Export diversification and the structural dynamics in the growth process: The case of Pakistan

Abstract

In this paper we to examine Pakistan's experience with exports and growth by constructing several measures of diversification and structural change in Pakistan's exports from a disaggregated data over a period of 27 years (1972-73) to 1997-98). Using these measures we have tested a number of relationships among the structure of exports, export growth, aggregate growth, and world growth. The analysis of export-growth relationship both in bivariate and trivariate scenarios rejects the hypothesis of export-led growth. Instead, our results reveal that growth leads exports in the case of Pakistan. The other interesting finding of the analysis is that, contrary to what is generally believed in Pakistan, and what is also shown in some of the studies, imports do not play any significant role in explaining the export-growth relationship. We find that the structure of exports can play a vital role in the growth process of both exports and income. These results are consistent with the possibility that export diversification enhanced Pakistan's growth performance (as has been the case between 1979-1987) relative to the periods with a rigid export mix (i.e., between 1973 to 1978 and 1988-1998). Out results indicate that export diversification is an important determinant of export performance.