Natural resource content of foreign trade and structural bias : an inter-country comparison of Czechoslovakia and Austria by means of input-output technique
The purpose of this study is to test the hypothesis that centrally- planned economies are characterized by what is called a bias towards absorption of natural resource intensive products (NRP) which is said to affect in turn the commodity structure of their foreign trade. While the study includes a detailed analysis of foreign trade structures and the absorption of NRP by final consumers, it is the intermediate demand for NRP and its determinants which are emphasized. Following the suggestions in the literature that the technologies used by the centrally- planned and market-type economies are different, the role of technology in determining intermediate demand for NRP has been examined in detail. Bias is defined here in terms of inter-country differences and the present comparison involves a case-study of Czechoslovakia as a centrally-planned economy and Austria as a market-type economy based on an input-output model. The use of the input-output model in inter- national comparisons of production and use of commodities has been criticized on the following grounds: (1) The distinction between technology and substitution is ignored in the model. (2) International differences in relative prices are normally ignored or assumed away in empirical work. (3) The comparisons may be severely affected by imperfections of input-output tables. This study attempts to answer the above criticism in an original way. New methods of sensitivity analysis were designed to test for the existence of the 'triangular' and other 'fundamental' properties of the technological matrices. In addition, the assumption of temporal stability of input-output coefficients is relaxed and an attempt is made to distinguish between technology and substitution with the help of the RAS method. Further analysis of the impact of relative prices on input-output flows was derived from an analysis of indirect taxation. The main conclusion of this study is that Czechoslovakia had a considerable NRP import bias which was primarily due to the pro-NRP absorption bias of final consumers. However, it is unlikely that 'excessive' aggregate demand for imports originated in 'NRP-biased' technology. This empirical analysis provides strong evidence that the production processes with regard to the use of NRP were highly similar in both countries.