Agricultural Exports and Economic Growth in Developing Countries: A Panel Cointegration Approach

Journal of Agricultural Economics, Vol. 61, No.
3, 2010, 565–583
doi: 10.1111/j.1477-9552.2010.00257.x
Agricultural Exports and Economic

Growth in Developing Countries:
A Panel Cointegration Approach
Ana I. Sanjuán-López and P. J. Dawson1
(Original submitted July 2009, revision received January 2010, accepted April
2010.)
Abstract
This paper quantifies the contribution of agricultural exports to economic growth
in developing countries. We estimate the relationship between GDP and agricul-
tural and non-agricultural exports for 42 countries using panel cointegration
methods. Results show that a long-run relationship exists, the agricultural export
elasticity of GDP is 0.07 whereas that of non-agricultural exports is 0.13, and
total exports Granger-cause GDP, which supports the export-led growth hypo-
thesis. Structural differences exist in the relationship by broad income group.
Balanced export-promotion polices are implied for the poorest countries, but, for
those with higher incomes, higher economic growth is achieved from non-agricul-
tural exports.
Keywords: Agricultural exports; developing countries; economic growth; panel

cointegration.
JEL classifications: C23, Q17.
1. Introduction
Economic growth is a primary aim of developing countries and a recurrent theme
in the trade and development literature is the role of exports in this process. Much
of this literature focuses on total exports as an engine of growth, but agriculture’s
contribution to total exports is often substantial in developing countries: in 2004 for
example, this proportion was 90% for Guinea-Bissau, 85% for Nicaragua and 75%
1
Ana Sanjuán-López is a Visiting Fellow in the School of Agriculture, Food and Rural
Development, Newcastle University, Newcastle NE1 7RU, UK, and a Research Fellow
in the Centre of Agrofood Research and Technology of Aragon (CITA), Zaragoza, Spain.
E-mail: aisanjuan@aragon.es for correspondence. Phil Dawson is a Reader in the School of
Agriculture, Food and Rural Development, Newcastle University, Newcastle NE1 7RU, UK.
E-mail: p.j.dawson@ncl.ac.uk. Ana Sanjuán-López gratefully acknowledges financial support
from the Spanish Ministry of Science and Education, within the programme ‘Fomento de
movilidad de profesores e investigadores’. We are grateful to two referees and an External
Editor for comments on a previous draft.
2010 The Authors. Journal compilation 2010 The Agricultural Economics Society.
566 Ana I. Sanjuán-López and P. J. Dawson
for both Benin and The Gambia (FAO, 2007). It is surprising that the empirical
relationship between agricultural exports and economic growth has been somewhat
neglected in the literature despite its role in the development process being long
recognised. Johnston and Mellor (1961, p. 575) argue that expanding agricultural
exports is one of the most promising means of increasing incomes. Moreover, where
a developing country’s exports are a small proportion of world trade, as is typical,
export demand for that country is elastic and policies that seek to stimulate agricul-
tural exports are not irrational even when world conditions are unfavourable, par-
ticularly where few alternatives exist. Agricultural exports therefore can play an
important role in economic growth, and export-led growth from agriculture may
represent optimal resource allocation for those countries that have a comparative
advantage in agricultural production.
Two empirical studies that examine the short-run relationship between agricultural
export growth and economic growth with panel data are Levin and Raut (1997) and
Dawson (2005). We contribute to this literature by examining the long-run relation-
ship between gross domestic product (GDP) and exports in developing countries.
Exports are disaggregated into agricultural and non-agricultural components, and the
main focus is to assess the impact of agricultural exports on economic growth. Our
framework is the export-led growth hypothesis where increases in exports lead to eco-
nomic growth. We use recently developed panel cointegration methods to address two
criticisms of conventional cointegration tests, namely that they tend to under-reject in
the presence of structural breaks and have poor size and power properties. Westerl-
und’s (2006a) multivariate panel cointegration procedure is used to test for the exis-
tence of a long-run relationship where structural breaks are permitted. Its parameters
are then estimated using fully modified ordinary least squares (FMOLS). In essence,
our method seeks unknown breaks in the series and then models them in a panel coin-
tegrating relationship. Westerlund’s method is particularly appropriate here because it
allows for the estimation of endogenously determined and heterogeneous structural
breaks, caused, for example, by the oil crisis of 1973 ⁄ 1974 and the debt crisis of
1981 ⁄ 1982, which may have affected individual countries differently. In addition,
there is some evidence to suggest that the level of economic development gives rise to
structural differences in the export–income relationship (Ram, 1987) and we divide
our dataset into three subsamples by the broad income groupings categorised by the
World Bank as ‘low’, ‘lower middle’ and ‘upper middle’ income countries.
There are three lines of enquiry. First, we test for cointegration between GDP and
agricultural and non-agricultural exports, thereby identifying any long-run export–
income relationship in developing countries. Second, we estimate this relationship and
examine whether it differs by broad income groups. Third, we test the export-led
growth hypothesis by testing causality from exports to GDP. The paper is organised as
follows: Section 2 outlines explanations of the export–income relationship and reviews
some empirical literature, section 3 details the empirical method, section 4 discusses
the data and presents the results and section 5 provides a summary and discussion.
2. Background
The export-led growth hypothesis has dominated the export–income literature and
there are four explanations. First following short-run Keynesian arguments, export
growth leads to income growth via the foreign trade multiplier. Second, foreign
exchange from exports can be used to finance imported manufactured and capital
Agricultural Exports and Economic Growth in Developing Countries 567
goods and technology, which contribute to growth (Chenery and Strout, 1966).
Third, competition leads to scale economies, technological advance and growth
(Helpman and Krugman, 1985). Fourth following endogenous growth theory, the
export sector creates positive externalities, such as more efficient production meth-
ods, which lead to growth (Balassa, 1978; Grossman and Helpman, 1993).
Alternative hypotheses regarding causality in the export–income relationship have
also been postulated. First, technology trade theory hypothesises growth-led exports
which occur when domestic demand lags income growth and technological advance
results in output increasing faster than domestic demand so that exports increase.
Similarly, economic growth could also reduce export growth when there is an
increase in domestic demand which is concentrated in exportable and non-tradable
goods so that economic growth increases but exports fall (Jung and Marshall,
1985). Second, intra-industry trade theory predicts that when economies of scale
increase productivity, exports also increase; if the resulting market structure involves
fewer firms, economies of scale lead to cost reductions, and there is bi-directional
causality between export growth and economic growth (Helpman and Krugman,
1985; Kunst and Marin, 1989).
There are numerous empirical studies of the export–income relationship and Giles
and Williams (2000a,b) and Ahmad (2001) provide comprehensive surveys. Rather
than replicating these surveys, we highlight the diverse results. Early studies gener-
ally support the export-led growth hypothesis and include Balassa (1978) whose
estimate of the export elasticity of income is 0.05, and its validity gained widespread
acceptance, notably by the World Bank (1987). Further support for the export-led
growth hypothesis is found from Solow-type sources-of-growth equations. Here, an
aggregate production function is specified with labour and capital as conventional
inputs and exports as an additional ‘input’. Sources-of-growth equations are then
derived where income growth is determined by growth rates of both conventional
inputs and exports. Examples include Tyler (1981), Feder (1983), Ram (1987) and
Dawson and Hubbard (2004), and export elasticities vary between 0.06 and 0.57.
More formal statistical tests of causality, often with simple bivariate export–income
models, provide mixed results. For example, Jung and Marshall (1985) provide
only weak evidence in support of the export-led hypothesis, whereas Xu (1996) and
Balaguer and Cantavella-Jordá (2004) find more general support. Sharma and
Dhakal (1994) find evidence of causality in both directions, of bi-directional causal-
ity and of no causality. Ghirmay et al. (2001) estimate long-run export elasticities
between )0.21 and 0.67; there is much evidence of bi-directional causality, but there
is also evidence of unidirectional causality in both directions. A further line of
enquiry is to examine the impact of increasing income on the export elasticity of
income, and Ram (1987) finds some evidence that this impact decreases as income
increases.
De Piñeres and Cantavella-Jordá (2007) highlight these disparate conclusions
by presenting results for Latin American countries. Findings show that long-run
relationships between GDP and exports exist only for some countries. For these,
there is evidence of export-led growth where long-run export elasticities vary
between )2.07 and 4.41, but there is also evidence of growth-led exports, bi-direc-
tional causality and no causality. These inconsistent results, and by extension
those elsewhere, arise because of differences in methodologies, countries examined,
variable definitions and data sources.
Few studies examine the relationship between agricultural exports and income,
but two exceptions that use panel data are Levin and Raut (1997) and Dawson
(2005).2 Levin and Raut examine the effect on GDP of exports of both manufac-
tured and primary goods, where the latter includes agricultural commodities. The
panel dataset comprises of 30 semi-industrialised countries and two time periods for
the 10-year growth rates of 1965–1974 and 1975–1984. A Feder-type sources-of-
growth equation is estimated and findings show that GDP growth can be increased
by manufactured export growth, but not by expanding primary commodity exports.
Export promotion therefore should focus on manufactured output. Dawson devel-
ops a Feder-type sources-of-growth equation from a dual economy model with agri-
cultural and non-agricultural sectors. This equation is estimated from annual data
for 62 developing countries for 1974–1995. Results show that the short-run agricul-
tural export elasticity of GDP is similar to the non-agricultural export elasticity,
and that their impacts fall as income increases. Both studies estimate sources-of-
growth equations where GDP growth is a function of export growth. Such differ-
encing of the variables throws away information contained in the data and the
focus is on the short run only. This paper, by contrast, examines the long-run rela-
tionship between GDP and agricultural and non-agricultural exports in levels using
annual data from 42 developing countries for 1970–2004. We also test the export-
led growth hypothesis, that is, we test non-causality from total exports to GDP.
3. Empirical Method
Many economic time series are non-stationary and are integrated of order one, I(1).
OLS regressions between such data are often spurious but where two or more I(1)
series move together and their linear combination is stationary, they are cointegrated
and a meaningful long-run equilibrium exists (Granger, 1988). The augmented
Dickey–Fuller (ADF) test (Dickey and Fuller, 1981) is often used to test for unit
roots and the null hypothesis of non-cointegration can be tested using the Engle–
Granger (1987) method. These tests have two well-known shortcomings. First, when
a series is subject to a deterministic trend and exogenous shocks cause structural
breaks, the ADF test tends to under-reject (Perron, 1989), as does the Engle–
Granger (1996) test. Second, both tests have poor size and power properties when
applied to time series of moderate length. Panel data can be used to address these
criticisms as they provide more variability and less collinearity between variables,
and parameter estimates are more efficient as degrees of freedom are greater
(Baltagi, 2001, pp. 5–7). A number of panel tests for both unit roots and cointegra-
tion have been developed and those used here are by Westerlund (2006a,b).3
Conditionally, the cointegrating relationships for each country and for the panel are
2
Balaguer and Cantavella-Jordá (2004) examine the relationship between GDP and exports
using annual data for Spain for 1961–2000. Exports are disaggregated into five categories,
one of which is agricultural exports. Inter alia, they find bi-directional causality between agri-
cultural exports and GDP.
3
We choose Westerlund (2006a,b) tests because our time series consists of 35 annual observa-
tions for 1970–2004 and it is reasonable to assume that structural breaks may have occurred
during that period due, for example, to the oil crisis of 1973 ⁄ 1974 or the debt crisis of
1981 ⁄ 1982.
then estimated following Pedroni (2001), and Canning and Pedroni’s (2008) test is
used to test for non-causality from exports to GDP.
3.1. Testing for unit roots

