Simultaneity in the Study of Exports and Economic Growth

A number of empirical studies have concluded that exports promote economic growth. In each case, a single equation model was estimated by OLS with the magnitude of the export growth coefficient being consistently small, albeit significant. The present study of extensive cross-country data indicates the likelihood of simultaneous determination of exports and economic growth. The rate of growth of exports is then treated as an endogenous variable with the equation estimated by 2SLS in a number of cases in which various plausible combinations are assumed for the system. The 2SLS results generally amplify the earlier findings but tend to show that exports probably play a more important role than was previously indicated. 019, F43]