Skip to main content

Advertisement

SpringerLink
Log in

International trade, human capital and economic growth in Sri Lanka

  • Research Article
  • Published:
International Journal of Economic Policy Studies Aims and scope Submit manuscript

Abstract

Trade-growth dynamics is a much-discussed issue but still relevant due to its policy implications. Contemporary research in this direction is augmented by assessing the role of human capital, trade openness, exchange rate, in addition to export and import impacting growth in countries concerned. This paper addresses such an issue in the context of a small open emerging economy Sri Lanka. The dynamics of income with export, import, exchange rate, trade openness, and human capital of Sri Lanka are explored for an extended period 1965–2017, and also for the post-reform period 1978–2017. Significant long-run associations of income with these variables for both samples are found. Both the export and import causes a rise in income since 1965, and more prominently in the post-reform period. The exchange rate and trade openness have negatively impacted income. The human capital measures also have some significant impact; however such impacts are not appreciable across the human capital measures and the sample periods. The prominent role of trade accelerating income particularly in the post-reform era signifies a leading role of the external sector of the economy. A trade-driven growth policy may be effective for Sri Lanka.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5

Similar content being viewed by others

Notes

  1. Continuous long-period series of gross enrollment ratio of the secondary and tertiary education are not found.

  2. Other equations of the ECM dynamics are not presented to save space.

  3. Some econometricians recommend that in the situation of contradictory inference of the number of cointegrating vector of the max-eigen and trace statistics one can rely on the trace statistic (which has more power than the maximum eigen value statistics).

  4. Weliwita and Tsujii [44] have reported that despite the continuous fall in the nominal exchange rate in Sri Lanka, particularly in the post-economic reform period, imports have raised.

References

  1. Abhayaratne, A. S. P. (1996). Foreign trade and economic growth evidence from Sri Lanka, 1962–1992. Applied Economics Letters, 3, 567–570.

    Article  Google Scholar 

  2. Agrawal, P. (2014). The role of exports in India’s economic growth. The Journal of International Trade & Economic Development: An International and Comparative Review, 24(6), 835–859.

    Article  Google Scholar 

  3. Banerjee, R., & Sinha Roy, S. (2014). Human capital, technological progress and trade: What explains India’s long-run growth? Journal of Asian Economics, 30(1), 15–31.

    Article  Google Scholar 

  4. Ben-David, D., & Loewy, M. B. (2003). Trade and the neoclassical growth model. Journal of Economic Integration, 18(1), 1–16.

    Article  Google Scholar 

  5. Dawson, P. J. (2005). The export-income relationship: The case of India. Progress in Development Studies, 5(1), 16–29.

    Article  Google Scholar 

  6. Davies, A., & Quinlivan, G. (2006). A panel data analysis of the impact of trade on human development. Journal of Socio Economics, 35(5), 868–876.

    Article  Google Scholar 

  7. Dilrukshini, W. A. (2009). Is the export-led growth hypothesis valid for Sri Lanka? A time-series analysis of export-led growth hypothesis. Staff Studies, Central Bank of Sri Lanka, 38(1 & 2), 75–94.

    Google Scholar 

  8. Din, M.-u. (2004). Exports, imports, and economic growth in South Asia: Evidence using a multivariate time-series framework. Pakistan Development Review, 43(2), 105–124.

    Article  Google Scholar 

  9. Dollar, D. (1992). Outward-oriented economies really do grow more rapidly: Evidence from 95 LDCs. Economic Development and Cultural Change, 40(3), 523–544.

    Article  Google Scholar 

  10. Dollar, D., & Kraay, A. (2002). Trade, growth, and poverty. Economic Journal, 114(493), F22–F49.

    Article  Google Scholar 

  11. Dutt, S. D., & Ghosh, D. (1996). The export growth–economic growth nexus: A causality analysis. The Journal of Developing Areas, 30(2), 167–182.

    Google Scholar 

  12. Edwards, S. (1998). Openness, productivity and growth: What do we really know? The Economic Journal, 108(447), 383–398.

    Article  Google Scholar 

  13. Ekanayake, E. M. (1999). Exports and economic growth in Asian developing countries: Cointegration and error-correction models. Journal of Economic Development, 24(2), 43–56.

    Google Scholar 

  14. Frankel, A. J., & Romer, D. (1999). Does trade cause growth? The American Economic Review, 89(3), 379–399.

    Article  Google Scholar 

  15. Gould, D. M., & Ruffin, R. J. (1995). Human capital, trade and economic growth. Weltwirtschaftliches Archiv, 131(3), 425–445.

    Article  Google Scholar 

  16. Grossman, G. M., & Helpman, E. (1991). Innovation and growth: Technological competition in the global economy. The MIT Press.

    Google Scholar 

  17. Herreries, M. J., & Orts, V. (2013). Capital goods imports and long-run growth: Is the Chinese experience relevant to developing countries? Journal of Policy Modeling, 35(5), 781–797.

    Article  Google Scholar 

  18. Huchet-Bourdon, M., Mouel, C. L., & Vijil, M. (2018). The relationship between trade openness and economic growth: Some new insights on the openness measurement issue. The World Economy, 41(1), 59–76.

    Article  Google Scholar 

  19. Jin, J. C., & Shih, Y. C. (1995). Export-led growth and the four little dragons. The Journal of International Trade & Economic Development, 4(2), 203–215.

    Article  Google Scholar 

  20. Jayachandran, S., & Lleras-Muney, A. (2008). Life expectancy and human capital investments: Evidence from maternal mortality declines. NBER working paper no. 13947. National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA.

