Export-promotion policies as a superior development strategy for semi-industrialized countries (SICs) have found support in the statistically significant correlations established between export expansion and output growth. This positive export-GDP association is often attributed to the possible externalities of competition in world markets - e.g., efficiency of resource allocation, economies of scale, and various labor training and 'demonstration' effects. In this paper, we show that the correlation mainly has been due to the contribution of exports to the reduction of import 'shortages', which restrict the growth of output in many SICs. In this sense, export promotion is particularly important for countries that cannot obtain sufficient foreign aid or capital. A second contribution of this paper is the development of a simultaneous equations model to deal with the simultaneity problem between GDP and export growth rates.
ASJC Scopus subject areas
- Economics and Econometrics