Conceptual Framework
International trade helps the economies of the countries by providing more jobs for people in order to process various commodities. If a country's economy is slow so does the volume of international trade while higher output produces more trade. The relevance of international trade has been on the rise in recent centuries in its economic, social, and political contribution. Without international trade, nations would be limited to he goods and services produced within their own borders. Increasing international trade is crucial to the continuance of globalization and industrialization especially in the situation of the Philippines.
There are so many theories and concepts regarding exports. Some of those theories and concepts were used in this study in order for our group to expound the relevant inputs and ideas. These theories and concepts will also set the groups outline, boundaries, and will serve as a working hypothesis.
Export-base theory is the focal concept in establishing the group's objective. The key concept of the export- base theory is that export activity is the engine for regional economic growth through export sales. The export-base theory of growth is grounded in the idea that a local economy must increase its monetary inflow if it is to grow and the only effective way to increase monetary inflow is to increase exports (John Blair, 1995). Export base theory argues that a county's or community's economy may be bifurcated into two sectors: an export or basic sector and a non-export or non-basic sector (Andrews, 1970; North, 1956; Tiebout, 1956).
External demand for a region's exportable goods and services injects income into the local economy, which in turn augments local demand for non-exportable goods and services (Krikelas 1992). In the historical perspective, this theory has been used in comparative static analysis to examine impacts on income and employment of a change in the local economy by export sales. These impacts are obtained as “multipliers”. The multipliers derived from the model are used to ‘forecast’ changes in income or employment attributed to a change in regional exports.
In export -base theory, it is argued that an economy is divided into two sectors; export or basic sector and the non export or non basic sector. The export or the basic sector is portion of the local economy that trades with firms outside the local region. The export trade brings in income to the area which according to the export base theory generates future development in the local economy. The non export or non basic sector sell their products within the local economy and exist to support export or the basic sector. Therefore expansion in the basic economic sector will likewise increase economic in the non basic economic sector.
According to Tiebout (1962, p.10), export markets are considered the prime movers of the local economy. If employment serving this market rises or falls, employment serving the local market is presumed to move in the same direction. When the factory closes, retail merchants (local) feel the impact as laid –off factory workers have less to spend. Because of prime mover prime role, export employment is considered as “basic”. Employment which serves the local market is considered adaptive and is titled “non-basic”.
It must also be noted that a regional economy need not be solely dependent on natural resources for growth (Stabler, 1968). Not only will the long-run characteristics of the natural resource help dictate a region's growth pattern, but also population growth, changes in taste, new discoveries, depletion of natural resources, changes in technology, linkage effects, will all have an influence on a region's economic growth potential.
The economic base model starts from the premise that economic activity can be separated into three sectors/stages, often referred to as the Fisher Clark thesis (Fisher, 1935; Fourastie, 1949). According to this theory of economic development there is a "natural" process of industrialization starting with the primary industries (e.g., agriculture, fishing, forestry and mining) which then evolves into manufacturing/secondary economic and then into the service/tertiary sector. The underlying assumption appears to be that services are in some sense "parasitic" and contribute little to the growth of local and regional economies (Kaldor, 1966). At the extreme, Fourastie (1949, as cited in Debbage & Daniels), for example, argues that if a regional economy develops the tertiary sector beyond the level at which it can be supported by the primary and secondary sectors this will cause economic decline rather than growth.
One of the uses of export-base theory is the identification of economic sectors that export and the amount of their export sales. By identifying the export or basic sectors, regional development practitioners can identify factors that influence export sales. If some factors are endogenous to the regional economy, regional development authorities may be able to formulate strategies to strengthen, protect, or expand sectoral export sales. Sectors that do not export and that may be importers of a given good and service also can be identified. By identifying importing sectors, regional economic development practitioners can formulate import substitution strategies that potentially could reverse flows of dollars from the regional economy (Shaffer, 1989).
There are so many theories and concepts regarding exports. Some of those theories and concepts were used in this study in order for our group to expound the relevant inputs and ideas. These theories and concepts will also set the groups outline, boundaries, and will serve as a working hypothesis.
Export-base theory is the focal concept in establishing the group's objective. The key concept of the export- base theory is that export activity is the engine for regional economic growth through export sales. The export-base theory of growth is grounded in the idea that a local economy must increase its monetary inflow if it is to grow and the only effective way to increase monetary inflow is to increase exports (John Blair, 1995). Export base theory argues that a county's or community's economy may be bifurcated into two sectors: an export or basic sector and a non-export or non-basic sector (Andrews, 1970; North, 1956; Tiebout, 1956).
External demand for a region's exportable goods and services injects income into the local economy, which in turn augments local demand for non-exportable goods and services (Krikelas 1992). In the historical perspective, this theory has been used in comparative static analysis to examine impacts on income and employment of a change in the local economy by export sales. These impacts are obtained as “multipliers”. The multipliers derived from the model are used to ‘forecast’ changes in income or employment attributed to a change in regional exports.
In export -base theory, it is argued that an economy is divided into two sectors; export or basic sector and the non export or non basic sector. The export or the basic sector is portion of the local economy that trades with firms outside the local region. The export trade brings in income to the area which according to the export base theory generates future development in the local economy. The non export or non basic sector sell their products within the local economy and exist to support export or the basic sector. Therefore expansion in the basic economic sector will likewise increase economic in the non basic economic sector.
According to Tiebout (1962, p.10), export markets are considered the prime movers of the local economy. If employment serving this market rises or falls, employment serving the local market is presumed to move in the same direction. When the factory closes, retail merchants (local) feel the impact as laid –off factory workers have less to spend. Because of prime mover prime role, export employment is considered as “basic”. Employment which serves the local market is considered adaptive and is titled “non-basic”.
It must also be noted that a regional economy need not be solely dependent on natural resources for growth (Stabler, 1968). Not only will the long-run characteristics of the natural resource help dictate a region's growth pattern, but also population growth, changes in taste, new discoveries, depletion of natural resources, changes in technology, linkage effects, will all have an influence on a region's economic growth potential.
The economic base model starts from the premise that economic activity can be separated into three sectors/stages, often referred to as the Fisher Clark thesis (Fisher, 1935; Fourastie, 1949). According to this theory of economic development there is a "natural" process of industrialization starting with the primary industries (e.g., agriculture, fishing, forestry and mining) which then evolves into manufacturing/secondary economic and then into the service/tertiary sector. The underlying assumption appears to be that services are in some sense "parasitic" and contribute little to the growth of local and regional economies (Kaldor, 1966). At the extreme, Fourastie (1949, as cited in Debbage & Daniels), for example, argues that if a regional economy develops the tertiary sector beyond the level at which it can be supported by the primary and secondary sectors this will cause economic decline rather than growth.
One of the uses of export-base theory is the identification of economic sectors that export and the amount of their export sales. By identifying the export or basic sectors, regional development practitioners can identify factors that influence export sales. If some factors are endogenous to the regional economy, regional development authorities may be able to formulate strategies to strengthen, protect, or expand sectoral export sales. Sectors that do not export and that may be importers of a given good and service also can be identified. By identifying importing sectors, regional economic development practitioners can formulate import substitution strategies that potentially could reverse flows of dollars from the regional economy (Shaffer, 1989).
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