Inward oriented and outward oriented trade strategies

Abstract

This article utilises the classification of developing countries according to their trade orientation that has recently been made available by the World Bank from the background work by Greenaway. It examines the effect of trade on economic development of the countries within each group, the efficiency of investment, and the industrialisation process under alternative trade strategies. The hypothesis that international trade benefits most developing countries and that an outward orientation leads to a more efficient use of resources and growth is partially supported by the econometric results. The methodology used, while giving rise to some estimation problems, exposes some dubious results obtained in cross‐section studies.