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Abstract
The many cross-country studies of the determinants of growth in Africa undertaken in the last few years typically conclude that the inward orientation of African countries has been a major obstacle to growth (see, for example, the survey in Collier and Gunning, 1999)1. A variety of mechanisms to increase openness and thereby growth have been proposed. To compete against international producers, domestic firms must adopt newer and more efficient technology or use the same technology with less x-inefficiency in order to reduce costs (Nishimizu and Robinson, 1984). Higher volumes of trade increase international technical knowledge transfer (Grossman and Helpman, 1991). If domestic firms have different degrees of inefficiency, the exit of the less efficient ones results in lower average costs and higher productivity. The firms that remain are forced to adjust in two ways: by expanding their scale of production and exploiting economies of scale, and by reducing their technical inefficiencies2. Both these adjustments will decrease average industry costs and raise productivity (Krugman, 1984; Roberts and Tybout, 1991). One may argue that the primary sources of development are learning and knowledge accumulation and, since international trade is one of the most important channels through which knowledge gets transferred, the degree of integration in the world trading system becomes a crucial determinant of growth prospects.
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