Abstract
This paper empirically investigates the direction of causality between export and productivity growth in 22 South African manufacturing industries. Data spanning the period 1972 to 1993 are used. Standard Granger-causality tests are complemented by cointegration analyses and the estimation of a theoretically derived regression model. Bearing in mind methodology difficulties caused by inadequate data, little evidence of a statistically significant relationship between export growth and productivity growth is found. Only in case of the chemicals and wood processing sectors were statistically significant evidence found that export expansion could cause an increase in productivity. Domestic demand expansion was found to be a possibly more significant determinant of productivity increases.
Highlights
It is often claimed that there exist a positive association between export growth and economic growth (e.g. Kavoussi, 1984)
If there is causality from productivity to exports and growth, or bi-directional causality between exports and productivity, R&D and/or output subsidies may be more effective to stimulate productivity growth (Kunst & Marin, 1989: 700). In light of this the purpose of this paper was to determine the likely direction of causality between export growth and productivity in South African manufacturing
Due to the wide variation in the export growth and output growth rates of the various sub-sectors within manufacturing in South Africa, since it may be argued that these have been due to different rates of increase in productivity, the focus in this paper was on 22 main manufacturing sub-sectors
Summary
It is often claimed that there exist a positive association between export growth and economic growth (e.g. Kavoussi, 1984). It is often claimed that there exist a positive association between export growth and economic growth In the literature the view is that export growth will cause economic growth (Edwards, 1992). The case for this particular causal direction can be explained as follows. Export-oriented industries, in manufacturing, are argued to be more susceptible to productivity improvements (due to exposure to competition and foreign technology transfers) and these lead to more investment, scale-benefits and more rapid output growth (Levine & Reneh, 1992: 943). Kavoussi (1984: 241) states that a reason for the positive association between export and economic growth is due to "a favourable impact of exports on total factor productivity" Productivity growth is seen as central in the causality chain from export growth to output growth. Kavoussi (1984: 241) states that a reason for the positive association between export and economic growth is due to "a favourable impact of exports on total factor productivity"
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