We apply the panel unit-root test of Westerlund (2006b) which allows for unknown
structural breaks. Denote yit as a multidimensional time series for i = 1,…, N coun-
tries and t = 1,…, T periods:
X
mi
yit ¼ gi þ di t þ hiq DUiqt þ tit ð1Þ
q¼1
X
pi
Dtit ¼ /i tit1 þ cij Dtitj þ eit ð2Þ
j¼1
i i
where DUiqt is a step dummy equal to unity for t > Tbq where Tbq denotes the date
of the qth break in country i (q = 1,…, mi) and mi is the number of breaks (mi ‡ 1)
in the ith country of the panel; gi is a constant that represents the level of the ith
series before any break; gi + hi is a constant that represents the level of the ith ser-
ies after any break; and eit is the disturbance which has zero mean, is serially uncor-
related and is uncorrelated across i.4 The null hypothesis is that the individual series
for all countries, that is, yit for i = 1,…, N and t = 1,…, T are non-stationary, and
the alternative hypothesis is that at least one of these series is stationary. Specifi-
cally, the null hypothesis is that H0: /i = 0 for all i, and the alternative hypothesis
is that HA: /i < 0 for some i. The Lagrange multiplier (LM) unit-root statistic for
each country’s series, s/i , is the t-statistic of /i estimated from an auxiliary regres-
sion in equation (2) following Amsler and Lee (1995) who illustrate for the case of
one break. Westerlund (2006b) then uses the cross-sectional average of the individ-
ual country LM s/i statistics, s/. Under cross-independence of the disturbances eit,
as T fi ¥ followed by N fi ¥, the standardised form follows an asymptotic normal
distribution:
pffiffiffiffi
N ðs/ HÞ
Z LM ¼ pffiffiffiffiffi ) Nð0; 1Þ ð3Þ
R
where H and R are the average of the mean and variance of the limiting distribution
of s/ which are estimated by simulation. Values of the Z-LM statistic smaller than
the appropriate left tail critical value reject the null hypothesis. The selection of the
number and location of the breaks is carried out through an outlier detection proce-
dure.
3.2. Testing for cointegration

