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MENTAL MODEL · M3441

Immiserizing Growth

Immiserizing Growth
BusinessHigh supportEconomics
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Updated 2026-07-31

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INTRODUCTION

English translation pending.

CORE DEFINITION

Immiserizing growth, formalized by Jagdish Bhagwati, describes a case in which growth concentrated in a country's export sector worsens its terms of trade enough that real national income declines. It requires a large share of world supply in the export good, inelastic world demand, and a strongly export-biased growth pattern. Output grows, yet the country is poorer, because the price effect outweighs the quantity effect.

SCAFFOLDING EFFECT

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- Terms of Trade Check: ask whether more output is being sold at a lower price per unit. - Race-to-Bottom Warning: recognize when extra effort lowers your own unit rate. - Welfare Accounting: measure real income after price effects, not just volume shipped.

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When a country supplies a large share of a good whose world demand is inelastic, expanding output lowers the world price more than proportionally. The price decline transfers income to foreign buyers, so the gain from extra volume is more than offset and national real income falls.

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Source support: Explicit

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    en.wikipedia.orghttps://en.wikipedia.org/wiki/Immiserizing_growthZH · Explicit
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