Structural Transformation, Openness and Economic

Abstract

Majority of the third world countries after gaining independence from the colonial powers were and remained poor, and underdeveloped from Western standard. In the post war era a number of theories were put forward to break the vicious circle of underdevelopment. Out of all those, the structural transformation theory was conceived an all curing remedy and almost all underdeveloped countries hailed this prescription. All these economies experienced the basic needs and integrated rural development policies during the period of 1970s. But during 1980s, these countries faced a common problem of macroeconomic instability. The neoclassical economists recommended the curing prescription for these countries in the form of export promotion, free markets and lesser role of these countries governments in economic matters. In this study, we empirically investigated the aforesaid policies in the context of Pakistan’s economy. The trade openness and structural transformation cause economic growth and partially support the neoclassical view.