Abstract
In this paper, we investigate the relationships between trade and labor productivity for nine Latin American countries in terms of the trade-led growth hypothesis. We use a vector error-correction model and perform independent tests of the short-run and long-run relationship among exports, imports and productivity to examine the direction of causality. The results show that exports and imports have impacts on labor productivity. We find evidence that the export‐led growth hypothesis is significant for Bolivia, Chile and Mexico; the growth‐led export hypothesis is significant for Uruguay; the import‐led growth hypothesis is relevant for Brazil, Colombia and Mexico; and the growth‐led import hypothesis is relevant for Brazil, Colombia and Uruguay. Finally, we note an important role of imports in the long-run development of these economies.
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Notes
Available at: https://data.worldbank.org/.
Available at: https://www.conference-board.org/data/economydatabase/.
Value added data are not available for Uruguay, Argentina and Mexico for the entire time span, so we used data for these countries according to availability.
For this, the Wald test is used under the null hypothesis \({H}_{0}: {\alpha }_{i,j}=0, {\uptheta }_{i,j}=0\).
In this case, the test has two cointegrating vectors (\(r=2\)), in which \(({\beta }_{\mathrm{2,1}}/{\beta }_{\mathrm{1,1}})\) is the \({X}_{t-1}\) normalized coefficient of the first cointegrating vector and \({\beta }_{\mathrm{2,2}}/{\beta }_{\mathrm{1,2}}\) is the \({X}_{t-1}\) normalized coefficient of the second cointegrating vector. If there is only one cointegrating vector (\(r=1\)), the significance is tested only over \({\beta }_{\mathrm{2,1}}/{\beta }_{\mathrm{1,1}}\). The magnitude of the cointegrating vectors will change with the normalizing variable, but the statistical significance will not change with normalization.
When \(r=1\), the test statistics follow \({\chi }^{2}\) with one degree of freedom.
When only one of the statistics presents significant values, we considered the series to be cointegrated, as in Peru, where only the trace statistic is significant at 5%.
For Chile and Ecuador, we estimate a difference VAR model, in which it is possible to test only the short run causality.
Data on the countries’ export baskets and economic complexity were consulted at The Observatory of Economic Complexity, available at: https://oec.world.
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de Souza Nonato, V.L., Carrasco-Gutierrez, C.E. Trade-led growth hypothesis: evidence from Latin America countries. Empir Econ 64, 727–745 (2023). https://doi.org/10.1007/s00181-022-02266-w
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DOI: https://doi.org/10.1007/s00181-022-02266-w