An institutional perspective on trade, prosperity and growth

Abstract: Problem: Since the World Trade Organization (WTO) was established the purpose of Interna-tional trade has changed. The WTO has the aim to demonstrate that developing countries can ac-complish growth by participating in international trade. The organization has created a framework that provides different types of assistance programs in favor of developing countries. However, the remaining issue is whether the developing countries have an efficient framework to capture growth.Purpose: The aim of this thesis is to provide knowledge that developing countries have a poten-tial outcome of economic growth by opening up their borders. The old statements that developing countries make a loss in free trade are intended to be proven wrong in this thesis.Method: The method in which this research paper will be conducted is to define the different perspectives of International trade applied by Adam Smith, Hayek and the Ohlin model followed by Douglass North‟s argument of effective institutions in third world countries. The aim is to inte-grate these theories together to show that there is a possibility of growth in a country by following trade policies. This will be proven by providing two case studies about Botswana and Uganda to show the relationships of entering the WTO and economic growth.Conclusion: Studying countries like Uganda and Botswana provides evidence that there is a posi-tive correlation between joining the WTO and starting to trade as a result of economic growth. However, there are many different aspects that have to be considered such as new regulations, ef-fective institutions, valid governments, trade policy in favor of liberalization and effort on streng-thening human capital.