Trade Orientation, Distortions and Growth in Developing Countries

Sebastian Edwards

No 3716, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper I use a cross country data set to analyze the relationship between trade orientation, trade distortions and growth. I first develop a simple endogenous growth model that emphasizes the process of technological absorption in small developing countries. According to this model countries that liberalize their international trade and become more open will tend to grow faster. Whether this higher growth is permanent, or only a short run result, will depend on the relative size of some key parameters. using nine alternative indicators of trade orientation I find out that the data supports the view that more open economies tend to grow faster than economies with trade distortions. The results are robust to the method of estimation, to correction for errors in variables and for the deletion of outliers. I finally argue that future research in the area should move towards the empirical investigation of the microeconomics of technological innovations and growth.

Date: 1991-05
Note: ITI IFM
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Citations: View citations in EconPapers (13)

Published as "The Political Economy of Inflation and Stabilization in Developing Countries," Economic Development and Cultural Change, January 1994, 42(2): 235-266
Published as "Interest Rate Determination in Developing Countries: A Conceptual Framework," IMF Staff Papers, September 1985, 32(3): 377-403
Published as with Peter J. Montiel, "Devaluation Crises and the Macroeconomic Consequences of Postponed Adjustment in Developing Countries," IMF Staff Papers, December 1989, 36(4): 875-903
Published as "Explaining Fiscal Policies and Inflation in Developing Countries," Journal of International Money and Finance, March 1991, vol. 10 (supp. 1): S16-S48
Published as "Openness,Trade Liberalization, and Growth in Developing Countries," Journal of Economic Literature, September 1993, 31(3): 1358-1393
Published as Edwards, Sebastian, 1992. "Trade orientation, distortions and growth in developing countries," Journal of Development Economics, Elsevier, vol. 39(1), pages 31-57, July.

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Journal Article: Trade orientation, distortions and growth in developing countries (1992)
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