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A further examination of the export-led growth hypothesis

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  • Christian Dreger
  • Dierk Herzer

Abstract

This paper challenges the common view that exports generally contribute more to GDP growth than a pure change in export volume, as the export-led growth hypothesis predicts. Applying panel cointegration techniques to a production function with non-export GDP as the dependent variable, we find for a sample of 45 developing countries that: (i) exports have a positive short-run effect on non-export GDP and vice versa (short-run bidirectional causality), (ii) the long-run effect of exports on non-export output, however, is negative on average, but (iii) there are large differences in the long-run effect of exports on non-export GDP across countries. Cross-sectional regressions indicate that these cross-country differences in the long-run effect of exports on non-export GDP are significantly negatively related to cross-country differences in primary export dependence and business and labor market regulation. In contrast, there is no significant association between the growth effect of exports and the capacity of a country to absorb new knowledge.

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Paper provided by FIW in its series FIW Working Paper series with number 084.

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Length: 35
Date of creation: May 2012
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Handle: RePEc:wsr:wpaper:y:2012:i:084

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Keywords: Export-led growth; Developing countries; Panel cointegration;

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Citations

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Cited by:
  1. Christian Dreger & Dierk Herzer, 2013. "A further examination of the export-led growth hypothesis," Empirical Economics, Springer, Springer, vol. 45(1), pages 39-60, August.
  2. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2011. "Market Size, Competitiveness and Technological Frontier - the Impact of Trade Integration with the UE on Productivity in Polish Manufacturing Sectors," National Bank of Poland Working Papers 82, National Bank of Poland, Economic Institute.
  3. Dreger, Christian & Zhang, Yanqun, 2013. "On the relevance of exports for regional output growth in China," Discussion Papers 331, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
  4. Mariam Camarero & Inmaculada Martínez-Zarzoso & Felicitas Nowak-Lehmenn D. & Cecilio Tamarit, 2013. "Trade Openness and Income: A Tale of Two Regions," Ibero America Institute for Econ. Research (IAI) Discussion Papers 226, Ibero-America Institute for Economic Research.
  5. Paula Gracinda Santos & Ana Paula Ribeiro & Vitor Manuel Carvalho, 2013. "Export-led growth in Europe: Where and what to export?," FEP Working Papers 479, Universidade do Porto, Faculdade de Economia do Porto.

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