Economic growth and import requirements

Abstract

Summary This article points out that our knowledge of the specific form and analytical reasons underlying the interrelationship known to exist between international trade and economic growth is limited and that this situation is largely due to the lack of an adequate theoretical framework. Comparative cost theory is not very helpful in this respect be cause the explanation of the rise of trade it provides does not lead to useful and unambiguous inferences about the role of trade in economic growth nor about the characteristics of trade flows during growth. The difficulty may in part be attributed to the circumstance that comparative cost doctrine provides theoretical support for an ideal system of trading which nations have consistently refused to follow. The article suggests that this situation of fact results because the primary objective that nations pursue in trading is not to exploit (at a given level of employment and capacity use) whatever comparative cost differences may exist, but to ‘develop’ th...