Trade liberalization and economic growth: a case study of Iran

We estimate the impact of trade liberalization and physical and human capital accumulation on Iran’s economic growth during the period 1959?2007. Using co-integration techniques and a vector error correction model, we find a unique long-run relationship between economic growth and its major determinants. These determinants include the physical and human capital stock, the labor force, real non-oil exports, and import tariffs. In addition, the short-term error correction dynamics analysis suggests that trade liberalization has a significant long run positive role in dynamic of growth. Our results support the view that the integration of the Iranian economy with the world economy is undoubtedly welfare improving.     

Education,Innovation and Long‐Run Growth

We extend a second‐generation Schumpeterian growth model to incorporate human capital accumulation to clarify the general equilibrium effects of subsidy policies on human capital accumulation and R&D activities in a unified framework. Despite the conventional argument that subsidies always stimulate these growth‐promoting activities, we find that subsidies asymmetrically affect human capital accumulation and R&D activities. Our theoretical results suggest that research using standard models of human capital might find false negative relationships between education subsidies and economic growth.     

Human Capital, Exports, and Economic Growth: A Causality Analysis for Taiwan, 1952–1995

By using cointegration and error-correction representation methodology, this paper tested the causal relationship among human capital accumulation, exports, and economic growth using data pertaining to Taiwan's real GDP, real exports, and higher education attainment over the period 1952–95. The main findings of the paper are that human capital accumulation fosters growth and stimulates exports, while exports promote long-run growth by accelerating the process of human capital accumulation. Taiwan's case study thus supports the human capital-based endogenous growth theory and the export-led growth hypothesis.     

Does Intelligence Affect Economic Diversification?

This paper extends the growing literature on knowledge economy by investigating the effect of intelligence on economic diversification. Using a battery of estimation techniques that are robust to endogeneity, we find that human capital has positive correlations with export diversification, manufactured added value and export manufactures. This empirical evidence is based on a world sample of 170 countries for the year 2010. The findings have significant implications for the fight against the Dutch disease. In essence, investing in human capital could bring economic diversity and therefore dampen negative external shocks related to resource‐dependence. Other knowledge‐economy implications are discussed.     

The engine of growth or its handmaiden?

This paper presents an analysis of time-series data for the countries in the Summers-Heston (1991) data set, in an attempt to ascertain the evidence for or against the export-led growth hypothesis. We find that standard methods of detecting export-led growth using Granger-causality tests may give misleading results if imports are not included in the system being analyzed. For this reason, our main statistical tool is the measure of conditional linear feedback developed by Geweke (1984), which allows us to examine the relationship between export growth and income growth while controlling for the growth of imports. These measures have two additional features which make them attractive for our work. First, they go beyond meredetection of evidence for export-led growth, to provide a measurement of itsstrength. Second, they enable us to determine the temporal pattern of the response of income to exports. In some cases export-led growth is a long-run phenomenon, in the sense that export promotion strategies adopted today have their strongest effect after eight to 16 years. In other cases the opposite is true; exports have their greatest influence in the short run (less than four years). We find modest support for the export-led growth hypothesis, if “support” is taken to mean a unidirectional causal ordering. Conditional on import growth, we find a causal ordering from export growth to income growth in 30 of the 126 countries analyzed; 25 have the reverse ordering. Using a weaker notion of “support”—stronger conditional feedback from exports to income than vice versa, 65 of the 126 countries support the export-led growth hypothesis, although the difference in strength is small. Finally, we find that for the “Asian Tiger” countries of the Pacific Rim, the relationship between export growth and output growth becomes clearer when conditioned on human capital and investment growth as well as import growth.     

Social status, human capital formation and super-neutrality in a two-sector monetary economy

In this paper, we study how social status affects the impact of monetary policy on the long-run growth rate in a two-sector monetary economy with human capital accumulation, and find that the super-neutrality of money, with regard to the growth rate of the economy depends on the formation of human capital. In an economy with Lucas-type human capital formation, money is super-neutral; however, for an economy in which both physical and human capital are used as inputs for human capital accumulation, the money growth rate will have a positive effect on the long-run economic growth rate. The existence, uniqueness and saddle-path stability of balanced-growth equilibrium are also examined.     

Export-led Growth in South Asia: A Panel Cointegration Analysis

Abstract

In this paper, we attempt to examine the export-led and manufacturing export-led growth hypothesis for four South Asian Countries; namely, India, Pakistan, Bangladesh and Sri Lanka, using Pedroni’s panel cointegration technique for the period 1980–2002. In this context we estimate growth accounting equations to investigate the impact of exports, manufacturing exports and other important physical and human capital variables on both total GDP and non-export GDP. The study finds long-run equilibrium relationship between GDP (and non-export GDP) and exports along with other variables supporting export-led growth hypothesis. The results also substantiate the existence of manufacturing export-led growth hypothesis. Further, we find that export, fixed capital formation, public expenditure on health and education have statistically significant coefficients re-emphasizing the importance of these variables for higher economic growth.     

