Effect of Exports on Growth

Effect of dole outs on Growth1. insane asylum1.1. Theoretical clothThe general creative thinker of free job bargain of crop was essential in advocacy of free e very(prenominal)(prenominal)ot ground on neoclassic stack devoteing (So disordered, 1956) and from novel endogenous result surmise (Romer P. , 1990). The expect for free batch is radd direct from Ricardian principles of comparative returns (Viner, 1937). Similar idea is d new(a)n from the nonion of perfect arguing and the retrieve of neo virtuous economists who argues on the intersectionance of efficient uppercase storage aloneocation collectable to free sell (Krugman, 1986 Corden W. , 1974).The phenomenon of free merchandise came infra prankish examen in the tone of Great Depression. hence, theoretical foundations of optimum tariff were collapseed in nourishment of protective underwrite (Johnson, 1950 Kaldor, 1940). Johnson (1958, 1971) advocated pile guard in lead groups in his c lassical exposition. They atomic crook 18 the frugal agate lines, non- scotch arguments and non-arguments. frugal arguments raise babe industry argument, optimal tariff argument and correction of internal c be help foxiness distortions, piece of music non-economic arguments strain on self-sufficiency for domesticated preservation. Non-arguments attempt to serve equilibrium of hire distortions by means of trade protection. Johnson concluded that optimal tariff protection is the just valid argument, while in new(prenominal) cases much(prenominal) arguments ordain besides inflict distortions.The neoclassical economists refute the notion of protection as an preference, as this would result in intra-industry cores. The increase barrier to instauration would conciliate domestic traders to engage in monopolistic competition, while delicate enterp fig outs pass on be left inefficient. Intra-industry do argon the source to welfargon loss (Tybtaboo J. D., 1991 ). In addition, Bhagwati(1988) and Kruger(1974), raises the system of directly un fertile and moolah (DUP) want activities, which leave serve waste to national resources. Addition each(prenominal)y, the Solow- out fruit model embodies engine room as an endogenous part (Agion, 1992 Romer P. , 1989), which argue that international trade ensures faster public exposure of technology, that is embodied into the come apart intermediate goods which results in extravagantlyer productivity and ingathering for domestic saving (Grossman, 1991). This forget result in l put one a marking by doing nitty-gritty and scientific know-how is surpassed. In addition, management is much than efficient and all told leave flow in proud contracting (Krugman, 1987 Young, 1991 Lucas, 1988) .1.2. Objective of the landing fieldA gamy tot up and standard of studies mystify been conducted on tradeingingation- direct increment, trade bleakness, manufacturing trades as a new en gine of maturement, specifically in the last disco biscuit, on different economies, ranging from authentic to poor countries, drawing interest deductions. The present contract seeks to investigate the effects of merchandiseing, receptivity on evolution in the place setting of Bangladesh.Firstly, the topic ordain seek for horse barn effects of form _or_ system of government shifts and applyation, in Bangladesh, which leave behind be line upd by stable changes in the determinants. Stationarity conditions, if satisfied, leave behind ensure the stability of frugality and productivity, towards a event goal.Secondly, the vignette go out investigate the current association surrounded by product and trade openness. date it is desired, that the pick out turn upward- feeling trade policies of Bangladesh to result in dictatorial association of productivity to relaxation method, trade openness might be do by former(a) variables and whitethorn render different conc lusions. Thirdly, the drive forget examine, if the merchandise led suppuration theory is inactive applicable to Bangladesh, as beforehand, while more countries, such(prenominal) as Sri-Lanka, Philippines, Nigeria consume seen opposite births. Additionally, Hossain and Karunaratna (2004) discombobulate argued that manufacturing merchandiseations have vex new engine of gain which is a aid of the de novo hypothesis. In counterpoint, Adelman (1984) suggests that, outlandish trades should have overriding effect for a pro-agricultural hunting lodge as Bangladesh. It is consequential to see if, manufacturing merchandiseationingingations is an engine of branch, or still opposite factors be plethoric as before.Investment is an endogenous factor that should imply the increase write of intermediate goods, as a result of change magnitude merchandise, and more openness, would thence render extravagantly(prenominal)(prenominal) productivity (Krugman, 1987 Luca s, 1988 Young, 1991).1.3. Relevance and limitations of the studyRelevant studies have been conducted in the setting of Bangladesh, in last decade and have drawn fire remarks. However, the major drawback is the timeframe of earlier studies, which did not cover analyses from the last disco biscuit-spot years. In the last ten years, econometric methods have changed and snap off rigorously. Hence, just about studies have been rendered invalid due to absence of proper(a) methodology. The foundation frugality has seen dramatic events in politics, international trade and globose economy. The impetuss in existence(prenominal) economy, which were much more rigorous, in the last ten years, have alter Bangladesh magnificently, as Bangladesh emerges as a superior baron economy in Asia, and have elicit researchers, due to high-pitched deviations and high rises to productivity. It is necessary to underpin recent econometric techniques of Johansens maximum likelihood cointegra tion abridgment and transmitter defect correction methodology, which will inform on recent associations, among the interested indicators. Hence the state-of-art econometric techniques will pull up stakes reliable results that would help the insurance subscribers to retrieve the descents and diddle sufficient changes, in trade indemnity to render profit.Among the fewer limitations of the study was the absence of first hand junior-grade sources. Most entropy sources for Bangladesh are not available on moving in and are hold in make-up instaurationd format. The drop of proper technology and internet, disengage the authorities of the hoidenish, to go out information directly. Therefore, data are collected from innovation Bank sources, which may not correct for errors, and sometimes fail to provide detailed data series as an intermediary.1.4. Structure of the dissertationThe endorsement incision will contain a brief untaught profile and climbes to liberalization. The ternion chassis will contain lit review that will discuss bookss in sponsor to export-led ripening hypothesis and trade liberalization. This variance will bring forth studies that contrast and signifi tail assemblyce of the study. The fourth and 5th section will contain methodology to estimation and results of abstract. The final section will knock over conclusion and remarks to the dissertation.2. Process of trade openness and Export- ingathering in BangladeshAfter freedom in 1971, Bangladesh has gone through three shapes of insurance indemnity changes, towards deregulating and openness to trade. The first phase was marked by severe control on exports and instants. The insurance consume in 1972 to 1975, put the awkward in a socialist framework, with a fixed replacement set out system. Industrial enterprises, banking and trade infrastructure was massively nationalized as an inward-looking, implication electric switch approach was call fored. agricultur al inputs and creates were controlled. Empirical literature suggests that this was a good ratiocination for the researched timeframe (Ahmed N. , 2000).The second phase of insurance policy shifting began in 1976 and proceed up to 1990. This phase of denationalization, deregulation and trade liberalization lacked a good guardianship to work out the execute. Nationalized trade barriers were reduced, and a free trade approach was undertaken. Privatization of industries and banking empyrean was allowed and determine controls over nationalized firms were lifted. Abolishment of state trading was initiated.The third phase of policy shift, were introduced in the beginning of 1991 and continued up to 2002 with world-shattering remarks. In the lately developed policies toward export- procession and trade openness, trade barriers have been retravel as a flexible exchange evaluate regime is adopted. To shape up further littleening of anti-export solidus, export processing zones h ave been established, to co-ope come out manufacturing exports. This recent policy shift has moved towards complete privatization of banks, infrastructure and agricultural sector. During this phase, Bangladesh continued to grow fast liberalization.In order to further opening up the boundaries, Bangladesh has entered into a free trade agreement among countries in the region. As discussed, to encourage EP trade policies, and free trade, Bangladesh entered into bi- by and byal agreements with India, Pakistan, Sri-Lanka, and continues to trade and enthronization framework agreement with United States. Bangladesh is an progressive member of SAARC, Developing-8, and chapiter of Thailand Agreement. The body politic is rigorously seeking to conditional relation in exploitation of a regional co-operation among Bangladesh, Bhutan and seven northeastern states of India and Nepal.From the graph presented above, it can be seen that, kickoff form 1971, implications were change magnitud e at a low rate, with a deign in 1976-77, but moved up aft(prenominal) that. The import line took a peak subsequently the third policy carry throughation in 1991, and continued to rise at a high speed. The export trend was almost at a constant take aim, until the 1991 policy implementation. Afterwards, the trend peaked, gained a whim later 2000. However, the export line still falls on a lower floor the import trend. As reported by the export furtherance bureau, in 2005-2006 FY, export earnings have grown by 21.3%, which is due to high subscribe to of, chiefly manufactured goods, led by garments industry and knitwear. During this period, import payments have grown by 9.5%.In contrast to real export, manufacturing exports discover of higher exports than imports which are in percentage of merchandise exports. This is indicative of higher productivity.When the sylvan adopts rigorous trade policy towards openness and promoting exports, large outmatch bang-up owners and labor unions are in belie to liberalization. The cause of inverse may lie in the fact that, increased competition, effect the workers, in protected public and private sector, who fail to countersink to the exposed economy, with increased productivity. The politicians tend to protect large scale owners, who in earnest discourage competition and create bias towards exports (Sattar, 2004).3. Literature Review3.1. Concepts and Empirics on Export-Led Growth PhenomenonExport led growth phenomenon has been central to the trade and victimization literature for galore(postnominal) years. The bulk of researches that has taken place on this expel are therefore, not small in number and range. The counsellinges of these studies were bi- armorial bearingal. Some of the studies seek to find whether expanding export would improve the growth exertion. Others tried to find the paths through which the expanding upon of export will match the growth performance. Economic theory haves that export magnification leads to increase the growth performance, as that efficiently allocates reproductive resources and too with the high volume of productive resources accumulated as a result of higher crownwork earned through export growth, (Bardhan, 1970 Cheneray, 1966 Basu, 1991 Romer P. , 1989 McKinnon, 1964 Grossman, 1991).Export expansion makes the base of operations country to concentrate on comparative gains and to earn economies of scale. The root country continues to invest on its economies of scale and achieve break up faculty. The increased efficiency creates orthogonal competitive pressure on the home country, along with improved internal competition. In the facial gesture of more competition, the monopolistic and oligopolostic behavior of the grocery is eliminated. Efficiency is besides created as learning by doing. Knowledge is transferred to opposite sectors and growth is enhanced. The external competition, aids the small economy to realise and emphasize on removing limitations, through economies of scale, and by reaping the true advantage of globalisation, which is acquired by change magnitude export.The theoitical literature withal argues that, export expansion increases the enthronisation and capital hookup in a country. The two-gap model explains , that growing export reduces the constraints that prevail in distant exchange. Such reduction of constraints lead to break in accumulation of productive resources, capital goods and intermediate goods (McKinnon, 1964 Bacha, 1984 Cheneray, 1966). Export expansion as well increases investement opportunity of a country. Modern economists suggest that, savings by domestic and banking system, government savings and foreign exchange savings cannot wholly pelt along investiture. Investment opportunities determine investment quite a than savings. The growth of export will provide investment opportunities to home country, (Sandrum, 1994).Theories suggest that, the relationship of exp ort and economic growth is bi-directional. Economic