloped countries in form suitable for our research needs. I want tothank Patrick J. Loftus, Director of that office, and Sidney Cashton andBipin L. Amrute, members of his staff, for delivering the data accordingto our specifications.
I am grateful to James F. McRee, Jr., for preparing the text for publi-cation; H. Irving Forman for his usual skill in drawing the charts; andMildred E. Courtney for her help in preparing the manuscript and inkeeping track of work in progress.
Finally, I wish to acknowledge with thanks the financial support whichthe Rockefeller Foundation and the Ford Foundation have provided forthe National Bureau's program of international studies, of which thisproject forms a part.
August 1967 HAL B. LARY