AIDS crisis and growth

We investigate an OLG economy where an AIDS epidemic influences human capital accumulation and growth through the creation of large numbers of orphans. We study how intra-family allocations regarding school and work time of children are adjusted in the face of AIDS within a family, and how, in turn, these adjustments influence accumulation of physical and human capital. We compute the aggregate effects of an AIDS epidemic on human and physical capital accumulation and growth. We find that growth effects of an AIDS epidemic are large. Some policies such as subsidization of AIDS medication have relatively small effects.     

How China is Reorganizing the World Economy*

We analyze the impact of China's integration into the global economy on other countries, Asian countries in particular. We first examine how the growth of China's exports is affecting the exports of other countries in Asia and the rest of the world. Our innovation is to distinguish exports of capital goods, consumer goods, and intermediates and to disaggregate textiles and consumer electronics, the most visible sectors where China's presence is felt. We next look to the impact of China on direct foreign investment flows. Here our innovation is to distinguish vertical and horizontal foreign direct investment (FDI) and to consider how they are affected by supply‐chain relationships. We then look more closely at factors influencing the articulation of these supply chains, the fragmentation of production, and the emerging international division of labor, focusing on two industries, electronics and autos, that exhibit very different responses. The results suggest that countries specializing in the production and export of components and raw materials feel positive effects from China's growth, while countries specializing in the production of consumer goods feel negative effects. Similarly, countries that compete with China for horizontal FDI find it more difficult to attract foreign investment as a result of that country's emergence, while countries that are potentially attractive destinations for vertical FDI find it easier to attract foreign investment as a result of trade links, especially in components and intermediates, that allow them to take advantage of supply chains involving their large and dynamically growing neighbor.     

Causal analyses between exports and economic growth in developing countries

This study investigates the prima facie causal relationship between the exports and output growth in 30 developing countries over the period from 1960 to 1988 in a multivariate framework. The information set considered for the output and exports models are ω = (domestic output, exports, labour and capital), and ω = (exports, domestic output, exchange rate and foreign output) respectively. This study indentities a feedback prima facie causal relationship between exports and output growth in five countries, export growth prima facie causes output growth in another six countries; output growth prima facie causes export growth in a further eight countries; and no causal relationship was observed between export growth and output growth in the remaining 11 countries. We also found that in 15 countries the foreign exchange rate prima facie caused export growth, and that in 12 countries world output caused export growth.     

Exports,investments and economic development of pre-accession countries of the European Union: an empirical investigation of Bulgaria and Romania

This paper attempts to analyse the relationship between exports, investments and economic development in two pre-accession countries of the European Union, Bulgaria and Romania. For investigation of this relationship a multivariate autoregressive VAR model is used. The results of cointegration analysis showed that there is one cointegrated vector among exports, investments and economic growth for the two countries. Granger causality tests based on error correction models (ECM) indicated that there is a ‘strong Granger causal’ relation between economic growth and exports as well as between investments and exports for the two countries. In addition, economic development and capital accumulation in an economy seem to have just as much of an influence on exports as exports have on capital accumulation and economic development.     

THE IMPACT OF FOREIGN CAPITAL ON MACROECONOMIC PERFORMANCE IN CENTRAL ASIA

This paper investigates the short‐run impact of shocks in international capital flows channeled through foreign direct investment (FDI) and foreign aid on national output and export performance in five Central Asian economies under a dynamic multivariate structural vector autoregressive (SVAR) framework. The identification of structural shocks is implemented by AB model based on IS‐LM‐BP postulates. The main message is that external capital shocks are persistent and small open economies are weak to absorb them. Overall, the aid shocks reduce national outputs, while FDI increase it, on average. The expansion of global demand (G20) leads to an increase in domestic GDPs, notably in Kazakhstan, Kyrgyzstan and Uzbekistan. The impact is augmented by a positive effect of FDI on export channel (and net exports) that shift the IS curve upwards. We cannot find any significant aid‐FDI nexus in the region, except in Kazakhstan. The structural variance decomposition (SFEVD) results suggest that external flows and foreign demand together explain the bigger part of variability in domestic GDP and exports. Finally, variations in foreign capital, aid and FDI, are mainly explained by series themselves. The role of domestic activities is found to be weaker for aid and greater for FDI. The results could be attributed to rigid exchange rates, high trade dependence, and necessity for foreign capital to explore natural resources in Central Asian region. Our results provide some valuable suggestions to improve an investment climate for boosting economic growth.     