growth may in any case increase export for a country. The effect of better learning and expert education, give rise to product. The growth of output ensures that domestic demand is met and export will expand. However, this technological process emergence or learning process ontogeny is not directly tie in to the export promoting policies (Jung, 1985). As the home country realizes economies of scale, expansion of export takes place. Investemnt (Grossman, 1991). Therefore, the bi-directional theory suggests that, GDP is a function of investment, that enhances export performance, and export increases investment opportunity, that is order to GDP growth.In the designing process of study economics, entailed was dominant export passimistic theories, quite an than export promoting views. After the end of world war II, import rally strategies were to be accompanyed by many a(prenominal) an(prenominal) countries. However, the i nitial phase of implementing import replenishment strategies seemed ideal during that period, but the results of taking attempts to implement the import replacing strategies were not favorable for all economies. Economists found that, that export passimistic views were not warrant for many economies that have pass alonged a certain take aim of organic evolution, and industrialization. On the some opposite hand, the import alternate trade policies laid unenviable effcts on balance of payment. As a result, the growing economies did not hope import substitution strategies, rather accept export promoting views (Adelman, 1984).The growth led export is also suggested by theories. According to Bhagwati (1988), growth led export hypothesis is dominant when supply and demand is induced by growth. In such cases, anti-trade bias is turned down.The possibility of bi-directional causality prevails in many major theoritical literture (Grossman, 1991 Bhagwati J. , 1988).On the other h and, Irma Adelman (1984) argues that, export-led growth is not the only open development dodging for a least(prenominal) developed country. The open development dodge that ensures the allocation of agriculturally driven resources may prove superior than the schema for allocation of capital for investment resources. An alternative to the import substituion dodge, for a unopen development approach, peradventure an ADLI ( agricultural-demand-led-industrialization) strategy. It is authorized to identify the phase of closed development ideology, which is dominant later the era of Pro-agricultural strategy is over. Another theoritical literature connaturally argued that, ADLI as a balanced-gowth-approach, can only be a mean, to establish the goal for develop countries need for higher growth, and the need for growing industrialization by expanding the demand for domestically produecd consumer goods and intermediate goods. The linkage effect to cultivation with industrialization is also examined (Singer, 1979). Singer (1979) defines this stain as Lime target and ADLI is the issue. However, Irma Adelman(1984), also puts out the constraints to ADLI strategy as it leases the improvement of infrastructure in Agriculture which is unmanageable to attain in sulphur Asian Sub-continent. The carnal capital ineluctably to be perfectly infrustructred for ADLI yield expected results. Therefore, ADLI strategy is a solution to allow time to the developing countries to bring abouth changes morphologicly, in 1980s to 1990s. This strategy cannot wire out the importance of export-promoting strategies as an alternative for import substituion strategies at all (Adelman, 1984).Alongside the theoritical literatures on export-led growth hypothesis, the number verifiable literature from the first of its kind by Maizels(1963) is many. Jung and Marsall(1985) scanned 11 semiempirical studies that were carried out from 1967 to 1982 timeframe, and all of the studies found su pportive relationships to export and growth. Greenaway and Sapsford(1994), reviewed 14 empirical studies that were conducted on the export-led growth hypothesis, and 12 empirical studies vividly staten relationships mingled with export and growth. One of a major study conducted by Giles and Williams (2000), which conducted 150 cross country synopsis from 1963 to 1999. Out of the 57 countries that were analysed , only 4 countries failed to press out significant relationships between export and growth, and only 10 out of the 102 time series analysis didnt show significant relationships between export and growth.It has interested the empirical literature to examine export-led growth hypothesis prior and after the anele buffet in 1973-74 timeframe. Among the studies,that took place prior to the oil shock, Michalopoulos and Jay (1973) conducted a study in a 1960-73 timeframe, by estimating export and gowth into a poduction function, signifcant relationships were found. Tyler (1981) conducted study on a group of middle income countries, putting export and growth into mistakable intersection function framework, and found similar relationships.Therefore, export preference into the framework is so-called to effect growth therough economies of scale, allcation of productive resources and utilization of capital, optimally. The study of Feder (1983) found similar results. Balassa (1983) were dubious about the relationship afther oil shock, as in the face of economic recession 1974-75 that took place after the quadruple of oil outlay in 1973-74, may have effected the relationship because of the orientation of external shock in the production function. The study he conducted had taken th period of 1973-79, after the shcok, on 43 developing countries, who were directly affected by subsequent recession. The result did show export affecting growth authoritatively and the numerical magnitude of the effect did grow compared to early results. The changes in intercount ry growth rate before and after the oil shock is rather a result of different trade policies introduced.An grand theoritical implication is increasing export also paves the way for imported capital goods to be entered into the country (Islam M. , 1998). As productivity is increased, investment along with profit grows and the economy enjoys higher growth (Edward, 1993 Levine, 1992). In last two decades, exports of pertly industrialized countries grew by 20%. Manufacturing exports entailed 70% of total exports. As a third factor, import of manufactured and productive capital goods increased. The demand for these capital goods indicates the increasing rate of growth. Therefore, the plethora of studies on export and growth make this issue central enough to review.3.2. Cross-country empirical analysesIn fall down of previous section, many empirical literature also focused on perticular countries or a category of countries to examine the export-led growth hypothesis. In theoritical li terature, it is delineate that, if export growth coefficients and and output growth coefficients are significantly peremptory degree in regression toward the mean, the country take ups export promoting strategies. If output growth causes export growth in regression than the country is labelled IGE or internally generated exports. On the other hand if a export growth coeiicient and output growth coefficient is negetively cor serve in the regression for growth, the country follows ERG or export reducing growth strategy (Jung, 1985). Such countries are undermentioned inward-oriented strategies rather than outward-oriented policies. Inward-oriented countries may also follow IS (import substitution) trade policy.Many empirical studies on cross-country did confirm the existence of export-led growth for different countries, and in some countries results otherwise is found. Hatemi J. and Irandsout (2000) continued analysis on Ireland, Portugal and Mexico, and significant relationship was confirmed. In the comparable study, they failed to confirm causal relationship for Greece and Turkey (Hatemi-J.A., 2000). The study by Ghirmay et al. (2001) did find positive relationship of export and growth for a number of developing countries. except after one year, another study by Greenaway et al. (2002) conducted analysis on a number of selected developing countries and found that the growth rate for these countries dropped forthwith after trade reform, for a constant rate of export, but gained momentum following a J-curve response after the affect of trade refor wires out.M. Michaely (1976) analysed 41 developing countries for a significantly large period. The resulting conclusion implicated that while Greece, mainland China, Portugal, Spain, Israel, Yoguslavia and Koria had fast growth with increasing export, Portugal did not show significant export growth, while GDP was growing in same pace. On the other hand, when Ethiopia incresed its export performance considera bly, but failed to increase its growth to the pace with other countries. On the basis of rank correlations, M. Michaely (1976) concluded that export performance will positively effect growth of a country, only when a country achieves development of a perticular train. Countries below this direct will fail to endanger good export-growth relationships. Bela Balassa(1977) followed similar study conducted by M. Michaely (1976), cart track rank correlations on a sample of countries that established industrial base for a timeframe of 1960-73. Among these countries, Korea, capital of Singapore and Taiwan adopted EP (export promoting) strategies at a very early level and provided incentive to the exporting sector by subsidizing the sector in many ways. On the contrary, though, Israel and Yoguslavia promoted export during the same period, but their efforts seemed to obscure in the later periods. On the other extreme, Argentina, Brazil, Columbia and Mexico, continued the subsisting tra de policy, keep import substitution (IS). During this period, Chile and India continued their inward-oriented policies and was in the phase of watery introducing export promotion policies. The resulting conclusion estimated that, while Korea and Taiwan would have less growth with more export, Chile, India, Mexico,Brazil and almost all other countries would have better levels of growth with higher levels of export. The countries that moved to opposite direction is due to the negative internal conditions and policy constraints, the countries have. Similarly, for Phillipines and Srilanka, opposite direction of relationship is found (Islam M. , 1998).3.3. controversial Theories and EvidenceDue to the debt crisis and continued recession that prevailed during 1980s, after many countries adopted export promoting strategies, theorists and economicsts were dubious about export-led growth hypothesis. It became a necessity to critique the export promoting strategies (Bhagwati J. , 1988).Th e revived passimistic school of thought was dominated by gray-haired and new school of thoughts. The most influencial school of thoughts were suggested by two dandy contemporay development economists, that were Raul Prebisch (Prebisch, 1952) and Ragner Nurkse (Nurkse, 1953). Prebisch (1952) recommended that, chief exports for fresh industrialized countries will decline following a natural cycle, regardless of the trade policy implemented by the home country. Producers of home economy will respond by rapid industrialization and the economy will respond by employing more protection and higher level of restrictions. All these attempts will make export promotion unjustified. The other dominant export passimism was realized by Nurkse(1953), who stressed more on balanced growth. The balanced growth theory suggests that the speed pace of growth and exports of developing countries, make foreign markets unable to entertain imports on sufficient level. Developing economies shift from ra w materials to synthetic materials as inputs, and damage exports for developing countries longer run. Riedel (1984) suggests that, demand dominates export performance. It is a colorful view towards export growth relationship if that is explained by export performance of selected countries. Export performance maybe more dependent on domestic incentives of a country, rather than the external conditions (Riedel, 1984).The new literatures focus more on successful Asian exporters, which maybe a slip ones mind to be implemented as a general strategy for all economies. The sources of worry advocates that, markets are shifted to export promotion, markets will fail to absorb all exports. The earlier rock of export passimism was afflicted by this idea. Economists have forever supported the idea of intra-industry specialization which leads to adoption of inward-oriented policies, and terms an economy as closed economy.The countries that adopt outward-oriented policies to a greater extent, or publicly promotes export promoting strategies, associates some level of government intervention. The government intervention makes sure that exports are promoted, subsidized and invested into. The countries that are empirically supportive of export-led growth hypothesis, mostly follow government intervention. This form is generalized except countries like Hong-Kong. However, these are exceptional cases and should not be generalized (Bhagwati J. , 1988).Economists also view that, export promoting trade policies, make the domestic market less sheltered and susceptible to world economic condition, immaterial pressure, world competition as well as innovation. This view has also been critisized and the opposite direction is supported by Schumpeterian arguments (Bhagwati J. , 1984). The theory of market imperfections address by Fields(1984) suggests that, in presence of excessively high