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Export, Import, Productivity and Growth: A theoretical and empirical study of an endogenous relationship

Ifwarsson, Ricky LU (2010) NEKM01 20102
Department of Economics
Abstract
Numerous studies in the international economic literature suggest that foreign trade has a large positive effect on growth. From the theoretical aspects there are several reasons to be¬lieve in both export- and import-led productivity growth as well as productivity-led exports. The empirical results have been mixed, with earlier studies indicating a strong relationship and more recent studies that question the exogeneity assumption, finding endogenous results in several directions. In this study I develop a theoretical model, based on Aghion and Howitt’s (1990) Schumpeterian framework, which explain important parts of the diverging results by showing that trade can affect the incentives and probabilities for innovations. I also investigate... (More)
Numerous studies in the international economic literature suggest that foreign trade has a large positive effect on growth. From the theoretical aspects there are several reasons to be¬lieve in both export- and import-led productivity growth as well as productivity-led exports. The empirical results have been mixed, with earlier studies indicating a strong relationship and more recent studies that question the exogeneity assumption, finding endogenous results in several directions. In this study I develop a theoretical model, based on Aghion and Howitt’s (1990) Schumpeterian framework, which explain important parts of the diverging results by showing that trade can affect the incentives and probabilities for innovations. I also investigate the relevance of the relationship between aggregated exports, imports and TFP in a Johansen approach for cointegration with error correction models and short-run Granger cau-sality tests, for five OECD countries. I conclude that there is some weak support of long-run relations in all except two cases, and that the strong support for trade induced productivity en-hancements cannot be found. The results are generally varying between countries and do not get more conclusive when studying the short-run effects. The heterogeneous results from this study therefore tend to question the previous assumption that trade, and especially export, positively affects productivity growth. (Less)
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author
Ifwarsson, Ricky LU
supervisor
organization
course
NEKM01 20102
year
type
H1 - Master's Degree (One Year)
subject
keywords
Export, Import, Productivity, Growth, Cointegration, Johansen approach, ECM, OECD
language
English
id
1668970
date added to LUP
2010-09-28 08:33:10
date last changed
2010-09-28 08:33:10
@misc{1668970,
  abstract     = {Numerous studies in the international economic literature suggest that foreign trade has a large positive effect on growth. From the theoretical aspects there are several reasons to be¬lieve in both export- and import-led productivity growth as well as productivity-led exports. The empirical results have been mixed, with earlier studies indicating a strong relationship and more recent studies that question the exogeneity assumption, finding endogenous results in several directions. In this study I develop a theoretical model, based on Aghion and Howitt’s (1990) Schumpeterian framework, which explain important parts of the diverging results by showing that trade can affect the incentives and probabilities for innovations. I also investigate the relevance of the relationship between aggregated exports, imports and TFP in a Johansen approach for cointegration with error correction models and short-run Granger cau-sality tests, for five OECD countries. I conclude that there is some weak support of long-run relations in all except two cases, and that the strong support for trade induced productivity en-hancements cannot be found. The results are generally varying between countries and do not get more conclusive when studying the short-run effects. The heterogeneous results from this study therefore tend to question the previous assumption that trade, and especially export, positively affects productivity growth.},
  author       = {Ifwarsson, Ricky},
  keyword      = {Export,Import,Productivity,Growth,Cointegration,Johansen approach,ECM,OECD},
  language     = {eng},
  note         = {Student Paper},
  title        = {Export, Import, Productivity and Growth: A theoretical and empirical study of an endogenous relationship},
  year         = {2010},
}