Impact of China on trade in electronic products

Using 6-digit product-level data of exports in electronics, this paper finds robust evidence that China's exports adversely affect both the intensive export margin and the extensive export margin of its competitors for the 1992–2018 period. The displacement effects of China's exports on the intensive margin apply especially for the group of intermediate and capital electronic goods and are much more robust and significantly larger in magnitude than the displacement effects found in other studies using aggregated trade data. Finally, we find that China's displacement effect is increasing in China's advantage relative to its competitors in terms of human capital index and internet access of its population.     

Regional Exports and Economic Growth: The Case of Spanish Regions

Different variables have been considered growth enhancing. Traditionally, physical capital, human capital, and public capital have been considered. While the first two variables have been considered positive factors, the latter shows an ambiguous effect. The literature has also considered the role of exports in the economic growth process, introducing several arguments that test the hypothesis that exports are growth enhancing. One argument to be considered is that higher exports can increase total factor productivity due to returns to scale and that exports are an effective means to introduce advanced technology. To test this argument, an empirical analysis considered three possibilities, an export model, a demand model, and a mixed model that combined both. This empirical analysis was carried out for the various Spanish regions.     

Social status,human capital formation and the long-run effects of money

This study examines the effects of monetary policy in a two-sector cash-in-advance economy of human capital accumulation. Agents concern about their social status represented by the relative physical capital and relative human capital. We find that if the desire for social status depends only on relative physical capital, money is superneutral in the growth-rate sense. However, if the desire for social status depends on relative human capital, the money growth rate will have a positive effect on the long-run economic growth rate. Furthermore, an increase in the desire to pursue human capital will raise the long-run growth rate, but an increase in the desire to pursue physical capital will lower it.     

South African trade policy mattersTrade performance and trade policy*

South African trade policy has exerted a major influence on the composition and aggregate growth of trade. In the Apartheid period, South Africa developed a comparative advantage in capital‐intensive primary and manufactured commodities partly because of its natural resource endowments, but also because the pattern of protection was particularly detrimental to exports of non‐commodity manufactured goods. By contrast, trade liberalization from 1990 not only increased imports, but by reducing both input costs and the relative profitability of domestic sales also boosted exports. This evidence suggests that additional trade liberalization and policies that afford South African firms access to inputs at world prices could well be part of the strategy to enhance export diversification.     

HUMAN CAPITAL AND CONVERGENCE: A PRODUCTION‐FRONTIER APPROACH*

Using nonparametric, production‐frontier methods, we decompose labor productivity growth into components attributable to technological change (shifts in the world production frontier), technological catch‐up (movements toward or away from the frontier), and physical and human capital accumulation (movements along the frontier). We find that (1) technological change is decidedly nonneutral, (2) productivity growth is driven primarily by physical and human capital accumulation, (3) the increased international dispersion of productivity is explained primarily by physical capital accumulation, and (4) international polarization (the shift from a unimodal to a bimodal distribution) is brought about primarily by efficiency changes (technological catch‐up).     

TECHNOLOGICAL CHANGE,HUMAN CAPITAL STRUCTURE,AND MULTIPLE GROWTH PATHS*

This paper presents a theoretical model to analyze the effects of technology change on growth rates of income and human capital in the uncertain environments of technology. The uncertainty comes from two sources: the possibility of a technology advance and the characteristics of new technologies. We set up an overlapping generations model in which young agents invest in both width and depth of human capital in order to adopt new technologies. The model develops explicitly the micro‐mechanism of the role of human capital in adopting new technologies as well as that of the process of human capital production in the uncertain environments. In our model, a higher level of width of human capital relative to the level of depth leads one country to a higher growth path. We also show that an economy can have different growth paths depending on the initial structure of human capital and the uncertainty about the nature of new technologies. In particular, new technologies with more uncertain characteristics may adversely affect human capital accumulation and income growth, leading the economy to a low growth trap.     

The impact of Africa‐China's diplomatic visits on bilateral trade

This article documents that African leaders’ state visits to China could stimulate China's exports to Africa in capital intensive manufacturing goods. We further find that state visits significantly increase official aid and exports by state‐owned enterprises to African countries which contribute to the trade growth after state visits.     

Export surges

How can developing countries stimulate and sustain strong export growth? To answer this question, we examine 92 episodes of export surges, defined as significant increases in manufacturing export growth that are sustained for at least 7 years. We find that export surges in developing countries tend to be preceded by a large real depreciation, which leaves the exchange rate significantly undervalued. In contrast, in developed countries, the role of the exchange rate is less pronounced. We examine why the exchange rate is important in developing countries and find that the depreciation is associated with a significant reallocation of resources in the export sector. In particular, depreciation stimulates entry into new export products and new markets. These new exports are important, accounting for over 40% of export growth on average during the surge in developing countries. We argue that a large real depreciation induces firms to expand the product and market space for exports.