One of the more important yet puzzling aspects of the recent global stagflation has been the rather surprising resiliency of growth rates of real income in non-oil developing countries during the 1973-80 period in the face of the marked slowdown of corresponding growth rates in the industrial world. The primary purpose of this paper is to shed some light on this phenomenon by examining the relationship between the rate of economic growth in the non-oil developing countries and that in the industrial countries over the past decade or so.
For the past hundred years the rate of growth of output in the developing world has depended on the rate of growth of output in the developed world. When the developed grow fast the developing grow fast, and when the developed slow down, the developing slow down. Is this linkage inevitable?1
In this section we begin our investigation into how the rate of growth of real income in industrial countries affects the income growth rate in non-oil developing countries by considering the relationship between income growth in the former and export growth in the latter.
This section focuses on the relationship between the export growth of non-oil developing countries and their economic growth rates. In brief, an attempt is made to identify the channels by which exports affect economic growth; whether the relationship between the two growth rates is rigid or subject to change; whether the relationship has strengthened or weakened over time; and how the relationship differs among the subgroups of non-oil developing countries.
This paper has examined the relationship between the rate of economic growth in the non-oil developing countries and that in industrial countries, with the intention of appraising the effects of slower industrial country growth on the non-oil developing countries during 1973—80. At the risk of oversimplifying the arguments and the evidence examined in the preceding sections, the principal conclusions emerging from our analysis can be summarized as follows: