Export Demand Elasticities as Determinants of Growth: Estimates for Mauritius
Alexis Habiyaremye & Thomas Ziesemer
#2008-072
In this paper, we combine the export-led and import-led growth
hypotheses in a growth model in which the importation of foreign capital
goods and the demand elasticities of own export products explain the
growth opportunities and the technical progress of developing countries.
This model, based on imported capital goods uses Mauritius’ data on
capital investment, employment, export partners’ growth and terms of
trade to estimate price and income elasticities of export demand,
total-factor productivity growth and economies of scale. These
elasticities are then used to assess how the growth in export partners’
income is converted into domestic growth. The implications of the
presence of low or high export demand elasticities are discussed by
relating them to various strands of trade and growth literature. Based
on the results of this estimation, we also calculate steady-state growth
rates, engine and handmaiden effects of growth as well as the dynamic
steady-state gains from trade for this latecomer export economy. The
implications of steady state results are also discussed in the light of
the Mauritian employment and growth perspectives.
Keywords: Growth model, trade in capital goods, exports, total factor
productivity
JEL classification code: O11, O19, O41, F43
UNU-MERIT Working Papers
ISSN 1871-9872