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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS
JANURAY 2011
VOL 2, NO 9
In early years, Pakistan was producing and exporting only primary products, mainly
dependent on climatic conditions. In 1948-49, 99% of Pakistan‘s export earnings were made
up of just five primary commodities: raw jute, raw cotton, raw wool, hides, and tea. A change
began to occur as Pakistan‘s economic policies shifted towards an emphasis on
industrialization. By 1951-52, the five main primary commodities contributed 93% of export
earnings, which by 1958-59 had fallen to 75%. Pakistan‘s composition of exports and imports
has changed drastically. Primary commodities, which were 99% of exports in 1948-49, fell to
45% in 1971-72, and were a mere 11% in 1994-95. Similarly, manufactured goods contribute
as much as 89% of Pakistan‘s exports.
The basic aim of this paper is to investigate the role of the component of total exports
(manufacturing, semi manufacturing and primary exports) in boosting up economic growth
during 1972 to 2005. The rest of the paper is organized as follows. The paper is organized as
follows: section 2 reviews the relevant literature. Section 3 explains specification of
econometric model, variables and data sources for empirical analysis. Section 4 deals the
methodological issues for longitudinal data. Section 5 reports the empirical results for short
and long run equilibrium alongwith granger causality based on Toda and Yamamoto (1995)
procedure. Last section concludes and suggests some policy recommendations based on
empirical results.
2. Literature Review
Given the enormous literature on ELG, we limited literature review by referring some highly
significant studies that provide a useful framework for the analysis of the ELG paradigm,
followed by some studies carried out for Pakistan. Segerstrom et al. (1990), Grossman and
Helpman (1990), Rivera-Batiz and Romer (1991) provide a useful framework for analyzing
the relationship between exports and economic growth. These studies emphasized that exports
enhance total factor productivity which increase economies of scale, technology, workers and
managerial skills, ability for utilization of resources as well as productive capacity of the
economy.
Exports promote thresholds effects due to economies of scale, increased capacity utilization,
productivity gains, and greater product variety (see Balassa, 1978 and 1985, Jung and
Marshall, 1985, Ram, 1985 and 1987, Bahmani et al., 1991, Khalifa Al-Youssif, 1997, and
Levin and Raut, 1997). These studies analyzed the role of exports in the economic growth
particularly for developing countries. Most of these studies concluded that there is a positive
relationship between exports and economic growth.
There are cross-country studies in the literature, of which key contributions are: Michaely
(1977), Feder (1983), Ram (1985), Sheehey (1990), Lopez (1991) and Edwards (1992). These
studies were aimed to see the role of exports for developing countries and argued in favor of
trade openness. Yet, there are some doubts concerning the importance of trade openness and
economic growth. Sheehey (1992) analyzed 53 non-oil developing countries, and found that
the positive impact of exports is only important for the industrialized economies. However,
Gunter et al. (2005) concluded that any gains from trade are often associated with external
effects that are dynamic in nature.
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