Abstract
Export diversification and import substitution are both theories of growth used to stimulate economies in various countries. The first of these theories uses an increased base of exports to trigger economic growth, whereas import substitution tries to achieve the same aim by reigning in expenditure on imports through the local production of these goods. This has been the strategy adopted by many developing countries as they can "insulate themselves from the sharp and unexpected changes in their terms of trade, and by extension, stabilize domestic incomes and employment".