  21. Johansen, S. (1991). Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models. Econometrica, 59(6), 1551–1580.

    Article  Google Scholar 

  22. Johansen, S. (1995). The vector autoregressive model. Likelihood-Based Inference in Cointegrated Vector Autoregressive Models (pp. 11–33). Oxford University Press.

  23. Jung, S. W., & Marchall, P. J. (1985). Exports, growth and causality in developing countries. Journal of Development Economics, 18(1), 1–12.

    Article  Google Scholar 

  24. Karunaratne, N. D. (2001). The export engine of growth and neoliberal reforms in Sri Lanka. Asian Profile, 29(4), 315–332.

    Google Scholar 

  25. Lee, J.-W. (1995). Capital goods imports and long-run growth. Journal of Development Economics, 48(1), 91–110.

    Article  Google Scholar 

  26. Loening, J. L. (2005). Effects of primary, secondary and tertiary education on economic growth evidence from Guatemala. World Bank Policy Research Working Paper 3610. The World Bank, Washington D.C.

  27. Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3–42.

    Article  Google Scholar 

  28. Maitra, B., & Debnath, S. (2015). Efficacy of recent monetary policy in Sri Lanka. International Journal of Economics and Business Research, 10(4), 341–361.

    Article  Google Scholar 

  29. Maitra, B. (2020). Exploring import-led growth in India: Evidence from the post-reform period. South Asian Journal of Macroeconomics and Public Finance, 9(1), 87–113.

    Article  Google Scholar 

  30. Mazumdar, J. (2001). Imported machinery and growth in LDCs. Journal of Development Economics, 65, 209–224.

    Article  Google Scholar 

  31. Panagariya, A. (2004). Miracles and debacles: In defense of trade openness. World Economy, 27(8), 1148–1171.

    Article  Google Scholar 

  32. Priyankara, E. (2018). Services exports and economic growth in Sri Lanka: Does the export-led growth hypothesis hold for services exports? Journal of Service Science and Management, 11, 479–495.

    Article  Google Scholar 

  33. Quah, D., & Rauch, J. (1990). Openness and the rate of economic growth, Mimeo. MIT.

  34. Ramzan, M., Sheng, B., Shahbaz, M., Song, J., & Jiao, Z. (2019). Impact of trade openness on GDP growth: Does TFP matter? The Journal of International Trade & Economic Development, 28(8), 960–995.

    Article  Google Scholar 

  35. Ravinthirakumaran, N. (2014). Applicability of openness-led growth hypothesis in Sri Lanka: An ARDL bounds test. South Asia Economic Journal, 15(2), 241–263.

    Article  Google Scholar 

  36. Ravinthirakumaran, N., & Shafiullah, M. (2016). Do Bangladesh and Sri Lanka enjoy export-led growth? A comparison of two small south Asian economies. South Asia Economic Journal, 17(1), 114–132.

    Article  Google Scholar 

  37. Riyath, M. I. M., & Jahfer, A. (2016). Exports, imports and economic growth in Sri Lanka: Evidence from causality and co-integration analysis. 5th Annual International Research Conference 2016, Faculty of Management and Commerce, South Eastern University of Sri Lanka.

  38. Rivera-Batiz, L. A., & Romer, P. M. (1991). Economic integration and endogenous growth. Quarterly Journal of Economics, 106(2), 531–555.

    Article  Google Scholar 

  39. Romer, P. M. (1990). Endogenous technological change. Journal of Political Economy, 98(5), 71–102.

    Article  Google Scholar 

  40. Shirazi, N. S., & Abdul Manap, T. A. (2005). Export-led growth hypothesis: Further econometric evidence from south Asia. The Developing Economies, 43(4), 472–488.

    Article  Google Scholar 

  41. Thangavelu, S. M., & Gulasekaran, R. (2004). Is there an export or import-led productivity growth in rapidly developing Asian countries? A multivariate VAR analysis. Applied Economics, 36(10), 1083–1093.

    Article  Google Scholar 

  42. Tsen, W. H. (2006). Granger causality tests among openness to international trade, human capital accumulation and economic growth in China: 1952–1999. International Economic Journal, 20(3), 285–302.

    Article  Google Scholar 

  43. Tzeremes, N. G. (2014). The effect of human capital on countries’ economic efficiency. Economic Letters, 124(1), 127–131.

    Article  Google Scholar 

  44. Weliwita, A., & Tsujii, H. (2000). The exchange rate and Sri Lanka’s trade deficit. Journal of Economic Development, 25(2), 131–157.

    Google Scholar 

  45. Young, A. (1991). Learning by doing and the dynamic effects of international trade. The Quarterly Journal of Economics, 106(2), 369–405.

    Article  Google Scholar 

Download references

Acknowledgements

The authors’ would like to thank an anonymous reviewer of the Journal for valuable comments and suggestions to improve the paper. The Authors’ are also grateful to the Editor-in-Chief Professor Akira Maeda for this kind cooperation in the entire review process of this paper. The usual disclaimer applies.

Author information

Authors and Affiliations

  1. Department of Economics, University of Gour Banga, P.O. Mokdumpur, Malda, West Bengal, 732103, India

    Biswajit Maitra & Moutushi Chakraborty

  2. Department of Economics, Malda Women’s College, Malda, West Bengal, India

    Moutushi Chakraborty

Authors
  1. Biswajit Maitra
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Moutushi Chakraborty
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Moutushi Chakraborty.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Maitra, B., Chakraborty, M. International trade, human capital and economic growth in Sri Lanka. IJEPS 15, 405–426 (2021). https://doi.org/10.1007/s42495-021-00065-2

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s42495-021-00065-2

Keywords

JEL

Search

Navigation