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Trade liberalization, the income elasticity of demand for imports, and growth in Latin America

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Abstract

This paper applies the balance-of-payments-constrained growth model to 17 countries of Latin America over the period 1977-2002. The crucial parameter to estimate is the income elasticity of demand for imports, which is done for Latin America as a whole and for individual countries. As well as estimating over the whole period, the technique of rolling regressions is also used to test whether a trend increase can be discerned as a result of trade liberalization. A trend increase is found for Latin America as a whole and for some individual countries, and the balance-of-payments equilibrium growth rate is a good predictor of growth performance in nine of the 17 countries. There is no evidence that the balance-of-payments equilibrium growth rate has increased in Latin America as a result of trade liberalization.

Suggested Citation

  • Penélope López & A. Thirlwall, 2006. "Trade liberalization, the income elasticity of demand for imports, and growth in Latin America," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 29(1), pages 41-61.
  • Handle: RePEc:mes:postke:v:29:y:2006:i:1:p:41-61
    DOI: 10.2753/PKE0160-3477290103
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    Cited by:

    1. Bilge Erten, 2010. "Industrial Upgrading and Export Diversification: A Comparative Analysis of Economic Policies in Turkey and Malaysia," Working Papers id:2778, eSocialSciences.
    2. Mario Cimoli & Jose Antonio Ocampo & Gabriel Porcile, 2017. "Choosing sides in the trilemma: international financial cycles and structural change in developing economies," LEM Papers Series 2017/26, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Cimoli, Mario & Porcile, Gabriel, 2011. "Tecnologia, heterogeneidad y crecimiento: una caja de herramientas estructuralista
      [Technology, heterogeneity and Growth: A Structuralist Toolbox]
      ," MPRA Paper 33801, University Library of Munich, Germany.
    4. Peter Dorman, 2007. "Low Savings or a High Trade Deficit?:," Challenge, Taylor & Francis Journals, vol. 50(4), pages 49-64.
    5. Lanre Kassim, 2013. "The Impact of Trade Liberalisation on Export Growth and Import Growth in Sub-Saharan Africa," Studies in Economics 1310, School of Economics, University of Kent.
    6. Andre Nassif & Carmem Aparecida Feijo & Eliane Araújo, 2016. "Structural change, catching up and falling behind in the BRICS: A comparative analysis based on trade pattern and Thirlwall’s Law," PSL Quarterly Review, Economia civile, vol. 69(279), pages 373-421.
    7. Mario Cimoli & Gabriel Porcile, 2014. "Technology, structural change and BOP-constrained growth: a structuralist toolbox," Cambridge Journal of Economics, Oxford University Press, vol. 38(1), pages 215-237.
    8. Elias Soukiazis & Pedro Cerqueira & Micaela Antunes, 2013. "Growth rates constrained by internal and external imbalances and the role of relative prices: empirical evidence from Portugal," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 36(2), pages 275-298.
    9. Maja Kadievska-Vojnovic & Danica Unevska, 2007. "Price and Income Elasticities of Export and Import and Economic Growth in the case of the Republic of Macedonia," Working Papers 2007-01, National Bank of the Republic of Macedonia.
    10. A. P. Thirlwall, 2013. "Economic Growth in an Open Developing Economy," Books, Edward Elgar Publishing, number 15208.
    11. Cimoli, Mario & Fleitas, Sebastian & Porcile, Gabriel, 2011. "Real Exchange Rate and the Structure of Exports," MPRA Paper 37846, University Library of Munich, Germany.
    12. Gala, Paulo & Libanio, Gilberto, 2010. "Exchange rate policies, patterns of specialization and economic development: theory and evidence in developing countries," Textos para discussão 211, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    13. Elias Soukiazis & Pedro Cerqueira & Micaela Antunes, 2011. "Growth rates constrained by internal and external imbalances: a demand orientated approach," GEMF Working Papers 2011-12, GEMF, Faculty of Economics, University of Coimbra.
    14. Ricardo Bebczuk, 2008. "Imports-Exports Correlation: A New Puzzle?," BCRA Working Paper Series 200833, Central Bank of Argentina, Economic Research Department.
    15. Anthony P. Thirlwall, 2011. "Balance of payments constrained growth models: history and overview," PSL Quarterly Review, Economia civile, vol. 64(259), pages 307-351.
    16. Pacheco-López, Penélope & Thirlwall, Anthony, 2009. "Has Trade Liberalisation in Poor Countries Delivered the Promises Ecpected?," Panorama Económico, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 0(08), pages 7-34, primer se.
    17. Ricardo Bebczuk, 2008. "Imports – Exports Correlation: A New Enigma?," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(52), pages 39-56, October -.

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