Economic Growth In Comparative Advantage Trap Analysis

Economic growth elements include natural resources, labor and capital. The factor endowments'structure determines the comparative advantage in economic growth. According to the theory of comparative advantage, a country's industrial development should use its relatively affluent elements. The countries abundant in natural resources should develop resource-intensive industries. The countries abundant in labor should develop labor-intensive industries. The countries abundant in capital should develop capital-intensive industries. This conforms to comparative advantage development strategy. However, the developing tracks of many countries which participate in the international division of labor according to the theory of comparative advantage differ from the economists'anticipation: the countries abundant in natural resources suffer from "natural resources'curse"; the countries abundant in labor are still in "poverty trap" after a short-run economic growth; Even as Japan such a capital intensive developed country, is also in the economic stagnation period over 20 years since the "bubble" bursts. In the development path of development, the countries according to the development strategy of comparative advantage may fall into the comparative advantage trap .what is the reason? Why some countries will fall into trap, some countries won't? Why can some country falling into the trap succeed in escaping, some countries have fled in mud?To study and solve the above problems, this paper focus on several forms of the comparative advantage trap, adhering to the Marxist materialistic dialectics, adopting comprehensive analysis method, comparative analysis, the standard and the empirical analysis method. According to the performance of falling into trap, this paper analyzes the causes, conditions of being trapped and the measures to avoid or get away from trap.In Chapter 1, the author focuses on domestic and foreign literature review on the international division of labor and comparative advantage. This part mainly introduces and reviews the researching results of the domestic and overseas scholars about this problem. The second chapter first elaborates the economic growth contribution of the comparative advantage formed by natural endowment from both theoretical and empirical views, discusses the phenomenon "resource curse", and points out that the "resource curse" essentially is the comparative advantage trap caused by inputs of excessive use of natural resources. To demonstrate the formation of "resource curse" and mechanism, this part analyzes the Dutch disease theory, deteriorating terms of trade theory, the product prices and elements price changes in an economy, the depositing cost of natural resources'industries. Then, this part introduces the serious consequences caused by the Natural resources'curse, which includes extruding the resources from industry, thus causing the insufficient physical capital accumulation and insufficient manpower capital investment of domestic manufacturing industry, forming the simple industrial structure, worsening the income distribution structure, resulting in rent-seeking phenomenon. In the final analysis of Chapter 2, this paper brings the reason of the Natural resources'curse and from the constraint conditions of economic growth of the countries which having natural resource endowment analyzing the countries'economic policy based on natural resource endowment which promote or restrict economic growth, and puts forward how to run away from the comparative advantage trap caused by the Natural resources'curse. In Chapter 3, the author points out that demographic dividend is the comparative advantage brought by the plenty labor, also a booster for economic growth. Also, this paper discusses the positive and negative effect of the population scale expanding role for economic growth, two demographic dividend periods, and the relationship between population age structure and savings. Then, the author analyzes the gradually disappearing demographic dividend and the formation of demographic debt and proposed demographic curse hypothesis. At last, the author proposes the constraining conditions from demographic dividend to demographic debts, and, on this basis, brings some policy suggestions to deal with the demographic debt. In Chapter 4, the author discusses the relationship between capital and economic growth, and points out that the capital accumulation plays as an important role in economic growth. Analyzing capital trap - "industry hollowing out", says that foreign direct investment doesn't produce the Industry hollowing out. Then, the author brings the constraining conditions of forming the capital trap in the capital-intensive industrial development with the capital endowment and transferring the industries to overseas. Analyzing the Industry hollowing-out in Japan and the U.S.A, the author concludes the reasons and gives some concrete suggestions to deal with the Industry hollowing-out. In Chapter 5, the author discusses that factors market price is the main index which reflects the changes and development of comparative advantage, and the control and distort of factors'market would depress rational factor endowments structure changes. The author puts forward how to perfect factor market, so as to realize the dynamic comparative advantage, to avoid forming the path dependence of a single factor input and to escape from trap successfully.The last part is to generalize conclusions, and summarizes the main ideas, and puts forward some policy Suggestions. Relying on a king of factor endowments to form comparative advantages of international division of labor does not necessarily lead one country economy into a "comparative advantage trap". Within the constraints, comparative advantage will bring economic activity in the country's long-term dynamic growth. The government should fulfill the Pareto improvement to avoid factor market imbalances, realize the factor market development, make market price changes can accurately reflects the changes of the structure of economic resources, and thus make the comparative advantage change dynamically. Before comparative advantage change, the government should have the correct prediction and save for a rainy day, cope with change of economy, and adjust the dominant industry body in advance. Through the education training and promoting human capital accumulation, an economy should adapt to the dynamic change of comparative advantage.In general, this paper has the following innovative points:(a) The paper pointed out that "resource curse", "population liability" and "industry hollowing-out" phenomena are really the comparative advantage traps. Because of the comparative advantage in some kind of factor, one country develops a dominant industry by using the factor heavily. In using the factor to product, an economy will form the path dependence, and the factor market will distort, when the structure of the factor endowments changes. The initial static comparative advantage may not turn into the dynamic comparative advantage, thus the economy would fall into the comparative advantage trap.(b) The author point out that today's demographic dividend may be tomorrow's demographic debt. The future of the labor burden may result in economic stagnation and even backwards and form the demographic curse similar to the resource curse.(c) Analyzing the change of the structure of factor endowments, the author points out that the distortions and control in the factor market is the reason that an economy forms comparative advantage trap. The dominant industry formed the path dependence in its developing process will also force the government intervene the factor market, thus, make distortions. The methods to solve the problems lies in: reducing unnecessary intervention of the factor market price, letting elements can be correctly reflect the elements of an economy so as to achieve the exiguity factor endowments structure upgrade, making the comparative advantage promote dynamically, forming the technology innovation ability, promoting human capital accumulation and make its industrial structure upgrade smoothly, will fulfill the economic development constantly, dynamically and smoothly.