Openess Trade and Growth Essay -- Economic Development, Trade Liberali

The economic growth story is as long as the history of economic thought. Since the early classics like Adam Smith, David Ricardo and Thomas Malthus studied the issue of growth or introduced fundamental concepts such as diminishing returns and their relationship with the accumulation of physical or human capital, the relationship between technological progress and labor specialization or focus competitive analysis tool dynamic equilibrium. As part of these theories appears arises that relationship between trade openness and economic growth is positive. These theories between trade openness and economic growth can be located more than 200 years, with the mercantilist theories. Under these concepts, International trade benefited a nation only if the other was impaired. In 1776, Adam Smith broke with this theory stating that if two nations trade voluntarily with one another, both benefit. This is based on "absolute advantage." Later, David Ricardo (1817) said that while a nation was less efficient than another in production of both goods, it is still likely to trade in a mutually beneficial. This essay attempts to show what is the relationship between trade openness and economic growth and explain their implications for Paraguay. There are many conceptions about the relationship between economic growth and trade but all the authors implies that there is a beneficial situation. For example, Yuhong Li,, Zhongwen Chen, Xiaoyin Wang (2010) Conclude that In open economies, development of foreign trade greatly impacts on GDP growth. According Douglas K. Agbetsiafa â€Å"Openness of the economy to international trade promotes economic development and growth while growth itself brings about associated increase in openness to trade† (p.... ...ee of trade openness has been a topic of debate in the literature in recent years for its effect on the growth of countries. Some authors argue that trade openness is positive because to diversify the supply and provision of goods and services to a emergency. The other position assumes that trade liberalization does not imply any benefit as all internalize external shock quickly. Trade openness is related to the agricultural export structure and dependence on imported products. Paraguay has to make ever-increasing efforts to receive the same amount of income whereas the increase in the volume of exports was higher than the value. Much of the current discussion on the impact of trade on growth is relevant to Paraguay considering that there has been trade liberalization, but public policies are needed to support the development of related institutional factors.