Exports of Services, Exports of Goods, and Economic Growth in Developing Countries

This paper and explores quantitatively the nexus between exports of services, exports of goods, and GDP growth, focusing particularly on the role of developing and transition countries, during the last two decades of the XX century. The Introduction briefly exposes some of the shortcomings and methodological problems affecting BOP statistics on international trade in services. The analysis in Sections 2 and 3 shows that, in the long run, services exports do have a positive impact on GDP growth in developing countries. Yet, in the 1990s, the services exports/GDP growth nexus was weaker in developing than in developed countries. Moreover, in developing countries, the growth-enhancing impact of exports as a whole declined, although this decline appears to be due more to the merchandise component of exports rather than to the services component. In the Conclusions, a tentative explanation for the aforementioned results is proposed. Most export-oriented services activities in developing countries are not concentrated in traditional services sectors, tend to be poorly integrated to the rest of the domestic economy, and are y often under the control of foreign economic agents. Thus, their potential as engines for growth is relatively limited. Furthermore, many previously inwardoriented developing countries, under conditions of financial duress, diverted resources towards exports as if they constituted a goal per se, rather than in the framework of a comprehensive long-term growth-maximizing strategy. Such opening-up reforms ended up facing diminishing returns.