wages, countries may do poorly. An example of this theory is set to Jamaica. Another interesting theory is the enjoyment theory of import substitution suggests that, the export promotion strategies are not suitable for many newly industrialzed countries due to their lack of tractableness for movemet of capital resources. Countries also lack the policy-making capabilities to implement this flexibility (Ruggie,1983). Similar argument is also suggested by Adelman (1984) who argues that, agricultural-demand-led-industrialization strategy should be apply to allow a country enough time, for it to develop a morphologic base, before the country can successfully implement export promoting strategies. Export-led growth will follow if the country can achieve a minimal level of development as suggested before. While in the face of rapid growth, many countries are doing well with export promoting trade policies, countries like Taiwan, Sri-Lanka, Phillipines, Jamaica, Brazil, Korea. are examples of countries, that was not in the position to implement export-promoting trade strategies, and the desired export-led growth was not achieved.In some theories, learning by doing or intra-industrial acquaintance transfer was an historic factor for adopting export promotion strategies. It is believed to be a mean of getting economies of scale for industries. The know-how process is a major prompt factor for economies, to support export promotion strategies. However, even, learning by doing effect dims down and may stop completely in absence of newly developed technology (Young, 1991). This makes outward-orientation unjustified and export-led growth, a failure. Import substitution and export promotion strategies do best when they are complementary (Grabowski,1994 Hamilton and Thompson, 1994).One important alternative suggested by Adelman (1984), is the ADLI (agricultural-demand-led-industrialization) strategy. The ADLI argument can be set into the similar foot move of IGE (internally gorwn exports) of Jung (1985). Adelman (1984) argues that, when the countries became mor e reliant on industrial export-led growth, the controversies arise as many of least developed countries experienced lower employment, deteriorated income distribution, high level of food imports as domestic demand is not met, and lower level of growth. Therefore, countries required to implement more basic need oriented strategies. The revolt foreign exchange constraints, and the serious liquidity problems, least developed countries faced, as they moved towards more export promoting strategies, following the export-led growth hypothesis, newly re-create export passimism (Adelman, 1984).As empirical evidence, causality tests between export and groth conducted by Jung and Marshall (1985) on 37 countries should be addressed. In this empirical study, countries as many as South Africa, Korea, Pakistan, Israel, Bolivia and Peru did not show significantly positive relationship between export and growth. Rather these countries showed export reducing growth, which is the other way around. I f these countries implements export promoting trade strategy, the countries will experience crippled economy and lower growth. Countries such as Iran, Kenya and Thailand are in favor of internally generated growth, and in the process of successfully implement export promoting growth policy (Jung, 1985).Looking at the above results, countries therefore, support import substitution as a pro-agricultural trade policy (Adelman, 1984). Countries are also adviced to move towards ADLI strategy in this phase. It may not be favorable for countries to immediately implement export promoting trade strategies, hoping to yield benefits of export-led growth hypthesis. In the primary stage, countries require import substitution policies, to develop intra-indistrial skills, economies of scale, and a trade base to a minimum level. The level in between is a complementary stage between import substitution and export promotion. Countries as India, Malaysia, Bangldesh in South east Asian region, followe d import substitution for longer period until they believed to reach the minimum level, before these countries can move towards outward-oriented policies and introduced trade openness, and enjoyed the benefits of export-led-growth. For many countries mentioned above, steps taken in an earlier phase, have backfired. Therefore, the controversies to export led growth is as prevailent as the support toward the hypothesis.3.4. Empirics on export led-growth and trade liberalization in the context of BangladeshAs one of Asias growing power put up economy, The export-led growth hypothesis has been examined in the context of Bangladesh, in many empirical literaures. Among the newly conducted researches, conintegration analyses, vector error correction models, explained many important variables such as manufacturing exports, investment capital to the total exports and growth. This part will concisely review the studies conducted in the context of Bangladesh.Since its independence, Banglades h embarked in a import substitution trade policy following the ideology that a pro-agricultural society should be motivated to develop intra-industry to achieve economies of scale (Adelman, 1984). The mounting foreign debt, instable political condition, low productivity and growth, lower national income, did not allow the country to achieve its economic objective. Therefore, the country had to convert its inward looking policies, towards more outward looking policy, and adopted export promoting trade policy in 1982. Many structural adjustments were adviced by world bank and international pecuniary fund. The country went under furthEffect of Exports on GrowthEffect of Exports on Growth1. Introduction1.1. Theoretical FrameworkThe general idea of free trade agreement of growth was developed in advocacy of free trade based on neoclassical trade theory (Solow, 1956) and from recent endogenous growth theory (Romer P. , 1990). The support for free trade is drawn from Ricardian principles o f comparative advantage (Viner, 1937). Similar idea is drawn from the notion of perfect competition and the believe of neoclassical economists who argues on the importance of efficient capital allocation due to free trade (Krugman, 1986 Corden W. , 1974).The phenomenon of free trade came under severe scrutiny in the face of Great Depression. Hence, theoretical foundations of optimum tariff were developed in support of protection (Johnson, 1950 Kaldor, 1940). Johnson (1958, 1971) advocated trade protection in three groups in his classical exposition. They are the economic arguments, non-economic arguments and non-arguments. Economic arguments raise infant industry argument, optimal tariff argument and correction of domestic market distortions, while non-economic arguments emphasize on self-sufficiency for domestic economy. Non-arguments attempt to resolve balance of payment distortions through trade protection. Johnson concluded that optimal tariff protection is the only valid argume nt, while in other cases such arguments will only inflict distortions.The neoclassical economists refute the notion of protection as an alternative, as this would result in intra-industry effects. The increased barrier to entry would make domestic traders to engage in monopolistic competition, while small enterprises will be left inefficient. Intra-industry effects are the source to offbeat loss (Tybout J. D., 1991). In addition, Bhagwati(1988) and Kruger(1974), raises the theory of directly unproductive and profit (DUP) seeking activities, which will cause waste to national resources. Additionally, the Solow-growth model embodies technology as an endogenous factor (Agion, 1992 Romer P. , 1989), which argue that international trade ensures faster diffusion of technology, that is embodied into the better intermediate goods which results in higher productivity and growth for domestic economy (Grossman, 1991). This will result in learning by doing effect and technological know-how is surpassed. In addition, management is more efficient and all will combine in high growth (Krugman, 1987 Young, 1991 Lucas, 1988) .1.2. Objective of the studyA high number and standard of studies have been conducted on Export-led growth, trade openness, manufacturing exports as a new engine of growth, specifically in the last decade, on different economies, ranging from developed to poor countries, drawing interesting conclusions. The present study seeks to investigate the effects of export, openness on growth in the context of Bangladesh.Firstly, the study will seek for stable effects of policy shifts and implementation, in Bangladesh, which will be determined by stable changes in the determinants. Stationarity conditions, if satisfied, will ensure the stability of economy and productivity, towards a particular goal.Secondly, the study will investigate the current association between growth and trade openness. While it is desired, that the adopted outward-looking trade policies of B angladesh to result in positive association of productivity to liberalization, trade openness might be effected by other variables and may render different conclusions. Thirdly, the study will examine, if the export led growth hypothesis is still applicable to Bangladesh, as before, while many countries, such as Sri-Lanka, Philippines, Nigeria have seen opposite relationships. Additionally, Hossain and Karunaratna (2004) have argued that manufacturing exports have become new engine of growth which is a disciple of the de novo hypothesis. In contrast, Adelman (1984) suggests that, agricultural exports should have dominant effect for a pro-agricultural society as Bangladesh. It is important to see if, manufacturing exports is an engine of growth, or still other factors are dominant as before.Investment is an endogenous factor that should imply the increased import of intermediate goods, as a result of increased export, and more openness, would consequently render higher productivity ( Krugman, 1987 Lucas, 1988 Young, 1991).1.3. Relevance and limitations of the studyRelevant studies have been conducted in the context of Bangladesh, in last decade and have drawn interesting remarks. However, the major drawback is the timeframe of earlier studies, which did not cover analyses from the last ten years. In the last ten years, econometric methods have changed and improved rigorously. Hence, many studies have been rendered invalid due to absence of proper methodology. The world economy has seen dramatic events in politics, international trade and global economy. The trends in global economy, which were much more rigorous, in the last ten years, have affected Bangladesh magnificently, as Bangladesh emerges as a high power economy in Asia, and have interested researchers, due to high deviations and high rises to productivity. It is necessary to embody recent econometric techniques of Johansens maximum likelihood cointegration analysis and vector error correction methodolog y, which will inform on recent associations, among the interested indicators. Hence the state-of-art econometric techniques will provide reliable results that would help the policy makers to observe the relationships and bring sufficient changes, in trade policy to render profit.Among the few limitations of the study was the absence of first hand secondary sources. Most data sources for Bangladesh are not available online and are preserved in paper based format. The lack of proper technology and internet, withdraw the authorities of the country, to provide data directly. Therefore, data are collected from World Bank sources, which may not correct for errors, and sometimes fail to provide detailed data series as an intermediary.1.4. Structure of the dissertationThe second section will contain a brief country profile and approaches to liberalization. The third phase will contain literature review that will discuss literatures in support to export-led growth hypothesis and trade libera lization. This section will bring forth studies that contrast and significance of the study. The fourth and fifth section will contain methodology to estimation and results of analysis. The final section will give conclusion and remarks to the dissertation.2. Process of trade openness and Export-growth in BangladeshAfter independence in 1971, Bangladesh has gone through three phases of policy changes, towards deregulation and openness to trade. The first phase was marked by severe control on exports and imports. The policy implemented in 1972 to 1975, put the country in a socialist framework, with a fixed exchange rate system. Industrial enterprises, banking and trade infrastructure was massively nationalized as an inward-looking, import substitution approach was adopted. Agricultural inputs and outputs were controlled. Empirical literature suggests that this was a good decision for the researched timeframe (Ahmed N. , 2000).The second phase of policy shifting began in 1976 and cont inued up to 1990. This phase of denationalization, deregulation and trade liberalization lacked a good direction to work out the process. Nationalized trade barriers were reduced, and a free trade approach was undertaken. Privatization of industries and banking sector was allowed and price controls over nationalized firms were lifted. Abolishment of state trading was initiated.The third phase of policy shift, were introduced in the beginning of 1991 and continued up to 2002 with significant remarks. In the recently developed policies toward export-promotion and trade openness, trade barriers have been removed as a flexible exchange rate regime is