Linder Hypothesis

Are the developing countries doing commerce? Is it right? What’s best for their economies? To treat with countries alike or commerce with the big economic powers?
Some may be against the commercebetween developing countries and big economies, ‘this increase dependence’, till today there is no clear consensus at present as to whether or not trade is beneficial to developing economies.(McPherson,2001)
One of the initial theories to start explaining this relation was the theory proposed by Linder (1961). In contrast with the supply-side orientation of the HOS model, the Linder theory isprimarily demand-side oriented. Linder believed that the pattern of trade derives from overlapping demand. Linder’s prediction that most trade in the world should occur between similarly endowed countriesis no paradox; it is, rather, the natural result of demand-driven trade.(Mc Pherson,2001)
The analysis from six East African developing countries studied here: Ethiopia, Kenya, Rwanda, Sudan andUganda can help to explain the Linder hypothesis and how this countries have increase their commerce with big economies and the respective effects for the social welfare. This can be start explained as:Theological shortcoming of previous analyses in which the magnitude of the Linder effect has been over- or under-estimated through the exclusion of information on those countries that have a zero ornegative desire to export to a given country (Mc Pherson,2001)
We can’t forget that we live in a globalized world, and factors in commerce change as the time goes by: “The fact that the majority ofinternational tradeis conducted between developed countries, which typically have very similar factor endowments, seems to call into question the validity of this theory.” (Mc Pherson,2001)

Oneexample for the developing couty-big economy relation is the one from case coming from Bharadwaj (1962who found that the HOS model does not adequately explain bilateral trade between the USA and India....