EXPORT GROWTH UNDER TRADE BARRIERS: A COMPARATIVE SECTORAL ANALYSIS OF DEVELOPING ECONOMIES

Abstract

The role of tariff liberalization in influencing economic development and sectoral dynamics has been extensively explored in economic literature. Studies have investigated the export-led growth hypothesis for developing economies. This study extends the literature by testing the export growth hypothesis through tariffs (domestic and implemented by partner countries) as a policy variable using a sectoral approach. The study also evaluated the given relationship for the first time in the service sector using restrictions (measured by STRI) as the policy variable at overall and at the sub-services sectoral level. Estimates of the System GMM, using yearly data from 2000 to 2020, showed that tariffs (both types) generally negatively affect exports and hence growth in both sectors. However, domestic tariff was significantly and positively linked to the exports in the food, beverage, and tobacco sector. Domestic tariffs may have encouraged local production growth, leading to greater export potential and overall efficiency in the sector. In the services sector, yearly data of 50 OECD countries was evaluated using System GMM. The results indicated that restrictions in the services sector had a significant negative impact on the services sector exports. The restrictions in the sub-services sectors showed varied associations with services sector exports. It is suggested to implement a sub-services sector-specific approach along with an evaluation of the purpose of restrictions. Overall, the results favored more liberalized trade policies to elevate growth through exports.