International journal of Rural Development, Environment and Health Research (IJREH) ISSN: 2456-8678 [Vol-5, Issue-2, Mar-Apr, 2021] Issue DOI: https://dx.doi.org/10.22161/ijreh.5.2 Article DOI: https://dx.doi.org/10.22161/ijreh.5.2.1
Agricultural Export and Economic Growth Nexus: A Case Study of Ethiopia Sindie Alemayehu1, Selam Tilahun2 1Department 2Department
of Agricultural Economics, Haramaya University, Ethiopia of Agricultural Economics, Wolayita Sodo University, Ethiopia
Received: 05 Dec 2020; Received in revised form: 01 Feb 2021; Accepted: 21 Feb 2021; Available online: 20 Mar 2021 ©2021 The Author(s). Published by AI Publications. This is an open access article under the CC BY license (https://creativecommons.org/licenses/by/4.0/)
Abstract — The Ethiopian export sector has depended on few agricultural products like coffee (29.5%), oil seeds (14.9%), pulses (9.5%), Chat (9.3%), and cut flowers (8%). The total export earnings were declined over time. This, the aim of this term paper is to study the trend and impact of agricultural export on economic growth in Ethiopia. The study was analyzed through Engel granger co-integration test and causality test by employed secondary time series data from 1997- 2018. The Engel granger co-integration test result showed that there is no long run relationship between agricultural export and economic growth. The Granger Causality test result revealed that there is no evidence of Granger causal relationship between agricultural export and economic growth implying neither export led growth nor growth driven agricultural export is valid in the context of Ethiopia. Therefore the government should make an effort to bring a structural change from export of primary agricultural goods to manufacturing goods. Keywords— agricultural export, co-integration test and economic growth.
I.
INTRODUCTION
Export is one of the very important contributors to economic growth in developing countries. In order to achieve the goal of economic growth countries were used import substitution or export promotion strategy. In 1950s and 1960s, most of the developing countries followed the import substitution policy for their economic growth and shift towards export promotion strategy in the mid 1970[1]. The relationship between economic growth and exports in developing countries has drawn the attention of researchers both theoretically and empirically since the classical economic theories by Adam Smith and David Ricardo, who argued that international trade plays an important role in economic growth, and there are economic gains from specialization. There are streams of empirical literatures which show conflicting and mixed results on exports and economic growth relationships. One stream of empirical studies provides support for the export-led growth paradigm [2] and [3]. There’s empirical evidence confirms that agricultural exports have more
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importance for the economic growth in developing countries. Other streams have found no association, or even a negative association [4] and [5]. Like other developing countries Ethiopia followed the export-led growth policy in 1992. Owing to this policy shift, some improvements in export earnings have improved during the post reform period but it contribution to the world market is low [1] and [6]. The country`s export sector has depended on export of a few primary agricultural products like coffee (29.5%), oil seeds (14.9%), pulses (9.5%), Chat (9.3%), and cut flowers (8%). Ethiopia’s total export earnings were declined by 2.3% in 2017/2018 from the previous year. The causes for dropping of Ethiopian exports are the markets for these products are largely unstable in terms of volume, price and carry a high degree of risk and uncertainty as well as low income elasticity. It is certain that the exports of primary goods are less competitive on the world market and weigh less against manufactured goods exported by developed countries resulting in deteriorating terms of trade [7]. Despite these unfavorable terms, this term paper
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