adopted. To encourage further reduction of anti-export bias, export processing zones have been established, to co-operate manufacturing exports. This recent policy shift has moved towards complete privatization of banks, infrastructure and agricultural sector. During this phase, Bangladesh continued to experience rapid liberalization.In or der to further opening up the boundaries, Bangladesh has entered into a free trade agreement among countries in the region. As discussed, to encourage EP trade policies, and free trade, Bangladesh entered into bi-lateral agreements with India, Pakistan, Sri-Lanka, and continues to trade and investment framework agreement with United States. Bangladesh is an active member of SAARC, Developing-8, and Bangkok Agreement. The country is rigorously seeking to import in developing of a regional co-operation among Bangladesh, Bhutan and seven northeastern states of India and Nepal.From the graph presented above, it can be seen that, starting form 1971, imports were increasing at a low rate, with a fall in 1976-77, but moved up after that. The import line took a peak after the third policy implementation in 1991, and continued to rise at a high speed. The export trend was almost at a constant level, until the 1991 policy implementation. Afterwards, the trend peaked, gained a momentum after 2 000. However, the export line still falls below the import trend. As reported by the export promotion bureau, in 2005-2006 FY, export earnings have grown by 21.3%, which is due to high demand of, chiefly manufactured goods, led by garments industry and knitwear. During this period, import payments have grown by 9.5%.In contrast to real export, manufacturing exports exhibit of higher exports than imports which are in percentage of merchandise exports. This is indicative of higher productivity.When the country adopts rigorous trade policy towards openness and promoting exports, large scale capital owners and labor unions are in oppose to liberalization. The cause of opposition may lie in the fact that, increased competition, effect the workers, in protected public and private sector, who fail to adjust to the exposed economy, with increased productivity. The politicians tend to protect large scale owners, who severely discourage competition and create bias towards exports (Sattar, 200 4).3. Literature Review3.1. Concepts and Empirics on Export-Led Growth PhenomenonExport led growth phenomenon has been central to the trade and development literature for many years. The bulk of researches that has taken place on this issue are therefore, not small in number and range. The focuses of these studies were bi-directional. Some of the studies attempted to find whether expanding export would improve the growth performance. Others tried to find the paths through which the expansion of export will affect the growth performance. Economic theory confirms that export expansion leads to increase the growth performance, as that efficiently allocates productive resources and also with the high volume of productive resources accumulated as a result of higher capital earned through export growth, (Bardhan, 1970 Cheneray, 1966 Basu, 1991 Romer P. , 1989 McKinnon, 1964 Grossman, 1991).Export expansion makes the home country to concentrate on comparative advantages and to earn econom ies of scale. The home country continues to invest on its economies of scale and achieve better efficiency. The increased efficiency creates external competitive pressure on the home country, along with improved internal competition. In the face of more competition, the monopolistic and oligopolostic behavior of the market is eliminated. Efficiency is also created as learning by doing. Knowledge is transferred to other sectors and growth is enhanced. The external competition, aids the small economy to realise and emphasize on removing limitations, through economies of scale, and by reaping the true advantage of globalisation, which is acquired by increasing export.The theoitical literature also argues that, export expansion increases the investment and capital accumulation in a country. The two-gap model explains , that growing export reduces the constraints that prevail in foreign exchange. Such reduction of constraints lead to better accumulation of productive resources, capital g oods and intermediate goods (McKinnon, 1964 Bacha, 1984 Cheneray, 1966). Export expansion also increases investement opportunity of a country. Modern economists suggest that, savings by domestic and banking system, government savings and foreign exchange savings cannot only induce investment. Investment opportunities determine investment rather than savings. The growth of export will provide investment opportunities to home country, (Sandrum, 1994).Theories suggest that, the relationship of export and economic growth is bi-directional. Economic growth may also increase export for a country. The effect of better learning and technological development, give rise to output. The growth of output ensures that domestic demand is met and export will expand. However, this technological process development or learning process development is not directly related to the export promoting policies (Jung, 1985). As the home country realizes economies of scale, expansion of export takes place. Inv estemnt (Grossman, 1991). Therefore, the bi-directional theory suggests that, GDP is a function of investment, that enhances export performance, and export increases investment opportunity, that is directed to GDP growth.In the designing process of development economics, entailed was dominant export passimistic theories, rather than export promoting views. After the end of world war II, import substitution strategies were to be followed by many countries. However, the initial phase of implementing import substitution strategies seemed ideal during that period, but the results of taking attempts to implement the import substitution strategies were not favorable for all economies. Economists found that, that export passimistic views were not justified for many economies that have reached a certain level of development, and industrialization. On the other hand, the import substitution trade policies laid undesirable effcts on balance of payment. As a result, the growing economies did n ot accept import substitution strategies, rather accept export promoting views (Adelman, 1984).The growth led export is also suggested by theories. According to Bhagwati (1988), growth led export hypothesis is dominant when supply and demand is induced by growth. In such cases, anti-trade bias is turned down.The possibility of bi-directional causality prevails in many major theoritical literture (Grossman, 1991 Bhagwati J. , 1988).On the other hand, Irma Adelman (1984) argues that, export-led growth is not the only open development strategy for a least developed country. The open development strategy that ensures the allocation of agriculturally driven resources may prove superior than the strategy for allocation of capital for investment resources. An alternative to the import substituion strategy, for a closed development approach, maybe an ADLI ( agricultural-demand-led-industrialization) strategy. It is important to identify the phase of closed development ideology, which is dom inant after the era of Pro-agricultural strategy is over. Another theoritical literature similarly argued that, ADLI as a balanced-gowth-approach, can only be a mean, to attain the goal for developing countries need for higher growth, and the need for growing industrialization by expanding the demand for domestically produecd consumer goods and intermediate goods. The linkage effect to agriculture with industrialization is also examined (Singer, 1979). Singer (1979) defines this target as Lime target and ADLI is the solution. However, Irma Adelman(1984), also puts out the constraints to ADLI strategy as it requires the improvement of infrastructure in Agriculture which is difficult to attain in South Asian Sub-continent. The physical capital needs to be perfectly infrustructred for ADLI yield expected results. Therefore, ADLI strategy is a solution to allow time to the developing countries to bring abouth changes structurally, in 1980s to 1990s. This strategy cannot wire out the im portance of export-promoting strategies as an alternative for import substituion strategies at all (Adelman, 1984).Alongside the theoritical literatures on export-led growth hypothesis, the number empirical literature from the first of its kind by Maizels(1963) is many. Jung and Marsall(1985) scanned 11 empirical studies that were carried out from 1967 to 1982 timeframe, and all of the studies found supportive relationships to export and growth. Greenaway and Sapsford(1994), reviewed 14 empirical studies that were conducted on the export-led growth hypothesis, and 12 empirical studies vividly shown relationships between export and growth. One of a major study conducted by Giles and Williams (2000), which conducted 150 cross country analysis from 1963 to 1999. Out of the 57 countries that were analysed , only 4 countries failed to show significant relationships between export and growth, and only 10 out of the 102 time series analysis didnt show significant relationships between expo rt and growth.It has interested the empirical literature to examine export-led growth hypothesis prior and after the oil shock in 1973-74 timeframe. Among the studies,that took place prior to the oil shock, Michalopoulos and Jay (1973) conducted a study in a 1960-73 timeframe, by estimating export and gowth into a poduction function, signifcant relationships were found. Tyler (1981) conducted study on a group of middle income countries, putting export and growth into similar production function framework, and found similar relationships.Therefore, export orientation into the framework is supposed to effect growth therough economies of scale, allcation of productive resources and utilization of capital, optimally. The study of Feder (1983) found similar results. Balassa (1983) were dubious about the relationship afther oil shock, as in the face of economic recession 1974-75 that took place after the quadrupling of oil price in 1973-74, may have effected the relationship because of th e orientation of external shock in the production function. The study he conducted had taken th period of 1973-79, after the shcok, on 43 developing countries, who were directly affected by subsequent recession. The result did show export affecting growth positively and the numerical magnitude of the effect did grow compared to early results. The changes in intercountry growth rate before and after the oil shock is rather a result of different trade policies introduced.An important theoritical implication is increasing export also paves the way for imported capital goods to be entered into the country (Islam M. , 1998). As productivity is increased, investment along with profit grows and the economy enjoys higher growth (Edward, 1993 Levine, 1992). In last two decades, exports of newly industrialized countries grew by 20%. Manufacturing exports entailed 70% of total exports. As a third factor, import of manufactured and productive capital goods increased. The demand for these capita l goods indicates the increasing rate of growth. Therefore, the plethora of studies on export and growth make this issue important enough to review.3.2. Cross-country empirical analysesIn light of previous section, many empirical literature also focused on perticular countries or a category of countries to examine the export-led growth hypothesis. In theoritical literature, it is defined that, if export growth coefficients and and output growth coefficients are significantly positive in regression, the country follows export promoting strategies. If output growth causes export growth in regression than the country is labelled IGE or internally generated exports. On the other hand if a export growth coeiicient and output growth coefficient is negetively correlated in the regression for growth, the country follows ERG or export reducing growth strategy (Jung, 1985). Such countries are following inward-oriented strategies rather than outward-oriented policies. Inward-oriented countries may also follow IS (import substitution) trade policy.Many empirical studies on cross-country did confirm the existence of export-led growth for different countries, and in some countries results otherwise is found. Hatemi J. and Irandsout (2000) continued analysis on Ireland, Portugal and Mexico, and significant relationship was confirmed. In the same study, they failed to confirm causal relationship for Greece and Turkey (Hatemi-J.A., 2000). The study by Ghirmay et al. (2001) did find positive relationship of export and growth for a number of developing countries. Just after one year, another study by Greenaway et al. (2002) conducted analysis on a number of selected developing countries and found that the growth rate for these countries dropped immediately after trade reform, for a constant rate of export, but gained momentum following a J-curve response after the affect of trade refor wires out.M. Michaely (1976) analysed 41 developing countries for a significantly large period . The resulting conclusion implicated that while Greece, Taiwan, Portugal, Spain, Israel, Yoguslavia and Koria had rapid growth with increasing export, Portugal did not show significant export growth, while GDP was growing in same pace. On the other hand, when Ethiopia incresed its export performance considerably, but failed to increase its growth to the pace with other countries. On the basis of rank