Westerlund (2006a) develops an LM statistic to test the null hypothesis of panel
cointegration where structural breaks are permitted in both null and alternative
4
The condition that eit is uncorrelated across i is useful to derive the asymptotical distribu-
tion of the panel unit-root test, but its validity is questionable here as it implies that econo-
mies of developing countries are independent.
hypotheses. Assuming that the data-generating process for a multidimensional time

series, yit, is:
yit ¼ zit0 diq þ xit0 bi þ eit ð4Þ
eit ¼ cit þ tit ð5Þ
cit ¼ cit1 þ /i tit ð6Þ
5
where xit = xit)1 + uit is a vector of stochastic variables; zit is a vector of deter-
ministic variables which may include country-specific constants and trends, or seg-
mented constants and trends; bi is a vector of cointegrating parameters; and diq for
q = 1,…, mi + 1 is a vector of estimated parameters where mi is the number of
breaks in cross-section i (and mi + 1 is the number of regimes) which are located
i i
at dates Tb1 ; . . . ; Tbm i
. The null hypothesis is that yit and xit are cointegrated for all
countries, that is /i = 0 for all i = 1,…, N, against the alternative hypothesis that
/i „ 0 for some i.6 When /i = 0, cit in equations (5) and (6) vanishes (assuming
ci0 = 0), eit = tit, and yit and xit are cointegrated as tit is stationary. The panel LM
statistic for cointegration (LMC) is the cross-sectional average of mi + 1 regime-
specific KPSS statistics (Kwiatkowski et al., 1992) computed for sub-samples of
i i
length Tbq Tbq1 :
i
Tbj
X X
N mi þ1 X 1 ^S2
it
LMC ¼ i i 2 ^2 ð7Þ
i¼1 q¼1 t¼T i þ1 ðTbq Tbq1 Þ xi
bj1
where
X
t
^Sit ¼ êij
i
j¼Tb;j1 þ1
is the partial sum of efficient estimates of the residuals in equation (4) and x ^ 2i is a
consistent estimate of the long-run variance of eit. The corresponding standardised
statistic, denoted as Z-LMC, under cross-independency as T fi ¥ followed by
N fi ¥ is:
pffiffiffiffi
N ðLMC HÞ
Z LMC ¼ pffiffiffiffi ) Nð0; 1Þ ð8Þ

R
where H and R are the average of the mean and variance of the limiting distribu-
tion of the LMC statistic in equation (7). Response surface moments are obtained
by Westerlund (2006a) using Monte Carlo simulations of the limiting distribution
which depend on the deterministic specification of the model and the number of
regressors in xit, but not on the location of the breakpoints. The Z-LMC statistic is
compared with the right tail of the normal distribution. The number and location
of breaks is selected using Bai and Perron’s (1998, 2003) iterative procedure.7
5
In our case, yit is GDP and xit is a two-dimensional vector containing agricultural and non-
agricultural exports.
6
Note that /i can be zero for some countries and it is not required that /i = / „ 0.
7
The asymptotic normal distribution is only valid under the assumption of cross-country
independence and bootstrapping is necessary to obtain appropriate critical values.
3.3. Estimating the cointegrated relationship

Pedroni (2001) and Westerlund (2006a) consider two panel estimators of equation
(4): (parametric) dynamic OLS (DOLS) estimates the lags explicitly, whereas
(non-parametric) fully modified OLS (FMOLS) deals with serial correlation using a
heteroskedasticity and autocorrelation-consistent estimator of the long-run covari-
ance matrix. Both correct for OLS bias induced by endogeneity, and both can be used
to provide within- or between-group (or group mean) estimates. Pedroni (2001, 2002)
argues that the between-group estimator is preferred for two reasons: first, it has rela-
tively minor size distortions in small samples; and second, bi need not be the same for
all N countries. Accordingly, we use the between-group estimator. The evidence for
preferring DOLS or FMOLS is not so clear, although both estimates tend to be simi-
lar.
3.4. Testing for causality

