Performance of Sectors’ Export and Their Effects on Economic Growth in Ethiopia: (Disaggregate Approach)

Tafesse Gizaw

doi:10.7176/jesd/10-11-05

Abstract

In numerous trade theories; economist argue export orientation boosts total productivity and output growth through its sympathetic effect on the efficiency of resource allocation, capacity utilization, economies of scale and technological advancement. But some other state that the effects of export varies country to country and items to items depending on the level of development. Having these and others arguments in mind, the performance as well as the short run and long run effects of disaggregate export on Ethiopian economic growth mainly designed in advance. To this end, the 41 years data has been collected from different sources and analyzed using both descriptive and econometric techniques. The findings of descriptive analysis reveal the performance of agriculture and service exports have been improved in amid 1992/93 and 2014/15. In particular it is portrayed that the unprecedented service export has been leading the export sector throughout post reform period. Conversely, with minor improvement; the performance industry export has been poor throughout the study period. Likewise the result of VECM model reveals; in the long run all sectors’ export significantly affect economic growth and in the short run their individual contribution is insignificant to the economy. In sum albeit the short run contribution of each disaggregate export to economic growth is insignificant, since their donation is significant in the long run; indispensible measure should be taken to develop export in general and each disaggregate export in particular. Key words : disaggregate export, economic growth and VECM model JEL Code T07 DOI : 10.7176/JESD/10-11-05 Publication date :June 30 th 2019

Highlights

Countries’ economic growth influenced by enormous variables, among these variables, as to many economist because export orientation scale-up total productivity through its sympathetic effect on the efficiency of resource allocation, capacity utilization, economies of scale and technological advancement, export affect the growth of economies both in developing and developed countries.Albeit export trade highly believed to play critical role in promoting economic growth of countries, since a number of developing counties import industrial product while they rely on very few agriculture product exports and since the income sensitivity of demand for these products are reasonably lower than imported industrial products, majorities of developing countries; due to excess import payment over earnings from export, experience deficit on their current account balance
That is a 1% increase in agriculture and industry export leads to a 0.032 percent and 0.013 percent increase in economic growth
That is a 1% increase in service export leads to a 0.014 percent increase in economic growth

Summary

Introduction

Albeit export trade highly believed to play critical role in promoting economic growth of countries, since a number of developing counties import industrial product while they rely on very few agriculture product exports and since the income sensitivity of demand for these products are reasonably lower than imported industrial products, majorities of developing countries; due to excess import payment over earnings from export, experience deficit on their current account balance. As a result, according to Todar (2006) the export potential of a good number of developing countries has been relatively puny compared with export performance of the developed countries. This is true when one analyzes about the performance of export and its relation with output growth in Ethiopia. The country used to import less volume of high value industrial products and with many development programs; has a plan for importing intermediate capital goods and the trade balance of the country getting deteriorated time to time

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Results

Conclusion