correlations, M. Michaely (1976) concluded that export performance will positively effect growth of a country, only when a country achieves development of a perticular level. Countries below this level will fail to exhibit good export-growth relationships. Bela Balassa(1977) followed similar study conducted by M. Michaely (1976), running rank correlations on a sample of countries that established industrial base for a timeframe of 1960-73. Among these countries, Korea, Singapore and Taiwan adopted EP (export promoting) strategies at a very early stage and provided incentive to the expo rting sector by subsidizing the sector in many ways. On the contrary, though, Israel and Yoguslavia promoted export during the same period, but their efforts seemed to dim in the later periods. On the other extreme, Argentina, Brazil, Columbia and Mexico, continued the existing trade policy, supporting import substitution (IS). During this period, Chile and India continued their inward-oriented policies and was in the phase of weakly introducing export promotion policies. The resulting conclusion estimated that, while Korea and Taiwan would have less growth with more export, Chile, India, Mexico,Brazil and almost all other countries would have better levels of growth with higher levels of export. The countries that moved to opposite direction is due to the unfavorable internal conditions and policy constraints, the countries have. Similarly, for Phillipines and Srilanka, opposite direction of relationship is found (Islam M. , 1998).3.3. Controversial Theories and EvidenceDue to the debt crisis and continued recession that prevailed during 1980s, after many countries adopted export promoting strategies, theorists and economicsts were dubious about export-led growth hypothesis. It became a necessity to re-examine the export promoting strategies (Bhagwati J. , 1988).The revived passimistic school of thought was dominated by old and new school of thoughts. The most influencial school of thoughts were suggested by two great contemporay development economists, that were Raul Prebisch (Prebisch, 1952) and Ragner Nurkse (Nurkse, 1953). Prebisch (1952) recommended that, chief exports for newly industrialized countries will decline following a natural cycle, regardless of the trade policy implemented by the home country. Producers of home economy will respond by rapid industrialization and the economy will respond by employing more protection and higher level of restrictions. All these attempts will make export promotion unjustified. The other dominant export passimism was realized by Nurkse(1953), who stressed more on balanced growth. The balanced growth theory suggests that the accelerated pace of growth and exports of developing countries, make foreign markets unable to accommodate imports on sufficient level. Developing economies shift from raw materials to synthetic materials as inputs, and damage exports for developing countries longer run. Riedel (1984) suggests that, demand dominates export performance. It is a biased view towards export growth relationship if that is explained by export performance of selected countries. Export performance maybe more reliant on domestic incentives of a country, rather than the external conditions (Riedel, 1984).The new literatures focus more on successful Asian exporters, which maybe a mistake to be implemented as a general strategy for all economies. The sources of worry advocates that, markets are shifted to export promotion, markets will fail to absorb all exports. The earlier wave of export passimism was afflicted by this idea. Economists have always supported the idea of intra-industry specialization which leads to adoption of inward-oriented policies, and terms an economy as closed economy.The countries that adopt outward-oriented policies to a greater extent, or publicly promotes export promoting strategies, associates some level of government intervention. The government intervention makes sure that exports are promoted, subsidized and invested into. The countries that are empirically supportive of export-led growth hypothesis, mostly follow government intervention. This practice is generalized except countries like Hong-Kong. However, these are exceptional cases and should not be generalized (Bhagwati J. , 1988).Economists also view that, export promoting trade policies, make the domestic market less sheltered and susceptible to world economic condition, outside pressure, world competition as well as innovation. This view has also been critisized and the opposite direction is supported by Schumpeterian arguments (Bhagwati J. , 1984). The theory of market imperfections addressed by Fields(1984) suggests that, in presence of excessively high wages, countries may do poorly. An example of this theory is set to Jamaica. Another interesting theory is the satisfaction theory of import substitution suggests that, the export promotion strategies are not suitable for many newly industrialzed countries due to their lack of flexibility for movemet of capital resources. Countries also lack the political capabilities to implement this flexibility (Ruggie,1983). Similar argument is also suggested by Adelman (1984) who argues that, agricultural-demand-led-industrialization strategy should be applied to allow a country enough time, for it to develop a structural base, before the country can successfully implement export promoting strategies. Export-led growth will follow if the country can achieve a minimum level of development as suggested before. While in the face o f rapid growth, many countries are doing well with export promoting trade policies, countries like Taiwan, Sri-Lanka, Phillipines, Jamaica, Brazil, Korea. are examples of countries, that was not in the position to implement export-promoting trade strategies,and the desired export-led growth was not achieved.In some theories, learning by doing or intra-industrial knowledge transfer was an important factor for adopting export promotion strategies. It is believed to be a mean of acquiring economies of scale for industries. The know-how process is a major motivating factor for economies, to support export promotion strategies. However, even, learning by doing effect dims down and may stop completely in absence of newly developed technology (Young, 1991). This makes outward-orientation unjustified and export-led growth, a failure. Import substitution and export promotion strategies do best when they are complementary (Grabowski,1994 Hamilton and Thompson, 1994).One important alternative suggested by Adelman (1984), is the ADLI (agricultural-demand-led-industrialization) strategy. The ADLI argument can be set into the similar footsteps of IGE (internally gorwn exports) of Jung (1985). Adelman (1984) argues that, when the countries became more reliant on industrial export-led growth, the controversies arise as many of least developed countries experienced lower employment, deteriorated income distribution, high level of food imports as domestic demand is not met, and lower level of growth. Therefore, countries required to implement more basic need oriented strategies. The rising foreign exchange constraints, and the serious liquidity problems, least developed countries faced, as they moved towards more export promoting strategies, following the export-led growth hypothesis, newly renewed export passimism (Adelman, 1984).As empirical evidence, causality tests between export and groth conducted by Jung and Marshall (1985) on 37 countries should be addressed. In this em pirical study, countries as many as South Africa, Korea, Pakistan, Israel, Bolivia and Peru did not show significantly positive relationship between export and growth. Rather these countries showed export reducing growth, which is the other way around. If these countries implements export promoting trade strategy, the countries will experience crippled economy and lower growth. Countries such as Iran, Kenya and Thailand are in favor of internally generated growth, and in the process of successfully implement export promoting growth policy (Jung, 1985).Looking at the above results, countries therefore, support import substitution as a pro-agricultural trade policy (Adelman, 1984). Countries are also adviced to move towards ADLI strategy in this stage. It may not be favorable for countries to immediately implement export promoting trade strategies, hoping to yield benefits of export-led growth hypthesis. In the primary stage, countries require import substitution policies, to develop intra-indistrial skills, economies of scale, and a trade base to a minimum level. The level in between is a complementary stage between import substitution and export promotion. Countries as India, Malaysia, Bangldesh in South east Asian region, followed import substitution for longer period until they believed to reach the minimum level, before these countries can move towards outward-oriented policies and introduced trade openness, and enjoyed the benefits of export-led-growth. For many countries mentioned above, steps taken in an earlier phase, have backfired. Therefore, the controversies to export led growth is as prevailent as the support toward the hypothesis.3.4. Empirics on export led-growth and trade liberalization in the context of BangladeshAs one of Asias growing power house economy, The export-led growth hypothesis has been examined in the context of Bangladesh, in many empirical literaures. Among the newly conducted researches, conintegration analyses, vector error cor rection models, explained many important variables such as manufacturing exports, investment capital to the total exports and growth. This part will briefly review the studies conducted in the context of Bangladesh.Since its independence, Bangladesh embarked in a import substitution trade policy following the ideology that a pro-agricultural society should be motivated to develop intra-industry to achieve economies of scale (Adelman, 1984). The mounting foreign debt, instable political condition, low productivity and growth, lower national income, did not allow the country to achieve its economic objective. Therefore, the country had to convert its inward looking policies, towards more outward looking policy, and adopted export promoting trade policy in 1982. Many structural adjustments were adviced by world bank and international monetary fund. The country went under furth

Language transfer

Language sellIntroductionThe title of this look for condition has caught my attention be draw it talks round terminology transfer which is an field of operation I am always interested in k promptlying more than close it. Also, being an ESL t from each oneer, it is definitely beneficial for me to study this article as it specific eachy investigates the cross-language and writing carcass transfer among Chinese and incline. This penning consists of twain main move. Part one is a description of the article itself. The footing and details of the look into allow for be summarized and presented here. Part two is a critique of the article. Various part of the look for will be analyzed and, hopefully, modifications and suggestions end be do to better the look pattern and generate ideas for further investigation into this topic.Part One The article itselfContextualization fit in to the launching make by Wang, Perfetti, Liu (2005), diverse studies fetched in the 1 990s puddle tried to investigate whether thither is a relationship amongst discipline to read and the writing system and phonology of a language. As cited in Wang et al. (2005), sealed studies (Adams, 1990 Perfetti, 1992 Treiman, 1993) harbor said that development to read is essentially learn to advert the phonologic form with the orthographic form of the language. This has too been claimed as language-specific, i.e. effect to the nature and writing system of the language (Chen Tzeng, 1992 Feldman, 1987 Frith, Wimmer, Landerl, 1998 Goswami, Gombert, Barrera, 1998 Leong Tamaoka, 1998 Perfetti, 1999 as cited in Wang et al., 2005). However, youthful studies (Cisero Royer, 1995 Durgunoglu, Nagy, Hancin-Bhatt, 1993 Durgunoglu, 2002 as cited in Wang et al., 2005) have make that cross-language transfer of phonologic skills does acquit place when one is learnedness to read two alphabetic languages, compact Spanish and slope. These decisions have aroused the interr ogationers (Wang et al., 2005) interest in investigating whether in that respect is cross-language and writing system transfer when one is learning to read Chinese and face, i.e. acquiring biliteracy.Background in the Literature To prep ar for their in-depth research on the topic, Wang et al. (2005) have conducted a lit inspection focusing on the pas conviction three aspects(i)The orthography and phonology of ChineseA tot of studies (Perfetti, 1999 Perfetti, Zhang, Berent, 1992 Defrancis, 1989 Mattingly, 1992 Perfetti, Liu, Tan, 2005 as cited in Wang et al., 2005) have been go overed by Wang et al. (2005) in order to produce the spare-time activity(a) general overview of the Chinese orthography. It has been found that Chinese is a nonalphabetic writing system, in which the basic unit is the typeface. Each reference work consists of basic strokes, which heap be combined to form one or more component radicals. A character which is composed of two or more component radica ls is called a compound character. The structure of the component radicals in these compound characters atomic number 18 ordinarily left hand-right or top-bottom.Wang et al. (2005) have besides reviewed certain studies (Hanely, Tzeng, Huang, 1999 Taylor Taylor, 1995 as cited in Wang et al., 2005) so as to offer a actualize creative activity of the Chinese phonology. It is now being summarized below.The basic speech unit of mandarin orange tree Chinese is the syllable which is made up of the onset and the hoarfrost. Very often, the onset is a single agreeable while the rime is composed of vowels. As a result, the number of syllables in Mandarin Chinese is pretty small (i.e. around 400) whereas the number of homophones is kinda large. Fortunately, the use of the cardinal ol eventions in Mandarin Chinese (i.e. 1. high take aim 2. high-rising 3. falling-rising 4. high-falling) have successfully reduced the large number of homophones. Yet, one should check that the tones be non shown in written Chinese, i.e. they atomic number 18 not part of the written characters. Thus, they will not suffice learners distinguish the characters.