We test for non-causality from xit to yit following Canning and Pedroni (2008).
Equation (4) can be represented by a dynamic error-correction model (ECM):
X
k X
k X
mi X
mi
Dy it ¼ aiêit1 þ C1ij Dy itj þ C2ij Dxitj þ s1qi I qit þ s2qi DUqit þ li þ mit ð9Þ
j¼1 j¼1 q¼1 q¼1
where êit1 is the estimated long-run disequilibrium, that is, the residuals from equa-
tion (4); ai is the error-correction term that gives the reaction of yit to return the
system to long-run equilibrium; and Iqit and DUqit are impulse and step dummies to
provide consistency with the breaks in levels and trends in the long-run relationship
in equation (4); and li is a constant for each country which is included in the esti-
mation of the (single) heterogeneous panel ECM only.
First, consider testing for non-causality for each country. The ECM in equation
(9) is estimated separately for each i = 1,…, N country where the number of coun-
try-specific lags, k, with a maximum of k = 4, is determined by the Schwartz
Bayesian criterion. The joint null hypothesis of no country short- or long-run cau-
sality from xit to yit is:
H01 : C2ij ¼ 0 and ai ¼ 0 for each i ¼ 1; . . . ; N and j ¼ 1; . . . ; k ð10Þ
and F Fk+1. The null hypothesis of no long-run causality from xit to yit for each
country is:
H02 : ai ¼ 0 for each i ¼ 1; . . . ; N ð11Þ
and t tT)npar where npar is the number of estimated parameters in equation (9).
More general insights about causality are provided by corresponding panel tests.
We estimate the single heterogeneous ECM in equation (9) jointly for i = 1,…, N
countries where the number of lags, k, are determined from country ECMs as
before. The joint null hypothesis of no short- or long-run causality in the panel is:
H03 : C2ij ¼ 0 and ai ¼ 0 for all i ¼ 1; . . . ; N and all j ¼ 1; . . . ; k ð12Þ
and the log-likelihood ratio is LLR v2RþN where R is the total number of lagged
Dxi terms in all N equations in equation (9). The null hypothesis of no long-run
causality from xit to yit in the panel is:
H04 : ai ¼ 0 for all i ¼ 1; . . . ; N ð13Þ
and LLR v2N .
The null hypotheses in equations (10) and (12) are Granger-causality
tests as yit evolves exogenously with respect to xit at all non-contemporaneous time
horizons.8
Following Canning and Pedroni (2008), we also test the ‘pervasiveness’ of long-
run casual effects in the panel. The group mean test is based on the average of
adjustment coefficients for each country, ai, in equation (9) and the null hypothesis
is of no long-run causality in the Ppanel on average. Denote the average of1the PNadjust-
ment parameters as: a ¼ N 1 N i¼1 a i . The test statistic is:
t ðaÞ ¼ N i¼1 tðai Þ
where t(ai) is the test statistic for each country and the null hypothesis is:
H05 : a ¼ 0: ð14Þ
The t ðaÞ statistic has a standard normal distribution under the null hypothesis of
no long-run causality and rejection in favour of the alternative hypothesis is at
either tail. The null hypothesis of no causality in equation (14) concerns the average
long-run effect and non-rejection may be a consequence of heterogeneous long-run
coefficients with positive and negative values that cancel each other out. To rule out
this possibility,
P Canning and Pedroni propose a Wald-type homogeneity test:
W¼ N r2
i¼1 ai ða i aÞ2 , where
a is the estimated group mean estimates of the N
error-correction terms and r2 ai is the inverse of the sample variance of the country-
specific error-correction terms. Under the null hypothesis of parameter homogeneity
across countries, W v2N .
4. Data and Results

We seek a relationship between GDP and agricultural and non-agricultural exports.
The (balanced) panel dataset consists of annual observations on GDP and agricul-
tural and non-agricultural exports for 42 developing countries for 1970–2004.
The World Bank currently designates 13 of these countries as having ‘low income’,
22 have ‘lower middle income’ and seven have ‘upper middle income’.9 Data on
8
In equation (9), yit is GDP and xit is a two-dimensional vector containing agricultural and
non-agricultural exports. To test no long-run causality, we test the significance of ai which is
the coefficient associated with the error term, êit1 , that is, the lagged residuals in equation
(4). The error-correction term, ai, measures the adjustment of GDP in each period to the dif-
ference between GDP and a linear combination of exports. Thus, we test the null hypothesis
of no causality from xit to yit, that is, from total exports to GDP. It does not seem possible
to test causality from each export variable to GDP separately. Likewise, in conventional
cointegrated systems, Granger-causality can only be tested between two exclusive subsets
of variables (Lütkepohl, 1993; Zapata and Gil, 1999).
9
The World Bank divides economies according to per capita gross national income (GNI). In
2008, low-income countries are for GNI of $975 or less; lower middle income countries are
for GNI between $976–$3,855 and upper middle income countries are for GNI between
$3,856-$11,905 (http://web.worldbank.org). During the sample period, not all countries were
categorised in the same income group. In 1990, for example, India, Indonesia and Sri Lanka
were classified as low-income countries, whereas now they have lower middle incomes.
Table 1
Unit-root tests
Variable Z-LM statistic
GDP
Full sample )0.39 (0.34)*
Low-income countries 0.69 (0.59)*
Lower middle income countries )0.19 (0.37)*
Upper middle income countries )1.54 (0.16)*
Agricultural exports
Low-income countries )2.97 (0.05)*
Non-agricultural exports
Low-income countries 0.15 (0.57)*
Notes: Bootstrapped P-values are given in parentheses. *Non-stationarity.
GDP and the total exports of goods and services are measured in constant local
currency units (source: World Bank, 2006). Agricultural and non-agricultural
exports in constant local currency units are obtained as follows. Data are obtained
for total agricultural exports, which includes all crop and livestock products, and
for total merchandise exports in US$ (source: FAO, 2007). Their ratio is then multi-
plied by the total exports of goods and services in constant local currency units to
obtain agricultural exports in constant local currency units. Subtracting agricultural
exports from total exports gives non-agricultural exports in constant local currency
units.
On average, agricultural exports as a proportion of total exports varies between
90% for Malaysia to 1% for Gabon. This ratio falls as income increases: it is 47%
for low-income countries, 37% for those with lower middle incomes and 26% for
those with upper middle incomes. Similarly, the ratio of agricultural exports to
GDP varies on average between 77% for Guinea-Bissau and 2% for Algeria. This
ratio also falls as income increases: it is 10% for low-income countries, 8% for
those with lower middle incomes and 6% for those with upper middle incomes.
Using logarithms throughout, we first examine the order of integration of each
variable using the panel Z-LM test of Westerlund (2006b) and results are shown in
Table 1.10 A maximum of one break in each equation is permitted. A deterministic
trend is included to account for possible trend stationary behaviour under the null
hypothesis and 5,000 replications are run to obtain bootstrapped critical values
under general conditions of cross-dependency (Chang, 2004; Westerlund, 2006b).
For the full sample and for each subsample by income group, all three variables
are I(1).
10
We are grateful to Joakim Westerlund who provided GAUSS code for both unit-root and
cointegration tests.
Table 2
Cointegration tests
Z-LMC statistic
Full sample 16.58 (24.06)

