Impact of Export Composition on Economic Growth in South Asia

Javed, Zanib and Munir, Kashif (2016): Impact of Export Composition on Economic Growth in South Asia.

Abstract

The primary objective of this study is to analyze the impact of export composition on economic growth in South Asian countries (Bangladesh, India, Pakistan, and Sri Lanka) from 1990 to 2013. Vertical and horizontal export diversification and their relation with economic growth are also analyzed in this study. Export composition, vertical and horizontal exports diversification are augmented in Cobb-Douglas production function in three models respectively. Herfindal index is used for measuring the export composition that reveals export diversification exists in South Asian countries. Results showed that export composition and vertical export diversification have inverted U relationship with economic growth, while horizontal export diversification has U shape relationship with economic growth. Moving from primary exports to manufacture exports linked with economic growth via externalities of learning by doing as vertical exports are positively related with GDP. Government should encourage the exporters to increase diversification in their export portfolio and provide incentives and technical assistance for research and development to move the exports from primary sector to manufacturing sector.

• Item Type: MPRA Paper
• Language: English
• Keywords: Exports, Economic Growth, Specialization, Diversification, South Asia
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O53 - Asia including Middle East

References

Abbas, S. (2012). Causality Between Export and Economic Growth: Investigating Suitable Trade Policy for Pakistan. Eurasian Journal of Business and Economics, 5(10), 91-98

Aditya, A., & Acharyya, R. (2011). Export Diversification, Composition and Economic Growth: Evidence from Cross Country Analysis, The Journal of International Trade and Economic Development: An International and Comparative Review, 22(7) 959-992

Afzal, M., Butt., A.R., Rehman, H., & Begum, I. (2009). A Dynamic Analysis of the Relationship Among Human Development, Exports And Economic Growth in Pakistan, The Pakistan development Review, 48(4), 885-920

Ahumada, H., & Sanguinetti, P. (1995). The Export-Led Growth Hypothesis Revisited: Theory and Evidence, Journal Estudios de Economia, 22(2), 327-355

Akbar, M., & Naqvi, Z.F. (2000). Diversification and the Structural Dynamics in the Growth Process. The Case of Pakistan. Pakistan Development review, 39(4), 573-589

Araujo, A.R., & Soares, C. (2011). ‘Export Led Growth ‘X’ Growth Led Export’: What Matters for the Brazilian Growth Experience After Trade Liberalization? MPRA, paper no: 30562

Awokuse, O. (2003). Is the Export –Led Growth Hypothesis Valid For Canada? The Canadian Journal of Economics, 36(1), 126-136

Benedictis, L. D., Gallegati, M., & Tamberi, M (2009). Overall Trade Specialization and economic development. Review of world economics, 145(1), 37-55

Besedes, T. (2010). Export Differentiation in Transition Economies, Economic System, 35, 25-44

Cass, D. (1965). Optimum Growth in an Aggregate Model of Capital Accumulation, Oxford Journal, 32(3), 233-240

Chenaf, D.N.C., and Rougier, E (2011). New exports matter: discoveries, foreign direct investment and growth, an empirical assessment for Middle East and North Africa countries, The journal of international trade and economic development, 20(4), 507-533

Chenery, H.B., Elkington, H., & Sims, C. (1976). A Uniform Analysis of Development Patterns, Center of International Affairs, Harvard University, Economic Development Report No: 92

Dreger, C., & Herzer, D. (2011). A Further Examination of the Export Led Growth Hypothesis. German Institute for Economic Research, Discussion paper: 1149

Elhiraika. A.B., & Mbate, M.M. (2014). Assessing the Determinants of Export Diversification in Africa. Applied Econometrics and International Development, 14(1), 147-160

Ferreira, G.F.C. (2009). The Expansion and Diversification of the Export Sector and Economic Growth: The Costa Rican Experience. The Department of Agricultural Economic and Agribusiness. Ph.D. Thesis, MBA McNeese State University, Louisiana State University.

Ghani, E., Mehmood, T & Din, M. (2012). Market Diversification and Firm’ Characteristics of Export-Oriented Manufacturers in Pakistan. The Pakistan Development Review, 51(2), 103-115

Gossy, G (2008). A Stakeholder Rationale for Risk Management, Implication for Corporate Finance Decisions, (1st ed) Germany: Betribswirtschaftlicher,

Gujrati, D.N (2003). Basic Econometric, (4th ed), United States: Gary Burke

Herzer, D., & Lehmann, F.N.D. (2006). What Does Export Diversification do for Growth? An Econometric Analysis. Applied Economics, 38, 1825-1838

Hesse, H (2008). Export Diversification and Economic Growth, The World Bank, Working Paper no: 21

Hummels, D., & Klenow, P.J. (2005). The Variety of Quality of National Exports. American Economic Association, 95(3), 704-723