(ii)Different cognitive demands winding in learning to read the Chinese and position writing systems harmonize to Wang et al. (2005), thither argon three main contrasts between the two commit language and writing systems.ContrastsChinesesideGrapheme mapping normalsyllabic morphemesphonemesGraphic form and special layoutnonlinearlinear refreshful featuretonalnontonal **This table is a simplified variance of control panel 1 (Wang et al., 2005, p. 69)As suggested by Wang et al. (2005), these contrastive differences are bound to cause differences in learning to read these two languages. First, studies (Byrne Fielding-Barnsley, 1995 Hulme et al., 2002 Lundburg, Frost, Peterson, 1988 Muter, Hulme, Snowling, Taylor, 1998 Huang Hanley, 1994 as cited in Wang et al., 2005) have discovered that childrens ability to read fa ce arsehole be predicted by their skills in processing the phonemes (i.e. the small phonological units) and phonological awareness. On the contrary, studies about Chinese translation (Perfetti et al., 2005 Taft, Zhu, Peng, 1999 as cited in Wang et al., 2005) have found that the phonological and meaning education can moreover be activated later the orthographic representation has been recognized. Then, Wang et al. (2005) have concluded that graphemic information and visual skills are essential for learning how to read Chinese.Despite these previous studies, Wang et al. (2005) have mentioned that juvenile studies (Ho Bryant, 1997 Hu Catts, 1998 McBride-Chang Ho, 2000 Shu, Anderson, Wu, 2000 as cited in Wang et al., 2005) have indicated that phonological information and early phonological skills such as rhyme processing do play a part in Chinese cultivation accomplishment.(iii)Cross-language transfer in multilingual and biliteracy acquisition Wang et al. (2005) have obta ined two key findings about cross-language transfer by center of reviewing numerous studies (Durgunoglu et al., 1993 Cisero Royer, 1995 Ganschow Sparks, 1995 Comeau, Cormier, Grandmaison, Lacroix, 1999 DAngiulli, Siegel, Serra, 2001 Geva Siegel, 2000 as cited in Wang et al., 2005). First, Wang et al. (2005) have found that a clear phonological relationship exists between two alphabetic languages such as Spanish-English, French-English, English-French, English-Italian, etc. This means the phonological skills of one language are exceedingly related to those of the other language.Second, Wang et al. (2005) have discovered that phonological skills of one language can help with the news expenditureiness narration skills of the other language.Yet, Wang et al. (2005) have failed to body-build out whether there is such cross-language transfer existing in Chinese and English as there is little research make in this cranial orbit and the two language systems are contrastive in na ture. as well as that, certain studies (Wydell Butterworth, 1999 Liow Poon, 1998 Liow, 1999 as cited in Wang et al., 2005) have tried to argue that there is dissociation or even a negative transfer from the nonalphabetic commencement language (L1, Chinese) to the alphabetic second language (L2, English).Nevertheless, Wang et al. (2005) have finally justify their research topic by saying that these previous studies have failed to try out the cross-language and writing system transfer as they did not investigate the phonological and orthographic processing skills of the learners L1 and L2.Research HypothesesWang et al. (2005) have hypothe size of itd that multilingual reading acquisition is a joint function of shared phonological skills and writing system specific skills (p. 72). They have particularly predicted that sensitivity in English and in Chinese to onset and rime, common linguistic units in both languages, will be tally and Pinyin reading skills will correlate with Eng lish word reading, since the two systems share the alphabetic principle (p. 72). However, Wang et al. (2005) have estimated that orthographic skills are writing system and script specific skills (p. 72).Details of the Research(i)Research frameThe design of this research is mainly quantitative in nature. A number of data-based lines were completed by the participants in order to obtain info in objective ways.(ii)Setting ParticipantsAs reported by Wang et al. (2005), the forty-six participants came from the Washington, DC area and they were Chinese immigrant children consisting of 24 boys and 22 girls with the mean age of 8 years and 2 months (SD = 9.1 months). All of them learned Chinese as their first off language and had developed normal English proficiency. They attended English classes in public schools and weekend Chinese schools in which the Pinyin systems and a simplified version of Chinese characters were taught and used. It should be noted that forty-two of them spoke both Mandarin Chinese and English at home while the other four solitary(prenominal) spoke Mandarin Chinese at home.(iii)MethodologyReferring to the description given(p) by Wang et al. (2005), the participants were tryouted in two 30-minute sessions in which they had to complete a set of Chinese or English experimental occupations in each session in a language laboratory. The list below has summarized the various experimental labors adopted by Wang et al. (2005).Chinese experimental tasks boil down authorphonological tasks onset, rime, and tone matchingParticipants ability to hold in and distinguish between the phonological units in spoken Chinese characters.Wang et al., 2005, p. 72-74Orthographic choice taskParticipants sensitivity to the legality of the radical position and form. Character callParticipants familiarity with the characters.Pinyin appointmentParticipants ability to match letters with sounds in Pinyin.English experimental tasksFocusReferencePhonological tasks onset and rime matchingParticipants ability to manipulate and distinguish between the phonological units in spoken English words.Wang et al., 2005, p. 74-76Phonological task -phoneme deletionNot givenOrthographic choice taskParticipants sensitivity to various orthographic patterns in English.Real word namingNot givenPseudoword namingNot givenAccording to Wang et al. (2005), there was as well as a nonverbal skill test which was used to test the participants nonverbal ability.(iv)Analytic proceduresAs mentioned by Wang et al. (2005) in the presentation of the research results, some(prenominal) measures were adopted to analyze the quantitative data collected from those experimental tasks. First, means and standard deviations were used to show the participants performance in the Chinese and English language and reading tasks.Second, the bivariate Pearson correlativitys were used to measure the correlations Chinese and English tasks.Third, the stepwise regression analyses were adopted to find out the best predictors for Chinese and English reading.Finally, the hierarchical regression analyses were used to explore (a) whether Chinese phonological and orthographic processing would affect English word reading and (b) whether English phonological and orthographic processing would affect Chinese character reading.(v)ResultsWith the help of the bivariate Pearson correlations, Wang et al. (2005) found that there was a significant correlation between the Chinese onset matching skill and English onset and rime matching skill. Moreover, another significant correlation was found between Chinese orthographic choice and Chinese character naming. Furthermore, Pinyin was found highly correlated with the pseudoword reading in English whereas the English phoneme deletion task was alike found highly correlated with English real word and pseudoword naming. expiry but not least, Chinese tone was found correlated with character reading as well.Through the stepwise regression analy ses, Wang et al. (2005) found Chinese orthographic processing to be the best predictor for Chinese character reading while the phoneme deletion skill was the best predictor for English real word and pseudoword reading.Consequently, by using the hierarchical regression analyses, Wang et al. (2005) found that only Chinese tone processing skill, but not orthographic skill, could affect English pseudoword reading. They could not find any cross-language knead of the English tasks on Chinese character reading.(vi)DiscussionWang et al. (2005) have concluded that the findings of this research do support their hypothesis.Specifically, Wang et al. (2005) have discussed the three significant findings (i.e. the significant correlations between Chinese onset, English onset, and rime matching skills the significant influence of Chinese tone processing skill on English pseudoword reading and the significant correlation between Pinyin and English pseudoword reading) and derived the implication that phonological awareness and skills are not language-specific but shared between Chinese and English reading when bilingual reading acquisition is taking place. Besides that, based on Wang et al. (2005), the finding of orthographic skills being unable to affect English reading skills has also supported the hypothesis proposed by Wang et al. (2005). This has been explained by Wang et al. (2005) who has cited a study (Liu Perfetti, 2003 as cited in Wang et al., 2005) to show that the orthographic skills of Chinese and English are language-specific as Chinese reading requires the use of both the left and right occipital brain areas while English reading mainly involves the use of the left occipital brain area. Part Two The CritiqueAssessment of the Researchs infixed ValidityBased on my outline, this research done by Wang et al. (2005) is considered to be a good research which has demonstrated a high aim of knowledgeable lustiness. The following is a detailed critique of the variou s parts of the research.(i)High correspondence between the research hypotheses and the findingsAs reflected from the previous session, the findings generated from this research are highly related to the research hypotheses established beforehand. Actually, they have successfully affirm the hypotheses, proving that there is a certain degree of cross-language transfer in Chinese-English biliteracy acquisition. (ii)In-depth literature reviewWang et al. (2005) have done a detailed and in-depth literature review on Chinese phonology and orthography, and previous studies related to the cross-language transfer in bilingual and biliteracy acquisition. This certainly helps lay down a good infrastructure for the later data analysis and discussion.However, it whitethorn be better if Wang et al. (2005) can provide the audience with a more comprehensive literature review by describing the English phonology and orthography in greater detail. In this way, the audience can have a clearer picture of the phonology and orthography of these two language systems. This can then enhance the audiences understanding of the research findings.(iii)Well-constructed and clear research hypothesesThe research hypotheses of this study are well-constructed with clear predictions made about the relationship among the variables mentioned. This can certainly help increase the internal validity as this has given clear directions for the development of research design, beat tools and analytic procedures.(iv)A well-selected group of participantsThe participants are well-selected with little variation in their background and learning profile. It is very wise for Wang et al. (2005) to study bilingual children as this can minimize the dominance of L1 over L2, which might affect the findings of the research. Moreover, the sample size is big enough for making generalizations. And, the number of male participants is similar to that of the female person participants. This can help reduce the sexuality influence on the findings.(v)Carefully-designed meter toolsObviously, the large number of Chinese and English experimental tasks and methods for data analysis are carefully designed and chosen. As shown from the results, the Chinese and English tasks are highly correlated, indicating a high aim of internal validity.Nevertheless, it is opinion that the tasks are cognitively or mentally too demanding for the young participants. This is because they are involve to process a number of tasks and a large amount of information and instructions within a short period of time. (vi)Variable overlooked sexual practice differenceAccording to Skaalvik Rankin (1994), girls have been found to be more motivate to study language than boys. One may then wonder if this gender difference would affect the level of cross-language transfer in bilingual reading acquisition. Since Wang et al. (2005) have recruited a similar amount of boys and girls as participants, they may also take a look at the in fluence of this variable. Assessment of the Researchs remote ValidityAlthough this research enjoys a high level of internal validity, its immaterial validity is relatively low and especial(a). The reasons are as follows(i)Findings are express mail to learners with a similar background or learning profileAs mentioned in the above, the background (e.g. age and family background) and learning profile of the selected participants are more or less the same due to the careful selection done by Wang et al. (2005) to avoid the research findings being affected by the soulfulness differences among the participants. As a consequence, the research findings derived from this specific group of participants can only be applied to learners with a similar background and learning profile.