Low-income countries 9.64 (15.07)
Lower middle income countries 12.43 (17.38)
Upper middle income countries 6.07 (8.37)
Note: Bootstrapped critical values are given in parentheses at the 5% significance level.
We now apply Westerlund’s (2006a) panel Z-LMC test to test the null hypothesis
of panel cointegration. Again in each country-specific equation, we allow for a max-
imum of one break (and two regimes) in both levels and trends. As our maintained
hypothesis is export-led growth, we normalise on GDP and the estimated equa-
tion is:
GDPit ¼ g1i þ g2i þ d1i t 1 þ d2i t 2 þ b1i AXit þ b2i
NAXit þ eit ; i ¼ 1; . . . ; N; t ¼ 1; . . . ; T ð15Þ
where g1i and g2i are the country-specific intercepts in the two regimes (q = 1, 2);
t1 and t2 are time trends in the two regimes with corresponding country-specific
parameters of d1i and d2i; and AX and NAX are agricultural and non-agricultural
exports with corresponding vectors of long-run parameters of b1i and b2i. Westerl-
und’s (2006a) bootstrap approach is applied to obtain critical values under general
conditions of cross-sectional dependence, and 5,000 replications are run. The results
are shown in Table 2. For the full sample and for each subsample, the null hypothe-
ses of panel cointegration are not rejected and there are meaningful long-run rela-
tionships between GDP and agricultural and non-agricultural exports. Of the
42 countries, 40 show evidence of a significant structural break with Ghana and
Sri Lanka being the exceptions.
Fully modified OLS estimates of equation (15) are shown in Table 3.11,12 There is
no particular pattern to the breaks, although 30 are between 1974 and 1988, with
five occurring around the oil crisis of 1973 ⁄ 1974 and the subsequent world recession
of 1974 ⁄ 1975 and six occurring shortly after the debt crisis of 1981 ⁄ 1982. Wald
tests, which are not reported, are used to test the null hypothesis that the intercept
and trend coefficients are equal across regimes. They show that 40 relationships
have a statistically significant broken level at the 5% significance level, 32 have
a broken trend and 30 have both. The modelling of the long-run export–income
relationship with structural breaks appears appropriate.
Under the export-led growth hypothesis, we expect the estimated export elastici-
ties to be positive. Those for agricultural exports are positive for 33 countries, of
11
The t-statistic for each panel parameter is the sum of the t-statistics across countries,
divided by the square of the number of countries. When negative individual t-statistics (which
correspond to negative coefficients) are larger in absolute terms than those that are positive,
negative panel t-statistics occur.
12
Results for DOLS are similar and are not reported.
Table 3
Fully modified ordinary least squares results
b1 b2 g1i g2i d1i d2i Break H0: b1 = b2
Low-income countries
Bangladesh )0.014 (0.42) 0.156* (2.60) 24.010* (16.00) 23.917* (15.71) )0.011 (0.54) 0.025* (3.72) 1974 5.41* [0.03]
Benin )0.017 (0.65) )0.014 (0.73) 27.047* (30.56) 27.592* (30.98) 0.033* (9.64) 0.046* (12.43) 1988 0.01 [0.93]
Burkina Faso 0.005 (0.97) )0.005 (0.98) 26.729* (153.66) 27.430* (148.47) 0.038* (38.45) 0.041* (45.43) 1989 2.64 [0.11]
Cote d’Ivoire 0.193 (1.34) 0.023 (0.27) 22.778* (4.17) 23.151* (4.12) 0.065* (5.73) 0.013* (3.48) 1979 1.82 [0.19]
Gambia 0.028 (1.29) 0.021* (2.20) 19.419* (35.56) 19.797* (36.04) 0.057* (4.34) 0.032* (38.36) 1974 0.15 [0.70]
Ghana 0.178* (11.28) 0.126* (5.65) 16.226 (43.20) – 0.020 (15.13) – 2.37 [0.13]
Guinea-Bissau 0.077* (4.43) )0.004 (0.46) 18.675* (51.21) 19.295* (49.60) 0.031* (28.96) 0.006 (0.80) 1997 20.68* [0.00]
India 0.015* (0.64) 0.037 (0.90) 27.406* (35.52) 27.651* (34.98) 0.034* (7.83) 0.051* (14.37) 1978 0.13 [0.72]
Kenya 0.106 (1.84) 0.034 (0.64) 22.949* (9.75) 23.585* (10.02) 0.052* (8.14) 0.024* (5.32) 1980 1.68 [0.20]
Madagascar 0.070* (2.83) 0.075* (5.05) 23.082* (32.30) 23.234* (32.69) 0.003* (2.96) 0.019* (4.49) 1996 0.02 [0.88]
Pakistan 0.094* (5.60) 0.049* (2.45) 23.866* (42.21) 25.116* (41.75) 0.052* (27.09) 0.029* (14.05) 1993 2.53 [0.12]
Senegal 0.083* (9.94) )0.033 (0.72) 26.198* (21.45) 26.706* (21.32) 0.031* (12.90) 0.034* (10.77) 1988 6.84* [0.01]
Zambia 0.004 (0.36) 0.144* (2.38) 24.203* (14.25) 24.369* (14.65) 0.012* (6.95) 0.022* (4.59) 1993 5.21* [0.03]
Panel 0.091* (15.62) 0.062* (7.98) – – – – – 0.02 [0.88]
Lower middle income countries
Algeria )0.033* (2.46) 0.631* (7.14) 10.444* (4.67) 10.900* (4.84) 0.036* (6.17) )0.002 (0.63) 1980 58.47* [0.00]
Bolivia 0.144* (4.51) 0.088 (1.12) 18.404* (11.75) 18.611* (11.95) 0.029* (6.44) 0.012* (2.70) 1985 0.34 [0.56]
Brazil )0.007 (0.12) 0.025 (0.54) 25.636* (14.64) 26.299* (14.57) 0.091* (7.04) 0.023* (4.28) 1976 0.24 [0.63]
Cameroon 0.174* (3.80) 0.092 (1.94) 20.561* (11.15) 21.210* (10.80) 0.050* (5.62) 0.015* (3.41) 1987 2.10 [0.16]
Colombia 0.117* (2.22) )0.011 (0.42) 27.819* (14.33) 28.821* (14.17) 0.039* (10.84) 0.027* (4.51) 1997 8.03* [0.01]
Congo Republic )0.003 (0.11) 0.264* (1.98) 19.269* (5.72) 19.933* (5.68) 0.032* (2.49) 0.005 (0.87) 1981 3.88 [0.06]
Costa Rica 0.103* (2.31) 0.108* (4.65) 21.535* (15.87) 21.827* (15.82) 0.042* (10.52) 0.026* (6.62) 1980 0.01 [0.91]
Dominican Republic 0.166* (3.59) 0.037 (1.17) 19.539* (15.69) 20.005* (15.50) 0.046* (7.88) 0.027* (5.33) 1983 5.57* [0.02]
Ecuador 0.033 (1.81) 0.024* (2.22) 21.249* (50.71) 21.878* (51.44) 0.067* (12.37) 0.019* (11.96) 1978 0.16 [0.69]
Agricultural Exports and Economic Growth in Developing Countries
Egypt 0.000 (0.00) 0.023 (0.35) 23.734* (13.14) 24.648* (12.95) 0.070* (5.53) 0.042* (10.00) 1981 0.10 [0.75]
El Salvador 0.133* (2.83) 0.157* (5.30) 16.317* (17.94) 16.376* (17.99) 0.033* (5.64) 0.015* (3.50) 1979 0.14 [0.71]
Guatemala 0.295* (7.64) 0.148* (4.47) 12.853* (16.82) 13.281* (17.37) 0.027* (19.20) 0.019* (6.85) 1988 5.94* [0.02]
575
Table 3
576
(Continued)
b1 b2 g1i g2i d1i d2i Break H0: b1 = b2
Indonesia )0.015 (1.27) 0.094* (4.31) 30.474* (40.95) 32.036* (41.36) 0.064* (53.17) 0.042* (9.80) 1997 17.02* [0.00]
Lesotho 0.046 (0.96) 0.060 (1.40) 18.525* (13.48) 19.162* (13.36) 0.070* (3.51) 0.038* (7.61) 1976 0.09 [0.77]
Morocco 0.016 (0.42) 0.173 (1.67) 20.196* (7.92) 20.569* (7.96) 0.046* (2.42) 0.020* (2.72) 1975 2.21 [0.15]
Nicaragua 0.194* (2.80) 0.129* (2.98) 17.021* (8.62) 16.849* (8.87) 0.007 (1.18) 0.007 (0.80) 1988 0.84 [0.37]
Paraguay 0.075* (4.78) 0.009 (0.42) 24.293* (53.32) 25.161* (52.91) 0.074* (16.24) 0.021* (14.02) 1979 3.96* [0.05]
Peru 0.105* (2.14) 0.086 (1.01) 20.758* (8.23) 20.976* (8.31) 0.025* (6.51) 0.021* (2.22) 1988 0.06 [0.81]
Philippines 0.050 (1.69) 0.004 (0.11) 25.194* (22.19) 25.700* (21.93) 0.052* (11.65) 0.034* (9.08) 1983 0.71 [0.40]
Sri Lanka 0.023 (0.70) 0.040 (1.71) 24.665* (20.60) – 0.040* (14.48) – – 0.34 [0.56]
Thailand 0.055 (0.46) 0.213* (3.67) 20.338* (5.69) 21.239* (5.52) 0.038* (3.08) 0.024 (1.54) 1997 1.84 [0.18]
Tunisia 0.034 (1.79) 0.139* (3.59) 18.546* (19.29) 19.163* (19.15) 0.046* (12.56) 0.036* (14.25) 1985 7.11* [0.01]
Panel 0.077* (8.63) 0.115* (10.94) – – – – – 3.20 [0.07]
Upper middle income countries
Argentina 0.135 (1.41) 0.149* (2.21) 19.765* (9.32) 19.734* (8.93) )0.010 (1.73) )0.010 (1.27) 1991 0.01 [0.92]
Chile 0.026 (0.35) 0.642* (5.11) 11.255* (3.36) 10.579* (3.09) )0.076* (2.14) 0.001 (0.06) 1974 14.94* [0.00]
Malaysia 0.100* (2.95) 0.454* (12.97) 11.532* (10.06) 11.745* (9.77) 0.021* (4.99) 0.008 (1.78) 1984 58.90* [0.00]
Mexico )0.077* (3.13) 0.060 (1.88) 27.300* (24.94) 27.815* (24.33) 0.051* (8.94) 0.030* (6.48) 1982 19.13* [0.00]
South Africa )0.075* (3.84) 0.048 (0.53) 27.526* (11.44) 27.803* (11.36) 0.017* (6.69) 0.029* (6.20) 1991 1.94 [0.17]
Trinidad and Tobago )0.153* (4.43) 0.512* (3.68) 15.381* (4.21) 15.515* (4.25) 0.024* (4.65) 0.005 (0.55) 1983 29.51* [0.00]
Uruguay 0.208* (2.49) 0.256* (4.90) 11.484* (7.36) 11.189* (6.83) )0.017 (1.73) 0.002 (0.29) 1982 0.22 [0.64]
Ana I. Sanjuán-López and P. J. Dawson
Panel 0.022 ()1.35) 0.294* (11.91) – – – – – 55.53* [0.00]

