The political economy of trade liberalization in developing countries

The paper addresses the issue of trade liberalization in developing countries from a political economy perspective using the theory of collective action. The role of collective action and interest group behavior is analysed critically both with respect to the initiation of attemps at liberalization and its outcome in terms of success or failure. A probit model is then used to test empirically the various hypotheses as to the determinants of likelihood of success of liberalization attempts. A sample of 51 liberalization episodes relating to 24 countries and spanning the period 1950-80 is used. Five factors are found to be critical in the process of liberalization: the strength of exporters groups as represented by the diversification and importance of manufactures and traditional exports, the strength of import-competing sector's opposition as measured by the share of manufacturing in GDP, the time elapsed since the beginning of import substitution, the size of country and the leadership committment and role. © 1990 Kluwer Academic Publishers.