A varying-coefficients model of export expansion, factor accumulation and economic growth: Evidence from cross-country, time series data

In this study we re-examine the role of export expansion in developing countries in a production function framework. However, our study goes beyond previous studies by not only using more recent data, but more importantly, by adopting a random coefficients model that can be viewed as a refinement of laws as stared by Pratt and Schlaifer. The random coefficients model is clearly more general than those adopted in previous studies, not only because it more correctly describes the law relating growth to its determinants, but also permits the impact for those determinants to be country specific. This is particularly important when considering a diverse group of developing countries. We estimate the model using Swamy-Mehta methods. Our results show that economic growth bears a statistically significant relationship to export growth for all except the strongly inward oriented group of countries. However, our findings suggest that there is no major difference between moderately inward oriented countries and moderately and strongly outward-oriented countries in-so-far as the impact of export expansion on economic growth is concerned.