Pakistan Institute of Development Economics

PDR

THE PAKISTAN DEVELOPMENT REVIEW 

Trade and Trade Policy for Development by Staffan Burenstam Linder. New York; Washington; London: Frederic A. Praeger, 1967. pp.xi + 179.

Linder’s theme is that conventional trade theory, as set out in the theories of comparative advantage and the compatibility of internal and external equilibrium, as well as the traditional free trade rules for trade policy are not valid for developing countries. He creates a trade model for developing countries in which internal equilibrium, in the sense of capacity income, and external (balance-of-payments) equilibrium are not compatible. Under these circumstances the need to satisfy the external equilibrium requirement dominates; this leads to a reduction of domestic output below capacity output. The existence of excess capacity in the midst of economic backwardness effectively retards continued investment and economic growth. Thus, the role of trade policy is to facilitate the achievement of capacity output

Hymen P. Minsky

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