Are Exports Productivity Enhancing? A Panel Analysis of Sub-Sahara Africa

Abstract

This paper examines the long-run relationship between exports and economic growth in Sub-Sahara Africa (SSA) to ascertain, if and how, exports drives economic growth through the productivity channel as opposed to volume contribution of exports to gross domestic product (GDP). We sampled seven SSA countries for the study including six of the most competitive countries in SSA by the Global Competitiveness Report ranking. Applying the panel analysis framework to a data set spanning 1987 to 2014, we found cointegration among non-exports GDP, gross capital formation, human capital, exports and imports. Estimates of the parameters of the cointegrating equation show a significant negative relationship between non-exports GDP and exports, suggesting that exports are productivity reducing in the long-run. However, there is a significant bi-directional causality between exports and economic growth. We conclude that, the dynamic effects of exports on growth through an economy-wide productivity increase are best achieved with the industrial sector as the leading exports sector.