Explaining the Supply-side Constraints to Export-led Growth in Selected Pacific Island Countries

Over the past two decades, an integral part of some Pacific island countries (PICs’) economic policy rhetoric has been export-led growth. However, despite the policy and technical support provided by many international organizations and bilateral donors, and an abundance of natural resources, their export sectors remain narrow and, with few exceptions, export industries have experienced little growth. Therefore, if these countries are to do better, it is critical to understand the supply- side constraints to export-led growth. Hence, the objective of this study was to identify and subsequently analyse the impact of supply-side constraints on export receipts for selected PICs, using Linear Programming (LP) models of export receipts. The study also provides estimates of the magnitude of the increase in export receipts that may be achieved if some of these constraints are removed. The results show the maximum export receipts that these PICs can achieve, given the supply-side constraints that they face. It is also seen that if some of the supply-side constraints are removed, the increase in exports receipts would be very promising. Finally, the paper provides some policy recommendations for the removal of some of the supply-side constraints.