Last Thursday night, the School of Economics’ Nic Sim gave a fascinating public lecture titled: “Does international trade lead to greater economic development? Evidence from less developed countries”. The lecture was part of the Faculty of the Professions’ Research 21 Public Lecture series. The short answer to Nic’s question is: YES. Based on empirical estimates, Nic concluded that on average, every 1% increase in trade raises income per capita by 0.5% in less developed countries (LDCs) – this positive impact is even stronger than the positive impact of trade on growth is developed countries. However, Nic highlighted that trade (and growth) can have some negative social effects if targeted policies are not in-place. For example, by stimulating production and transportation (hence people) flows within LDCs, trade/growth may increase both pollution and the spread of HIV. In my view, this does not mean that international trade should be limited. Indeed, it should be promoted to raise incomes per capita in LDCs. At the same time, governments should address pollution and HIV directly with targeted policies; the additional income generated through trade will provide valuable resources to address such social issues.
More information on our Research 21 Public Lecture series, including Nic’s lecture, is available at here.