Trade, Aid and Development

Abstract

Alarger country is more likely to find opportunities of production within its own borders, and therefore to require less imports per head, than a smaller. To state the issue more precisely, if country B has only half the real income per head of country A, but twice the population, so that the aggregate real incomes of the two countries are the same, then their imports may also be expected to be about the same in volume. Attempts to explain volume of imports per head for various countries at different times as a function of real income per head have not proved very satisfactory. But an analysis2 by one of the authors of imports as a function of total national product, irrespective of whether its size was due to population or to high per head income, proved satisfactory. (After all, it is the scale of the market which determines the possibility of establishing a greater variety of industries in a country, largely irrespective of whether the market has arisen through size of population, or through level of real income per head.) A range of cases in which aggregate net real product, measured in dollars of 1950 purchasing power, ranged from less than r billion (Norway and Finland in 1913) to 350 billion (United States at the present time), showed in general imports varying about with the three/fourth power of national product, subject to certain qualifications for particular countries, explainable in terms of their geographical situation, or tariff policy.