Why Openness Matters: Evidence from the Developing World

Abstract

In this paper I present a realistic scenario about the open-economy framework. I acknowledge the unfair practices imposed by the industrialized nations lead to structural adjustments in the domestic economy. However, I argue that these practices help developing countries to become more productive in the long-run. By forcing inefficient farmers to move away from agriculture and into manufacturing, these nations can stimulate their economies and thus achieve higher rates of growth. The literature on the subject is vast; however, this paper provides a different approach. More studies must be conducted in order to understand the real factors behind economic growth. Departing from the standard measure of openness is just the first step in getting more accurate results. As economists continue to update their databases, the results might shed some light about the importance of trade openness and the transition to industrialization. [From Conclusion]