Full panel 0.073* (14.74) 0.126* (17.20) – – – – – 19.20* [0.00]
Notes: t-statistics are given in parentheses; p-values are given in brackets. Significance is at the *5% level.
which 18 are significant; nine coefficients are negative of which four – Algeria,
Mexico, South Africa and Trinidad and Tobago – are significant. The magnitudes
of the positive elasticities are generally small, as expected: 19 are less than 0.1, 12
are between 0.1 and 0.2, whereas those for Guatemala and Uruguay are 0.3 and
0.21. Similarly, elasticities for non-agricultural exports are positive for 37 countries,
of which 21 are significant; and the five negative estimates are all insignificant. The
magnitudes of the positive non-agricultural export elasticities are also generally
small: 20 are less than 0.1, 10 are between 0.1 and 0.2 and seven are greater than
0.2 with Algeria, Chile, Malaysia and Trinidad and Tobago being surprisingly large
at over 0.45.
The panel FMOLS estimates provide some general insights. As each country is
permitted its own break, there is no estimate of a break for the panel. Table 3
shows that both agricultural and non-agricultural exports significantly determine
GDP. For the full sample, a 1% increase in agricultural exports increases GDP by
0.07%. Corresponding elasticities are 0.09 for low-income countries, 0.08 for those
with lower middle incomes and 0.02 for those with upper middle incomes. Thus, the
impact of an increase in agricultural exports on GDP seems to fall as income
increases, although it is not possible to test whether these differences are statistically
significant. Similarly for the full sample, a 1% increase in non-agricultural exports
increases GDP by 0.13%. Corresponding elasticities for low-, lower middle and
upper middle income countries are 0.06, 0.12 and 0.29; so, the impact of an increase
in non-agricultural exports on GDP appears to increase as income increases.
Wald statistics are used to test the hypotheses that for each country the coeffi-
cient associated with agricultural exports is the same as that associated with non-
agricultural exports, that is, b1 = b2 for each i = 1,…, N. Table 3 shows that this
null hypothesis is rejected for 15 countries at the 5% significance level. There is no
obvious pattern of rejections: the null hypothesis is rejected for four of 13 low-
income countries, for seven of 22 lower middle income countries and for four of
seven upper middle income countries. For the full sample and for upper middle
income countries, the null hypothesis that b1 = b2 is also rejected; for lower middle
income countries, it is rejected at the 10% significance level; and for low-income
countries, it is not rejected. Thus, for low-income countries, changes in agricultural
and non-agricultural exports have a statistically identical effect on GDP, whereas
for lower and upper middle income countries, a change in non-agricultural exports
has a greater impact on GDP than a similar change in agricultural exports, as, per-
haps, would be expected.
Finally, we test for non-causality from total exports (both agricultural exports
and non-agricultural exports together) to GDP for each country from heteroge-
neous panel ECMs in equation (9). The results are shown in Table 4. The null
hypothesis of non-causality in both the short and long run for each country, that is,
H01 in equation (10), is rejected for 26 countries, whereas the null hypothesis in the
long run only, that is, H02 in equation (11), is also rejected for 26, but not the same,
countries. There is no pattern of rejections between income groups. Corresponding
tests for the panels are H03 in equation (12) and H04 in equation (13). Both for the
full sample and for all sub-samples by income group, the null hypotheses are con-
vincingly rejected. Similarly, the group mean panel tests, where the null hypothesis
is of no long-run causality for the panel on average, that is, H05 in equation (14),
imply that total exports cause GDP. Homogeneity tests show evidence of heteroge-
neous long-run coefficients within each sample. Our findings therefore lead us to
Table 4
Non-causality tests from total exports to GDP
Lags Short run and long run Long run
Low-income countries
Bangladesh 3 3.77 [0.01]* )1.28 [0.22]
Benin 1 4.75 [0.01]* )2.79 [0.01]*
Burkina Faso 1 6.58 [0.00]* )4.09 [0.00]*
Cote d’Ivoire 1 0.89 [0.46] )1.06 [0.30]
Gambia 1 4.49 [0.01]* )3.43 [0.00]*
Ghana 1 2.16 [0.11] )2.45 [0.02]*
Guinea-Bissau 1 5.71 [0.00]* )2.67 [0.01]*
India 1 7.79 [0.00]* )4.40 [0.00]*
Kenya 1 4.25 [0.01]* )3.32 [0.00]*
Madagascar 1 10.43 [0.00]* )3.78 [0.00]*
Pakistan 1 1.58 [0.22] 2.07 [0.05]*
Senegal 1 1.61 [0.21] )0.77 [0.45]
Zambia 1 3.35 [0.03]* )2.38 [0.02]*
Panel – 157.37 [0.00]* 87.61 [0.00]*
Group mean test )2.65 [0.00]*
Homogeneity test 46.74 [0.00]*
Lower middle income countries
Algeria 2 1.33 [0.29] )0.96 [0.35]
Bolivia 1 3.43* [0.03]* )1.66 [0.11]
Brazil 1 6.57* [0.00]* )4.26 [0.00]*
Cameroon 1 1.89 [0.16] )1.51 [0.14]
Colombia 1 4.61 [0.01]* )3.70 [0.00]*
Congo Republic 1 0.99 [0.41] )1.72 [0.10]
Costa Rica 1 7.56 [0.00]* )4.55 [0.00]*
Dominican Republic 1 5.34 [0.01]* )3.98 [0.00]*
Ecuador 1 9.64 [0.00]* )3.77 [0.00]*
Egypt 1 7.94 [0.00]* )4.71 [0.00]*
El Salvador 1 3.73 [0.02]* )0.97 [0.34]
Guatemala 1 0.83 [0.49] )1.50 [0.15]
Indonesia 1 0.39 [0.76] )1.00 [0.33]
Lesotho 1 6.83 [0.00]* )4.44 [0.00]*
Morocco 1 3.90 [0.02]* )3.34 [0.00]*
Nicaragua 1 4.48 [0.01]* )3.48 [0.00]*
Paraguay 1 12.31 [0.00]* )5.47 [0.00]*
Peru 1 4.23 [0.01]* )3.41 [0.00]*
Philippines 1 1.73 [0.18] )1.75 [0.09]
Sri Lanka 1 3.32 [0.03]* )2.80 [0.01]*
Thailand 1 1.88 [0.16] )1.32 [0.20]
Tunisia 2 1.13 [0.37] )1.54 [0.14]
Panel – 256.59 [0.00]* 216.12 [0.00]*
Upper middle income countries
Argentina 1 11.47 [0.00]* )5.61 [0.00]*
Chile 1 0.77 [0.52] )1.05 [0.31]
Malaysia 1 2.67 [0.07] )2.67 [0.01]*
Mexico 1 1.44 [0.25] )1.58 [0.12]
Table 4
(Continued)
Lags Short run and long run Long run
South Africa 1 3.60 [0.03]* )2.81 [0.01]*