(ii)Findings may not be able to make generalizations in the actual learning contextIn this research, Wang et al. (2005) have conducted all the Chinese and English experimental tasks in a language laboratory in a bid to minimize the influence of the numerous factors which may affect the participants cross-language transfer in the actual learning context. For instance, in the real learning context, learners cross-language transfer in the process of language acquisition can be affected by their learning environment, teachers teaching methodologies, peer influence, learning materials, etc. Hence, the research findings derived from tasks conducted in the language laboratory which keeps the other factors constant may not be able to contribute to making generalizations in the actual learning context.(iii)Few implications can be derived for language learning and teachingFew implications can be generated from this research for language learning and teaching as the findings can only be applied to a specific type of learners (i.e. bilingual Chinese-English learners with a particular background and learning profile). Besides that, the experimental tasks conducted are all at word level and this definit ely does not resemble the actual reading acquisition in language learning, which is usually at condemn level or discourse level.Suggested Modifications for the ResearchWith reference to my analysis shown in the above, certain modifications can be made in the different parts of the research mentioned below.(i)Literature ReviewIt is suggested that Wang et al. (2005) may also give the audience an introduction on the English phonology and orthography instead of simply describing English as an alphabetic, nontonal language with phonemes as the smallest basic speech units in the language. This is because this introduction can help to make this research more complete as the audience are then allowed to make a clearer comparison between the two target language systems and better understand the findings obtained from this research. (ii)Measurement toolsAs mentioned previously, the Chinese and English experimental tasks can be cognitively or mentally too demanding for the young participants as they need to process a dowery of information and instructions within a short time. Therefore, it is suggested that Wang et al. (2005) may every simplify the content and instructions of the tasks or lengthen the period of time given to participants for completing the tasks. In this way, the influence of frustration and fatigue on participants performance in the tasks can be avoided. (iii)DiscussionFor the discussion part, it is recommended that Wang et al. (2005) can also analyze the data collected and see if there is any influence of gender difference on the cross-language transfer between Chinese and English reading acquisition. By doing so, significant implications may be derived and this will in turn provide useful implications for language learning and teaching in the real learning context. Suggestions for an Extension StudyAfter having studied this research and its findings, it is believed that further research can be done in the following areas in order to derive more impl ications for language learning.(i)Chinese and English reading at sentence level or discourse levelReferring to what mentioned beforehand, this research done by Wang et al. (2005) focuses on Chinese and English reading acquisition at word level only as all the experimental tasks are designed at word level. However, it is a well-known fact that learning to read may proceed to sentence level or discourse level. Thus, it is definitely worth investigating whether cross-language transfer still occurs when Chinese and English reading acquisition is done at sentence level or discourse level.(ii)Bilingual children whose first language is English Since bilingual reading acquisition is the main focus of this research, it is believed that similar research can also be done to study bilingual Chinese-English children whose first language is English and see if similar findings about the cross-language transfer can be generated. In this way, the findings generated may help confirm the findings prod uced by Wang et al. (2005) and enhance the external validity of the study done by Wang et al. (2005).(iii)Children with dyslexia or other language learning problemsLikewise, will there be any changes to the present findings of the research conducted by Wang et al. (2005) if the bilingual participants suffer from dyslexia or other language learning problems? It is thought to be a good idea to further research on this group of participants. Hopefully, useful implications can be derived to help enhance the learning effectiveness for this group of learners.(iv)Reading articulateness and comprehensionAs mentioned in the above, research on bilingual reading acquisition should not be limited to word-level as reading occurs more often at sentence level or discourse level. In addition, reading acquisition should not be limited to phonological and orthographic skills of individual words only. Actually, reading fluency and comprehension are two important aspects in reading acquisition. So, it is worth researching on these two aspects and figure out if there is any cross-language transfer in these areas of Chinese and English language learning.ConclusionCritiquing a research article is indeed a challenging but thought-provoking task to me. Through working on this assignment, I have learned about how a quantitative research can be conducted in the area of language acquisition, and gradually developed a better set of scathing analysis skills when writing the critique. I would surely bear in genius the research and analytical skills that I have learned from the study of Wang et al. (2005) and pitch them into use when I am given a chance to conduct a research on my own.

Vidal Business Strategy Overconfidence

Vidal Business Strategy oer self-assertion doorwayDuring the annual business plan meeting regarding the shower gel chump Vidal, it was decided for 2017 to decline the 1+1 promo quantities in an effort to grasp get out profitability versus last class. From the arguments that were presented, i believe that the ag assemblage has overestimated the chance for the latter scenario to happen, since the ending aptitude has been impacted by over office. The aim of this announce is a) to present arguments that justify the latter, b) to detect the source of this solidus and c) to root on de-bias techniques that ordain be prove useful besides for the future.The endVidal, in a short period of clock became the 3rd pretender into the segment, with a dogging growth. Last year it gained +3.5 bear downs in terms of market sh atomic number 18 and a +30% increase in value gross revenue. Managers pointed that the key drivers of success were a) the bang-up value for money product b) the juicyest rate of 1+1 promo strong point c) the coronation on distribution and traditional advertising.The team concluded that the accusatory to penetrate the market was completed and there is an opportunity to achieve ruin profitability and ROI at the end of 2017. This could happen by a 20-25% drop-off in 1+1 promo quantities. Following this scheme, managers estimated that they corporation retain at least last years value sales, which in combination with the dismantle cost of selling nighs forget improve the brands profitability. The greatest eithery that allow for support the latter is products excellence and consumer loyalty. More specifically, they considered that the combination of products low monetary value (secondlowest) and quality is so unique, that by reducing the 1+1 promo, consumers uncoerced be directed towards the regular product. Moreover, after the distribution expansion the team estimated that the products superiority versus aspiration will attr act wise consumers.I witness that both scenarios be overconfident and their probabilities should be reassessed for the following creators.Initially, the findings of a qualitative research indicated that Vidal is a value for money product, but still lacks in terms of packaging. Most consumers considered the packaging as old fashioned and correlative it with private Label. Additionally, they indicated whatsoever practical issues during the usage which argon capable to celebrate both users mystify and perceptional quality.From a quantitative perspective, it was noniced that 55% of Vidals r til nowues were buckle underd from the 1+1 quantities whereas the regular product presented a sharp increase in 3 out of 5 variances, mainly be grounds of distribution expansion and not from gaining consumers from other players.Private Labels are bestowers into the segment succession in 2016 presented a substantial growth. From the data declare, I noticed that the second player had arou nd -40% lower price during some periods that are not back up from their 1+1 promo wave. From the latter I suspect that they might invested in price simplifications in order to constrain PLs growth since they are much expensive.As a consequence I would like to underline thatPrivate labels are growing signifi hind endtly in a price painful segment. Maybe by reducing 1+1 quantities we might entreat our consumers towards them, since we are highly cor link and much expensive.Palmolive might has realized the brat of PL and might has adapted its strategy by offering price reductions. The enterprisingness to curtail our investment under these circumstances might also natural spring consumers towards them.I think that the team has overestimated the regular products competitive advantage compared with competition and discreditd the importance of 1+1 promo.I believe that the source of this bias is generated by the teams motivation to improve profits since its a key murder indicator for both the companys and managers growth. During this effort managers knew that is not feasible to increase investment in order to boost sales and consequently they thought approximately a cost reduction strategy. The initial feedback active the very good results might boosted their trustfulness, whereas the fact that the brand has experienced only successes might restrict them to consider alternative scenarios.In order to improve the end do swear out I would like to recommend some techniques of reducing certitude. The inaugural is related around the importance of counter-argumentation. This performer that managers when taking a finding should consider reasons why this decision might goes ravish. If the latter is difficult so they could ask from outsiders to express their opinion. For example in our case originally authorize the decision all the team members is recommended to list a number of reasons why the 1+1 reduction could not lead to increased profitability. In case that no one could think about any reason then, the Sales force should will some input, since they adjudge excellent instinct of the market and its dynamics.Secondly, I would indicate the importance of feedback. The company is operating since 1970 go is consisted form experienced and new members. It is a great opportunity to execution the companys knowledge by creating a case- translate library that will host all the companys ago successes and disappointments. at one time a year we could organize the Sarantis-Training-Academy, in which managers will be assigned with cases, and they will be asked to provide their input for separately strategy by assigning probabilities about their favored hypothesis. Afterwards, they will be informed about the real outcome and managers will be awake if they are overconfident or not.Finally from now on, I recommend that the Brand manager should be floorable for each decision. After every business plan meeting he will be obligated to present the proposals on the board of directors. The fact that he will have to present the creative thinkers to seniors and experienced members might help him to enhance both self-importance and group-criticism and reducing certitude.ConclusionThe marketing team might has overestimated the probability of their scenario regarding the brands strategy of 2017, whereas this time has neglected also the normative approach. The excellent launch in combination with the fact that Vidal has experienced only successes might boosted the level of authorisation. In order to improve the decision process this report has proposed 3 debias techniques (feedback, consider-the reverse gear and accountability) that fit to the wayal research seem to use up overconfidence.Part BIntroduction certitude might be proved a foul element for the decision making process since it does not only evokes populate to overestimate their probabilities about the favored scenario but it also john convey catast rophic consequences. For example, in a study that examined the effect of overconfidence on newsvendors forecasts, showed that the higher the overconfidence the tighter the profit loss (Crosson and Ren, 2009), while directly overconfidence seems to be a key driver for many an(prenominal) start-up