Ibrahim, I. (2002). On Exports and Economic Growth, Jurnal Pengurusan, 3(18), 1-18

Jarreau, J., & Poncet, S (2011). Export sophistication and economic growth: Evidence from China. Journal of development economics, 97, 281-292

Kaulich, F (2012). Diversification vs Specialization as Alternative Strategies for Economic Development: Can We Settle a Debate by Looking at The Empirical Evidence? United Nations Industrial Development Organization, working paper: 3/2012

Knight. D.M (2013). Opportunism and Diversification: Entrepreneurship and Livelihood Strategies in Uncertain Times, Journal of Anthropology, DOI: 10.1080/00141844.2013.822012

Kubo, A. (2011). Trade and Economic Growth: Is Export Led Growth Passé? Economic Bulletin, 32(2), 1623-1630

Lee, J. (2011). Export Specialization and Economic Growth Around the World. Economic System, 35, 45-63

Matthee, M., & Naude, W. (2007). Export Diversity and Regional Growth. World Institution for Development Economic Research, research paper no: 2007/11

Mengistu, A. A. (2009). Do Physical and Human Capital Matter for Export Diversification? A Comparative Analysis of Sub-Sahran African and East Asia, African and Asian studies, 8, 1-46

Minondo, A. (2011). Does Comparative Advantage Explain Countries’ Diversification Level? Rev World Econ, 147, 507-526

Munemo, J. (2011). Foreign aid and Export Diversification in Developing Countries. The Journal of International Trade and Economic Development, 20(3), 339-355

Naude, W., & Rossouw, R. (2011). Export Diversification and Economic Performance: Evidence from Brazil, China, India and South Africa. Econ Change Restruct, 44, 99-134

Palley, T.I. (2011). The rise and Fall of Export led Growth, Levy Economic Institution, working paper no: 675

Parteka, A., & Tamberi, M. (2013). What Determines Export Diversification In The Development Poricess? Empirical Assessment. The World Economy, doi: 10.1111, 807-826

Paulino, A.U.S. (2011). Trade Specialization, Export Productivity and Growth in Brazil, China, India, South Africa and A Cross Section of Countries, Econ change restruct, 44, 75-97

Persson, M., & Wilhelmsson, F. (2013). EU Trade Preference and Export Diversification. Research Insinuation of Industrial Economics, IFN working paper no: 991

Ramsey, F.P. (1928). The Mathematical Theory of Saving, Wiley-Blackwell, 38(152), 543-559

Rebelo, S (1991). Long-Run Policy Analysis and Long-Run Growth, The University of Chicago Press, 99(3), 500-521

Ricardo, D (1817). On the Principles of Political Economics and Taxation, Batoche Books Kitchener, 1-333

Romer, P.M. (1990). Endogenous Technological Change, National Bureau Of Economic Research, Working Paper no: 3210

Salvadori, N., & Opocher, A. (2009). Long run Growth, Social Institutions and Living Standards (pp. 147-152). UK, Edward Elgar Publishing Limited.

Shepotylo, O. (2013). Export Diversification Across Countries and Products: Do Eastern European (EE) and Commonwealth of Independent State (CIS) Countries Diversify Enough? The Journal of International Trade and Economic Development, 22(4), 605-638

Shirazi, N.S., & Manap, T.A.A. (2005). Export Led Growth Hypothesis: Further Econometric Evidence From South Asia, The Developing Economics, XLIII(4), 472-488

Smith, A, (1776). An Inquiry into the Nature and Causes of Wealth of Nation, Feedbooks, 1-527

Solow, R.M (1956). The Contribution of the Theory of Economic Growth, The quarterly journal of economics, 70(1), 65-94

Stanley, D., & Bunnag, S (2001). A new look at the benefits of diversification: lesson from Central America, Applied Economics, 33(11), 1369-1383

Stewart, J. (2010). Single Variable Calculus Concept and Contexts. USA, Brooks/ Cole CENGAGE Learning.

Syrquin, M., & Chenery, H. (1989). Three Decades of Industrialization, The World Bank Economic Review, 3(2), 145-181

Talor, T.G. (2008). Export Diversification in Latin America and The Caribbean, The Journal of the Caribbean Agro-Economics Society, 7(1), 157-175

The World Development Indicator: A statistical update 2013 - HDI rankings. <http://databank.worldbank.org/data/home.aspx>

UN Comtrade Database: A statistical update 2013 - HDI rankings. <http://comtrade.un.org/>

UN Comtrade, (2014). 2013 International Trade Statistics Yearbook Volume I Trade by Country, United Nations New York.

Webb, M.A (2005). The Conflicting Impact of Export Fluctuations and Diversification Programs, International Trade and Economic Development, 14(3), 271-280.