Trinidad and Tobago 1 0.59 [0.63] )1.13 [0.27]
Uruguay 1 4.98 [0.01]* )3.34 [0.00]*
Panel – 78.80 [0.00]* 67.63 [0.00]*
Homogeneity test 11.79 [0.16]
Full panel – 389.82 [0.00]* 346.79 [0.00]*
Notes: P-values are given in square brackets. Significance is at the *5% level.
conclude that there is strong evidence to support the export-led hypothesis that
total exports cause GDP.
5. Summary and Discussion

The role of exports as an engine of economic growth has long been a focus in the
trade and development literature. Agriculture’s contribution to total exports is
often substantial in developing countries, and it is surprising that there have been
few empirical studies on the impact of agricultural exports on GDP. Two excep-
tions which use panel data are Levin and Raut (1997) and Dawson (2005). This
paper extends their analysis in two ways for a sample of 42 developing countries:
first, we examine the relationship between GDP and agricultural (and non-
agricultural) exports in levels to provide information on long-run effects; and
second, we examine causality from total exports to GDP. Our aim is to provide
general insights into the export–income relationship from a panel of developing
countries. We use recent panel multivariate cointegration methods which allow for
structural breaks in each country’s relationship. The dataset is also divided into
three subsamples by broad income groupings to enquire whether relationships differ
according to income level.
Results show that long-run relationships exist between GDP and agricultural and
non-agricultural exports for the full sample of 42 developing countries and for each
subsample by income group. There are structural breaks in the relationship for most
countries and their modelling appears important. Most breaks occur in the early
1980s following the debt crisis of 1981 ⁄ 1982 and the subsequent imposition by the
World Bank of trade liberalisation policies in return for financial aid. As Edwards
(1993) observes, ‘[This crisis]…played an important role in reshaping policy views
regarding development strategies, growth policy and long-term growth… In the
1980s economists dealing with poorer nations began to recommend, with increasing
insistence, development strategies based on market oriented reforms that included
as a fundamental component the reduction of trade barriers and the opening of
international trade to foreign competition. … [And] the World Bank, the Interna-
tional Monetary Fund, and other multilateral institutions routinely required the
developing countries to embark on trade liberalisation and to open up their external
sector as a condition for receiving financial assistance’. A number of breaks also

