Exports as a factor of production: A consistency test

Abstract

For more than a decade, economists have routinely introduced an export growth variable into a crosscountry production function framework as a way of examining various aspects of the growth process in developing countries, the export promotion hypothesis in particular. While the authors of these studies have rejected the argument that their results are biased by the accounting relationship between exports and GDP, some recent studies offer evidence supporting this contention. Here a simple procedure is proposed to test for this bias. The procedure consists of testing directly for the implied lower productivity in the nonexport sector of the economy.