Steel, Trade, and Development: A Comparative Advantage Analysis With Special Reference to the Case of Brazil
Braga, Carlos Alberto Primo
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https://hdl.handle.net/2142/77433
Description
Title
Steel, Trade, and Development: A Comparative Advantage Analysis With Special Reference to the Case of Brazil
Author(s)
Braga, Carlos Alberto Primo
Issue Date
1984
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, General
Language
eng
Abstract
This work describes the diffusion process of the steel industry in the Periphery of the industrialized world--particularly, in Brazil. The current crisis of the world steel industry is analyzed in Chapter I from the standpoint of the economic forces that have been gradually shifting comparative advantage in steel production in favor of less developed countries (LDCs) in the post-World War II era. The basic research question is whether Brazil, one of the leading steel producers in the Periphery, had already achieved comparative advantage in large scale steel production by the late 1970s.
Chapter II shows that the theoretical debate between free-traders and protectionists influenced the tempo and the characteristics of the diffusion process and that this process was never driven by static efficiency considerations. The export performance of several LDCs in the last ten years, however, has given empirical relevance to the proposition that the latest steel projects implemented by these countries would be approved even by static efficiency criteria. In this context, Chapter III introduces the Domestic Resource Cost (DRC) concept as a suitable method for comparative-advantage oriented project evaluation.
The analysis is then focused on the Brazilian steel industry. Its historical evolution is summarized in Chapter IV, and Chapter V uses the DRC concept to evaluate the expansion projects of two of its major steel integrated plants. Both projects fail the DRC test, suggesting that by the late 1970s Brazil had not yet achieved comparative advantage in the production of flat rolled steel products. Such results also suggest that although inward-looking industrialization strategies had allowed some LDCs to develop technologically modern steel industries, these countries did not yet achieve comparative advantage in "big steel" production. In this context, the growth potential of more outward-looking development strategies for their steel industries must not be overestimated.
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