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A further examination of the export-led growth hypothesis

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Abstract

This article 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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Authors and Affiliations

  1. German Institute for Economic Research (DIW Berlin), Berlin, Germany

    Christian Dreger

  2. European University Frankfurt (Oder), Brandenburg, Germany

    Christian Dreger

  3. Department of Economics, Helmut-Schmidt-University, Holstenhofweg 85, 22043, Hamburg, Germany

    Dierk Herzer

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  1. Christian Dreger
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Dreger, C., Herzer, D. A further examination of the export-led growth hypothesis. Empir Econ 45, 39–60 (2013). https://doi.org/10.1007/s00181-012-0602-4

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