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Outward-Orientation and Development: Are Revisionists Right

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Author Info
T. N. Srinivasan () (Economic Growth Center, Yale University)
Jagdish Bhagwati
Abstract

The costs of import substitution (IS) as a strategy for industrialization, which was deemed synonymous with economic development by many development economists of the fifties and sixties, were shown to be substantial in the influential and nuanced studies of the seventies and eighties under the auspices of OECD, NBER and World Bank. These studies played a critical role in shifting policies in several developing countries away from the IS strategy. Recently there has been a proliferation of cross country regressions as a methodology of analysis of issues relating to growth, trade and other issues. Both proponents (e.g. Sachs and Warner (1995)) and opponents (Rodriguez and Rodrik (1999)) of the view that openness to trade is linked to higher growth have relied on such regressions. The paper systematically reviews the theoretical and empirical studies on such linkage. It rejects the cross-country regression methodology for reasons of their weak theoretical foundation, poor quality of their data base and their inappropriate econometric methodologies. It argues that the most compelling evidence on this issue can come only from careful case studies of policy regimes of individual entries such as those of OECD, NBER and World Bank. It concludes that the virtues of openness established in these nuanced in-depth studies remain unrefuted.

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Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 806.

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Length: 44 pages
Date of creation: Sep 1999
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Handle: RePEc:egc:wpaper:806

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Related research
Keywords: Developing Countries; Economic Development; Economic Growth; International Trade; Openness; Import Substitution; Export Promotion; Cross-Country Regressions;

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Find related papers by JEL classification:
E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
F11 - International Economics - - Trade - - - Neoclassical Models of Trade
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Anne O. Krueger, 1997. "Trade Policy and Economic Development: How We Learn," NBER Working Papers 5896, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995-1), pages 1-118. [Downloadable!]
  3. Hamada, Koichi, 1974. "An economic analysis of the duty-free zone," Journal of International Economics, Elsevier, vol. 4(3), pages 225-241, August. [Downloadable!] (restricted)
  4. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-national Evidence," Electronic Working Papers 99-003, University of Maryland, Department of Economics. [Downloadable!]
    Other versions:
  5. Balasubramanyam, V N & Salisu, M & Sapsford, David, 1996. "Foreign Direct Investment and Growth in EP and IS Countries," Economic Journal, Royal Economic Society, vol. 106(434), pages 92-105, January. [Downloadable!] (restricted)
  6. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Arvind Panagariya, 2003. "Trade Openness: Consequences for the Elasticity of Demand for Labor and Wage Outcomes," International Trade 0308007, EconWPA. [Downloadable!]
  8. Krueger, Anne O, 1997. "Trade Policy and Economic Development: How We Learn," American Economic Review, American Economic Association, vol. 87(1), pages 1-22, March. [Downloadable!] (restricted)
  9. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October. [Downloadable!] (restricted)
  10. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation, Yale University. [Downloadable!]
  11. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
  12. Krueger, Anne O & Schiff, Maurice & Valdes, Alberto, 1988. "Agricultural Incentives in Developing Countries: Measuring the Effect of Sectoral and Economywide Policies," World Bank Economic Review, Oxford University Press, vol. 2(3), pages 255-71, September.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rockmore, Marc & Zhang, Xiaobo, 2006. "Moving up and moving down: a new way of examining country growth dynamics," DSGD discussion papers 34, International Food Policy Research Institute (IFPRI). [Downloadable!]
  2. Ana Flávia Machado & Frederico G. Jayme Jr, 2002. "Trade liberalization and labor market in Brazil: impacts on employment and wages in tradeables and nontradeables sectors," Textos para Discussão Cedeplar-UFMG td174, Cedeplar, Universidade Federal de Minas Gerais. [Downloadable!]
  3. Sibley, Christopher W. & Walsh, Patrick Paul, 2002. "Earnings Inequality and Transition: A Regional Analysis of Poland," IZA Discussion Papers 441, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Bonaglia, Federico & Braga de Macedo, Jorge & Bussolo, Maurizio, 2001. "How Globalization Improves Governance," CEPR Discussion Papers 2992, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Richard Kozul-Wright & Paul Rayment, 2004. "Globalization Reloaded: An Unctad Perspective," UNCTAD Discussion Papers 167, United Nations Conference on Trade and Development. [Downloadable!]
  6. Kishor Sharma, 2000. "Liberalization and Structural Change: Evidence from Nepalese Manufacturing," Working Papers 812, Economic Growth Center, Yale University. [Downloadable!]
  7. Eduardo Lora & Ugo Panizza, 2002. "Structural Reforms in Latin America under Scrutiny," RES Working Papers 4301, Inter-American Development Bank, Research Department. [Downloadable!]
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  8. Indra de Soysa & Eric Neumayer, 2004. "False Prophet, or Genuine Savior? Assessing the Effects of Economic Openness on Sustainable Development, 1980–1999," International Trade 0409001, EconWPA, revised 13 Oct 2004. [Downloadable!]
    Other versions:
  9. Ferreira, Pedro Cavalcanti Gomes & Rossi Junior, José Luiz, 2001. "New Evidence on Trade Liberalization and Productivity Growth," Economics Working Papers (Ensaios Economicos da EPGE) 433, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
  10. Gilberto A. Libânio, 2003. "Trade, specialization and growth: a preliminary assessment of the Brazilian experience in the nineties," Textos para Discussão Cedeplar-UFMG td220, Cedeplar, Universidade Federal de Minas Gerais. [Downloadable!]
  11. Dilli Raj Khanal & Prakash Kumar Shrestha, 2008. "Trade and investment linkages and coordination in Nepal: Impact on productivity and exports and business perceptions," Working Papers 5208, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada.. [Downloadable!]
  12. Frederico Gonzaga Jayme Jr, 2001. "Notes on trade and growth," Textos para Discussão Cedeplar-UFMG td166, Cedeplar, Universidade Federal de Minas Gerais. [Downloadable!]
  13. Reuter & Ulrich, 2004. "The Effects of Intraregional Disparities on Regional Development in China: Inequality Decomposition and Panel-Data Analysis," Econometric Society 2004 Far Eastern Meetings 716, Econometric Society. [Downloadable!]
  14. Adam McCarty, 2001. "Globalisation and Human Development," International Trade 0110001, EconWPA. [Downloadable!]
  15. Wei, Shang-Jin & Wu, Yi, 2001. "Globalization and Inequality: Evidence from within China," CEPR Discussion Papers 3088, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  16. Carlos Esteban Posada P., 2004. "Causas del desarrollo y mecánica del crecimiento," Method and Hist of Econ Thought 0411003, EconWPA. [Downloadable!]
  17. Eduardo Lora & Ugo Panizza, 2002. "Las reformas estructurales en América Latina bajo la lupa," RES Working Papers 4302, Inter-American Development Bank, Research Department. [Downloadable!]
  18. Dollar, David & Kraay, Aart, 2001. "Trade, growth, and poverty," Policy Research Working Paper Series 2615, The World Bank. [Downloadable!]
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