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Openness, Outward Orientation, Trade Liberalization and Economic Performance in Developing Countries

  • Sebastian Edwards

This paper deals with the role of trade regimes in determining economic performance and growth in the developing countries. The policy and empirical literatures on trade orientation and economic growth are critically reviewed; it is argued that a key limitation of these works has been the inability to create measures of trade orientation that are: (i) objective; (ii) continuous and (iii) comparable across countries. A growth model that relates trade orientation to the ability to absorb technological progress from the rest of the world is developed for the case of a small country. The model is tested using a new index of trade orientation that is free from the limitations described above. The results obtained using a cross country data set provide strong support to the hypothesis that, with other things given, countries with a less distorted external sector grow faster than those countries with a more distorted external sector. The new theories of economic growth are also discussed, and their usefulness for analyzing the relation between trade orientation and growth in the developing countries is assessed.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2908.

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Date of creation: Mar 1989
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Publication status: published as "Openess, Trade Liberalization, and Growth in Developing Countries", Journal of Economic Literature, 1993, V31(3), 1358-1393
Handle: RePEc:nbr:nberwo:2908
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