01567pab a2200145 454500008004000000100001500040245006800055260000900123300001400132362001000146520119600156650001501352650002001367773003401387180718b2006   xxu||||| |||| 00| 0 eng d  aJha, Rajiv  aA model of exports and investment in an open developing economy  c2006  ap.820-25.  a4 Mar  aThe paper develops a model that privileges exports as the key element of demand; not only do export permit the exploitation of scale economies by enlarging the size of the market served by domestic producers but also lead to the effective use of the relatively abundant factor, i.e. labour. The development literature has further emphasised the fact that exports are instrumental in inducing investment because of the incentive they provide to introduce new techniques through additions to the capital stock. the model introduces somewhat different export and investment, which stimulates growth. However, the commodity composition of a developing economy's export implies that exports are a function of the real exchag e rate. An increase in the real exchange rate (depreciation), while stimulating exports and thus growth, however, leads to an erosion of the real wage share because of a price rise through imports. The steady state can be interpreted as a balance of these two forces - an exchange rate depreciation leads to growth through an increase but simultaneously causes a cutback in government expenditure to maintain a floor wage share, impeding the growth process. - Reproduced.  aInvestment  aExports/Imports  aEconomic and Political Weekly