failures. This report is based on previous studies, and aims to underline the causes that triggered overconfidence to the Vidals marketing team while in parallel is focusing to provide a series of debiasing techniques in an effort to eliminate its effect.Overconfidence and SuccessIn Vidals case I feel that the successful launch among with the wide recognition of the teams efforts, might have boosted their level of confidence. This relationship mingled with success and overconfidence has atomic pile of similarities with the case of Ducati.More specifically, in 2003 Ducati entered the motorcycle racing circuit MotoGP without having high expectations. During this effort, the team was focu sing on data analysis and was gathering regular feedback from the drivers for its improvement. At the end of the first year, Ducati surpassed every expectation and gathered the 2nd place, whereas for next year the team targeted the world-class place. This time the differentiated point was that the team stopped steping deeply into the data and receiving feedback. They considered that now their experience was enough in order to create an even better motorbike. Once a team member indicated you look into the data to understand whats going misemploy and not why you are performing well. The next year Ducati did not covered expectations and performed even worse than the previous year. (Gino and Pisano,2011). Similarly, like on Ducatis case, it is remarkable how the Vidals marketing team after its successful launch didnt look deeply into the data, since so utmost it was a key principle preliminary taking any action. Additionally, the team seemed overconfident not only about their pre dictions but also about the products characteristics and executing.There are findings which show that success can inspire overconfidence. For example in a recent study, Hilary and Menzly (2016) effect that analysts becoming overconfident when they achieve accurate forecasts as they tend to depose more than on private cultivation and to neglect markets reaction. As a consequence they perform less accurate predictions in the future. Additionally, when a principal achieves successful performance he becomes overconfident as he tends to fiat his perceptional skills higher than the expected. The latter leads him not to use consequential cultivation even though he might has a good database (Gervais and Odean, 2001). Walter and Ferrier (2004) tell also that success could generate overconfidence while it makes managers intolerant on new prospects.Since, success inspires overconfidence, it is strategic for managers to examine and understand the causes of success (Gino and Pisano,20 11).Definition and Sources of OverconfidencePlous (1993,p.217) stated that no judgement decision is more prevalent and more catastrophic than overconfidence. In order to support this rationale in his sustain are some examples of the ostracize consequences of overconfidence. One of them is the destruction of Pearl Harbor, since Americans considered undoable the scenario for someone to conduct a proper attack in that location. Similarly, NASA, before the explosion of the space shuttle Challenger in 1986, had estimated that the risk of failure was 1/10,000.Overconfidence might has different forms. The first is related when someone overestimating the probability of the favored outcome to occur (Griffin and Varey, 1996), while the others are related when commonwealth consider themselves to be better than others, or when someone overestimates his skills or performance (overestimation) (MooreHealy,2007). I believe that in Vidals case both types are valid. This happens because the team might overestimated the probability to retain the amount of 2016 value sales by neglecting critical information, while they have excellent perception about the products potential.Russo and Shoemaker (1992) stated that a major cause of overconfidence is a persons difficulty to imagine all different outcomes that an event could have (availability bias).Due to this inadequateness people become overconfident regarding their predictions as they have fewer paths to consider. In Vidals case the team could not envision different consequences of the cost reduction strategy, whereas the fact that the brand had only successes, might restricted the teams effort to anamnesis or envision different scenarios. Another cause of overconfidence according to Russo and Shoemaker is anchoring. They stated that managers are anchored to one value or idea without making any adjustments, As a result they might generate sales forecasts before setting and adjusting their confidence rates. A prior study of T versky and Khaleman (1974) confirmed this relationship by also stating that people tend to underestimate the risk of failure.The fact that cost reduction was the first thing that get across the teams mind, might be due to an association based error. People are not used to think hard and usually trust the thought that comes first into their mind (Kalheman,2003). Here, the first thing that the managers noticed was that Vidal had by far the highest promo intensity, while they might recalled from their semantic memory that cost reduction is a common and direct way to improve profitability. Arkes (1991) stated that people can think reasons to support their judgings much faster than the contradictory ones. The latter in combination with the fact that supportive reasons are greatly cued can cause overconfidence.Debiasing Techniques and LimitationsLichtenstein and Fischhoff (1980), stated that people are usually overconfident, but in an sample that they conducted they engraft that feed back could improve participants calibration. Calibration is the skill to assign probabilities that equals the correct estimations (Sharp et.al, 1988). insideng feedback is one out of four types of feedback (outcome, process, environmental, performance) that are related with opinional predictions, and can be divided into two subtypes (scoring-rule and calibration feedback)(Benson Onkal, 1992).In 1987, Arkes conducted an experiment between 2 groups in order to detect the effect of feedback. The 2nd group was informed that will have easy questions to solve while the 1st group was told that the questions were difficult. However, in reality both questions were difficult. After the first 5 questions the second group had higher confidence but same true statement ratio with the first group. During the next sessions and after the second group standard the discouraging feedback the members expressed less confidence and better trueness.Similarly, in a recent study in which participated 5 7 students it was founded that performance feedback reduced overconfidence and lead to more accurate predictions (Al-Harthy 2016). Moreover, Richards (2015), examined as well the effect of feedback. This time the sample was consisted from 171 MBA students with 5 years of working experience. The participants were asked to assess themselves in 5 areas and afterwards to participate in a 3-hour assessment regarding their skills (problem solving, decision making, leadership, teamwork and planning).After the assessment, they participated in a pedagogy fall in order to understand the essentials of behavior in relevance with the above skills. In parallel, they were being involved with many tasks such as feedback and discussions with students. At the end of the semester the subjects repeated the same assessment. It was found that participants initially were overconfident in their self-assessment but after the feedback and the training course their overconfidence level was reduced.Russo and Shoemaker(1992) pointed out the importance of feedback in companies since its a fast and cheap way to reduce overconfidence. He proposed that, companies should provide the employees with actual past cases where the result is known and to ask them to provide their guesses combined by their confidence level. With this method that was applied also successfully in Shell in order to train its junior gemologists, the employees learn to assess their level of confidence in relevance with their job and to identify if they are overconfident or not.However, all the above do not mean that feedback is always effective. Meikle et.al (2016) stated that this method is not suitable for people who have vested interest in seeing the world in a biased way. More specifically, a study in which participated football fans showed that feedback was not able to improve their accuracy on predictions since most of them still had preferences towards their favorite team (Massey et.al,2011).Additionally, the scori ng-rule feedback (subtype of performance feedback) in which the forecaster gets rewards or penalties according to the outcome of his prediction doesnt show to reduce overconfidence (Fisher,1982). Finally, its important to indicate that this method is less efficient on overconfident CEOs, as they tend to show greater resistance on feedback which restricts them from improving calibration (Chen,et.al,2014).Feedback is useful for improving the decision making process since one of its characteristics is to warn that something, goes wrong or it might go wrong Thaler and Sunstein (2008). Kahneman (2003) stated that an outsiders view can provide more accurate predictions while it is less possible to provide unrealistic estimations. This happens because the outsiders view can provide safety against favored predictions that have less probabilities than the expected to happen (Kahneman Lovallo,1993). The outsiders can exploit knowledge from previous experiences by taking also into account the problems unique characteristics and data. As a result, since many people are overconfident, it is recommended for important decisions to ask either from an outsider to share his opinion or the decision maker to try to think like an outsider (Bazerman, 2013). This means that the decision maker should either think of reasons why his scenario might go wrong or to ask from others to provide counterarguments (Russo Shoemaker,1992). The latter might be proved helpful since considering the opposite scenario is capable to reduce the high levels of confidence (Soll et.al 2013).In a study that was conducted by Koriat et.al (1980), it was found that when subjects wrote down contradicted reasons and alternatives against their selected answer, they showed less confidence and better calibration.One way that might lead to this direction and to reduce overconfidence is accountability. The fact that the person is accountable for the decision, will lead him to enhance his pre-emptive self-criticism as he will have to present the decision and its rationale to others (Larrick, 2004).This instrument will lead him to improve the decision quality and to assess more objectively the alternatives (Tetlock et.al, 1989). In a study that was conducted by Tetlock Kim(1987) the subjects participated in a person-perception process. The participants after receiving responses from each test signr they were asked to submit a short reputation brief and to retake the test. This time they had to predict the responses of each test taker by assigning probabilities and level of confidence. It was found that subjects that they were told (before the test), that the researcher would like to have a detailed interview about their answers, to show more appropriate levels of confidence and better accuracy. Similarly in a recent study that participated 71 student students in a computer-based laboratory showed that accountability reduced importantly overconfidence (Jermias,2006).However, Brown (1999) st ated that accountability might lead managers to take decisions that are most favorable to their peers, while the great amount of information could cause the lost-pilot effect if it will not being used decent (Larrick,2004). Accountability, does not seem to improve calibration in organizations in which the answer to the question what is a good decision is maddeningly subjective (e.g advertising agencies), whereas it is more effective in preventing rather reversing judgmental biases (Tetlock Kim 1987).The positive effect of overconfidence recommendationsContrary to all the above, overconfidence does not have solely negative effects. As Goethe wroteFor a man to achieve all that is demanded of him he must(prenominal) regard himself as greater than he is. Bernardo and Welch (2001) stated that overconfident entrepreneurs are more likely to explore their environment and to provide additional information to their social group while overconfident managers are more willing a)to take risk d ecisions b)to devote more effort and c) to motivate the team to accomplish its goal (Gervais et.al,2002). Finally, Taylor and Brown (1998) indicated that overconfident and optimistic people are more positive, happier and they have excellent ability for caring about others.Since overconfidence has also a positive side, Russo (1992) recommends that managers should distinguish between deciding and doing. This means that the decision process should be combined by realism and rationality, whereas the executing of the decision should take advantage of the motivational benefits of overconfidence. As a result, its important for the decision makers to realize what they do know and what they dont, while the ones who are implementing the decision should indulge overconfidence when they think that will be proved dependable for the performance.ConclusionOverconfidence when impacts the decision process could have negative consequences. However, it has some advantages that can be exploited from the ones who are implementing the decision. 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