FOREIGN TRADE REGIMES AND ECONOMIC GROWTH IN DEVELOPING COUNTRIES

Abstract

This paper surveys empirical studies which seek to demonstrate the limited static gains from a movement towards free trade in Section I. Section II surveys statistical studies which have established the dynamic effects of growth in exports on that of per capita income. Section III summarises the results from a series of comparative studies of developing countries trade regimes undertaken in the 1960s to 1970s, which show fairly conclusively that so-called 'outward-orientation' does in practice seem to be positively associated with better economic performance in terms of growth rates of per capita income. Section IV examines whether the conclusions of these studies were also valid for the more volatile global environment of the 1970s and 1980s while Section V considers various arguments which seek to provide a link between growth performance and trade regimes through the 'dynamic' income effects of the growth in world income and trade. Section VI introduces certain insights of the classical writiers which might explain the stylised facts about the links between trade and growth performance.

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