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Abstract
The relationship between trade and growth has occupied the development debate for a protracted period. Indeed, the vigor and interest characterizing the debate reflect both its perceived importance and continued elusiveness in settling the main contentious issues on the theoretical and empirical fronts. What appears to be gaining wide acceptance from cross-country evidence is that those developing countries that have been most successful in pursuing growth are also the ones that have taken most advantage of trade opportunities. These countries have experienced high rates of economic growth in the context of rapidly expanding exports and imports. The converse is that countries that have rigidly stuck to import substitution policies and maintained barriers to export have lagged behind. At least this is the long-term association that has been supported by a large range of cross-country studies including Edwards (1993), Tanzi (1995), Sachs and Warner (1995, 1997), and Papageorgiou, Michaely, and Choksi (1991). What is far less clear is the extent to which trade and trade policies have played a causal role, rather than being a facilitator of other more fundamental factors of growth (Rodrik, 1997).
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