International Trade as an Engine of Economic Growth in Zambia. An Application of New Structural Economics

Abstract

International trade has been called the “engine of growth” that propelled the development of today’s economically advanced nations during the nineteenth and early twentieth centuries. Rapidly expanding export markets provided an additional stimulus to growing local demands that led to the establishment of large-scale manufacturing industries. From both theoretical and empirical point of view, the positive impact of international trade on economic growth has been widely documented. From this aspect, it has been argued that openness is important for growth since it generates channels for technology diffusion, which makes possible for less developed countries to import productivity gains from overseas. This study, from the perspective of new  structural economics analyzed international trade as an engine of economic growth in Zambia. The study used secondary data from penn world tables 8.0, world bank’s world development indicators (WDI) and the central statistical office.  Study results indicate that Zambia is an open economy  and that foreign direct investment and the trade to GDP ratio exerts a significant effect on economic growth in Zambia. In particular, study results suggest the need for policy makers to encourage expenditure on infrastructure that would facilitate trade and intensifying exports of goods in which Zambia has a comparative advantage in,  such as traditional exports (mainly metals-copper and cobalt) and non-traditional exports (other than copper and cobalt).

Keywords: economic growth, export-led growth hypothesis (ELGH), new  structural economics, Zambia