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International Trade and Finance
Notes
6 LOVELY PROFESSIONAL UNIVERSITY
Theoretical synthesis
We begin with the structuralist synthesis of EG of Kuznets (1972), Chenery and Syrquin (1975 and
1989) and Chenery et al. (1986). In brief, we noticed that what is most relevant is the fact that the
observation of the process of EG of the country depends on the changes of factorial provision but
also, and especially, on changes in demand, leading to the increase of the internal market, the
substitution of imports and the variations of exports. In this sense, they defend that the TPF included,
among other factors, the ones associated with the weight and countenance of IT.
In turn, in a brief reference to the analyses that underscore economic integration (more or less
institutional), we mention, for instance, Young (1928), Florence (1948), Stigler (1951), Meade (1953),
Svennilson (1954) and Scitovsky (1958). This group of authors took dynamic effects into account,
namely those resulting from the increase in competition, from the gain of economies of scale, from
changes in the level and nature of investments, from the increase of research expenses, from technical
progress and from the elimination of the risk and uncertainty in trade.
Another example is Findlay’s model (1980 and 1984) for the commercial relations between the
(developed) North and the (underdeveloped) South. While integrating the neoclassical theories of IT
and EG and at the same time recognizing the specificities of the LDCs, he assumes that the economy
of the North is dynamically described by Solow’s (1956) model of EG, except for the fact that it
consumes an importable good in addition to its own product, while the economy of the South works
according to Lewis’ (1954) model of unlimited supply of labour. The terms of trade [based on Johnson
(1967)] related EG in the two economies. So, the South had the IT as the principal driving force of EG.
However, the rhythm of EG was determined by the (exogenous) EG rate of the North.
We conclude with the work of Feder (1982), where EG proceeded from the effects of the traditional
sources and from the exporter sector performance. In brief, he considers that economies have two
distinct productive sectors (exporter and non-exporter), differing in the final destination of productions
and in the superiority of the productivity of the traditional factors in the exporter sector. He concluded
that the rate of EG was explained by the rates of investment, labour growth and exports growth. He
also presents a way of comparing the relative benefits of the allocation of resources to both sectors.
Empirical applications
In what concerns empirical applications, we immediately point out the structuralist inclination present
in Hagen and Hawrylyshyn (1969), Chenery et al. (1970), Chenery et al. (1986) and Chenery and
Syrquin (1989). These authors tested the significance of ‘structuralist’ variables, and decided on its
relevance in explaining EG, particularly in samples of LDCs and in the years that followed the 60’s.
They demonstrate, with empirical studies, the evidence that the exports promote EG. Moreover, they
claim that the existence of imports limits may reduce EG.
Feder (1982) proceeded with the empirical application of the developed framework, in semi-
industrialized and marginally semi-industrialized countries, between 1964-1973.
He concludes that, statistically, its formulation was superior to the traditional neoclassical formulation.
He also decided on the superiority of the marginal production of the factors in the exporter sector
and on the externality of this sector over the other. Finally, he concluded that the allocation of one
unit of capital to the exporter sector would create one marginal value for the economy superior to
what would be obtained if it were affected by a non-exporter sector. Ram (1987) extended the analysis
of Feder to the estimation of time-series for each country from a sample of 88 LDCs, in the years 1960-
1985. The obtained regressions (being globally statistically significant) confirm the positive effect of
the exporter sector, in about 70% of the countries.
We conclude by saying that even more sceptic empirical applications like those of Michaely (1977),
Tyler (1981) and Dodaro (1991) do not challenge the positive effect of IT on EG, provided the countries
have reached a certain minimum threshold of development.
The question of the international trade policies
In view of the failure of introverted EG experiments, of the success of extroverted EG experiences
(case of countries of Southeast Asia) and of the dominant theoretical thought, the UN started to