Supply Relations for Minor Exports From Honduras: Issues in Trade and Development

135 p.Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 1987.International trade can play an important role in a developing country's economic growth. This role is often critical in a small-open economy, especially if it is dependent on demand for a limited range of commodity exports. Such is the case for Honduras, whose main exports have traditionally been bananas, coffee, and minerals.Documentation was provided to argue that the import substitution policies, adopted by Honduras and shared with the Central American Common Market, together with reliance on concessional and private capital inflows, especially during the 1970s, were insufficient by themselves to generate an adequate rate and stability of economic growth. Specifically, exchange earnings from major exports proved inadequate to sustain consistent and efficient economic expansion. The appeal of minor exports is the prospect of a more diversified portfolio of exchange earnings, to reduce the variance and to increase the mean.This study is thus focussed on Honduran minor exports, referred to here as all exports excluding bananas, coffee, and minerals. The numerous products then were classified into three groups: manufacturers, selected crops, and miscellaneous. A reduced-form export supply function was derived from theoretical elements of profit-maximizing firms and translated into a regression model and estimated for the aggregate of minor exports and for each of the components.In most cases, the minor export supply function explained more than 90 percent of the variation in the dependent variable. The parameter estimate for the variable measuring world income was significant in nearly all equations, and the sign of its coefficient was positive as expected. For the ratio of world to domestic wages, all coefficients were positive, except for one subclass of manufacturers. However, that negative coefficient was significant. Half the remaining coefficients were significant as well as positive, casting doubts on "elasticity pessimism", a popular generalization among Honduran professionals and policy makers.The response to price was found to be non-significant and, except for the group miscellaneous, ISIC 31, and ISIC 33, the sign of its coefficient was negative instead of the expected positive. But the results cannot be considered conclusive. Specifically, a problem most likely was in the construction of the price indexes, from the lack of adjustment for trade policy distortions.U of I OnlyRestricted to the U of I community idenfinitely during batch ingest of legacy ETD