Exports and economic growth. The gains from reallocation in Korea..

Abstract

This paper presents some empirical evidence suggesting that promotion of manufactured exports can lead to accelerated rates of growth in a developing economy. Based on a two-sectoral model involving exports and non-exports, a method is developed to measure the gains obtained through a reallocation of resources from the domestic to the external sector. The benefits from continued export expansion are found to decline over time. Cointegration tests confirm the long-run character of the estimated relationships. A simulation based on a dynamic, optimal control model illustrates the growth effects of different shocks and policies affecting the Korean export sector.Export expansion; Economic growth; Rellocation gains; Korea;