Trade and economic development in small open economies: The case of the Caribbean countrie

Caribbean economic research has always recognised the importance of exports to the growth and development of Caribbean economies. Despite this recognition no attempt has been made to formally analyse that relationship in detail. Two alternative approaches to this issue are adopted in the thesis. The first follows the Feder (1983) model, which suggests that there are differences in marginal factor productivities between the export and non-export sectors and that exports have dynamic growth effects or "externalities". These issues are, for the first time, empirically investigated for a sample of small developing countries including Jamaica and Trinidad & Tobago. The second approach goes beyond the Feder analysis to explicitly recognise the function of exports in developing countries as providing the main source of foreign exchange for much needed imports of intermediate and capital goods. A production function incorporating imports or real foreign exchange receipts as an input is hypothesised. The results suggest that foreign exchange flows are important determinants of output expansion.;Given that exports are important to economic growth and development in Carribbean economies the weak export performance over the last twenty years must be a cause of concern. The thesis analyses the export performance of the major English-speaking Caribbean countries--Jamaica, Trinidad & Tobago and Barbados, over the last twenty years. As a necessary condition to modelling the export performance, standard tools of descriptive analysis are employed--Constant Market Share Analysis (CMS) and Revealed Comparative Advantage (RCA) Indices--to highlight the areas of weakness. The issue of "incentives" and anti-export bias is analysed by examining the behaviour of the real effective exchange rate. The range of export development policies that have been adopted to counteract anti-export bias is also examined. Finally, time series regression analysis of the export performance is carried out by modifying conventional export supply models. The role of "incentives" is highlighted and the real effective exchange rate is used to capture the impact of "incentives" on export flows.