occur in the mid-1970s following the quadrupling of oil prices during the crisis of
1973 ⁄ 1974 and the subsequent world recession of 1974 ⁄ 1975.13
Long-run relationships are estimated by fully modified OLS. Both agricultural
and non-agricultural exports significantly determine GDP, in a Granger-causality
sense. This result supports that of Dawson (2005) but contrasts with Levin and
Raut (1997) who find that primary commodity exports, including agricultural
exports, have an insignificant effect on economic growth. For the full sample, we
find that the agricultural export elasticity of GDP is 0.07, whereas those for low,
lower middle and upper middle incomes are 0.09, 0.08 and 0.02 respectively. Corre-
sponding non-agricultural export elasticities are 0.13 for the full sample and 0.06,
0.12 and 0.29 for the sub-samples. As expected, these long-run elasticities are
greater than the short-run estimates of Dawson where the effect on economic
growth of changes in agricultural and non-agricultural exports is similar at around
0.02. Finally, we find strong evidence that exports Granger-cause GDP.
These results are subject to four caveats. First, we estimate a simple, three-
variable model where GDP is determined by both agricultural exports and non-
agricultural exports, and omitted variable bias may have occurred. Theoretical
models of the export-led growth hypothesis often adopt an aggregate production
function where output is determined by the conventional inputs of labour and
capital, and exports are included as an additional input. A Solow sources-of-growth
equation where all variables are stationary is then derived which is estimated by
classical methods. The production function has also been estimated in levels by
cointegration methods. In addition, more ad hoc models, where, for example, GDP
is determined by exports and imports, have been estimated. Many studies, however,
estimate simple bivariate export–income relationships especially where the focus is
on causality testing. Although it might be expected that factors other than exports
are important in determining GDP, the widespread presence of cointegration
reported here between GDP and agricultural and non-agricultural exports suggests
that a simpler model is appropriate. Second, we use GDP as a measure of income.
Exports are a component of GDP and results which show that exports lead to
GDP growth may be a statistical artefact (see inter alia, Michaely, 1977; Heller and
Porter, 1978; Sheehey, 1990; Love, 1994). A solution is to define income as GDP
net of exports. Most empirical studies, however, including Levin and Raut (1997)
and Dawson (2005), use GDP as a measure of income rather than GDP net of
exports as the former better reflects economic development. Thus, the estimated
coefficients here represent the sum of spill-over effects from agricultural and non-
agricultural exports and the importance of agricultural ⁄ non-agricultural exports in
GDP. Third, a maximum of one break is permitted in the export–income relation-
ship for each country as it is unlikely that more structural changes in an individual
macro-economy have occurred within our relatively short sample period. This also
avoids data mining. Fourth, we use causality tests to examine the export-led growth
hypothesis, that is, we test non-causality from total exports to GDP, and we cannot
test non-causality from agricultural and non-agricultural exports to GDP separately.
However, as agricultural exports are a substantial proportion of total exports in
13
Balassa (1981) discusses in detail the effects of the oil crisis on key macroeconomic vari-
ables, including exports and economic growth, for newly industrialised countries.
many developing countries, it is perhaps reasonable to conclude that agricultural

exports cause GDP also.
We find strong evidence that for developing countries in general agricultural and
non-agricultural exports together Granger-cause GDP. This insight lends general
support to the export-led growth hypothesis for developing countries which is also
found in many country-specific studies. Accordingly, there appears to be potential
for economic growth by adopting outward-looking, export-promotion policies.
Such policies are advocated by international financial institutions. Our empirical
results suggest that they are capable of being effective generally in developing coun-
tries.
Like Ram (1987), we also find that there are substantial structural differences in
the export–income relationship by broad income groupings. The long-run effect on
GDP of an increase in agricultural exports falls as income increases, whereas the
converse holds for an increase in non-agricultural exports. Moreover, non-
agricultural exports have a higher impact on GDP than agricultural exports for
those countries with lower and upper middle incomes than for those with low
incomes. The implication is that export-promotion policies in higher income
countries should focus on non-agricultural exports if the objective is to increase
economic growth. However, for the poorest of developing countries, agricultural
and non-agricultural elasticities of GDP are not significantly different and agricul-
tural exports have an equivalent role to that of non-agricultural exports as an
apparent engine of growth. This suggests the need for balanced export-oriented
policies in low-income countries.
The conclusion that agricultural exports can play a role similar to that of non-
agricultural exports as an engine of growth particularly in low-income countries
lends support to Johnston and Mellor (1961). Specifically, they argue that increasing
agricultural exports leads to increasing economic growth, and that export-led
growth from agriculture may represent optimal resource allocation for those coun-
tries which have a comparative advantage in agricultural production. Our conclu-
sion contrasts with traditional, export-pessimism on the role of the
primary ⁄ agricultural sector in mobilising resources for domestic investment, where
the falling contribution of agricultural exports both to total exports and to GDP as
incomes increase is consistent with the stylised fact of an economic transformation
away from the predominance of the agricultural sector. On the other hand, as
Kaplinsky (2006) argues, some agricultural subsectors may exhibit price behaviour
which is similar to that in the non-agricultural ⁄ manufacturing sector, whereas some
manufacturing subsectors may exhibit behaviour reminiscent of that conventionally
attributed to the primary sector.
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Journal of Agricultural Economics, Vol. 61, No.

Agricultural Exports and Economic

Keywords: Agricultural exports; developing countries; economic growth; panel

3.1. Testing for unit roots

3.2. Testing for cointegration

hypotheses. Assuming that the data-generating process for a multidimensional time

3.3. Estimating the cointegrated relationship

3.4. Testing for causality

4. Data and Results

Variable Z-LM statistic

Notes: Bootstrapped P-values are given in parentheses. *Non-stationarity.

Full sample 16.58 (24.06)

b1 b2 g1i g2i d1i d2i Break H0: b1 = b2

b1 b2 g1i g2i d1i d2i Break H0: b1 = b2

Panel 0.022 ()1.35) 0.294* (11.91) – – – – – 55.53* [0.00]

Lags Short run and long run Long run

Lags Short run and long run Long run

South Africa 1 3.60 [0.03]* )2.81 [0.01]*

5. Summary and Discussion

sector as a condition for receiving ﬁnancial assistance’. A number of breaks also

many developing countries, it is perhaps reasonable to conclude that agricultural

Balaguer, J. and Cantavella-Jordá, M. ‘Export composition and Spanish economic growth:

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