Productivity Performance and Export Performance: A Time-Series Perspective

Recent trade theory suggests that the relationship between trade and productivity is fundamentally ambiguous. This study investigates the cointegration and causal relationship between productivity growth and export growth for a number of industrialized countries. On the basis of Johansen's technique and the augmented Granger causality tests, the evidence shows that productivity and exports are causally related in the long run for each economy. The results suggest that export growth contributes to productivity growth and, thus, the expansion of exports is an integral part of productivity growth. We interpret these results as strongly supportive of the role of endogenous growth models in explaining continuous growth.