International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

Trade, Government Consumption, and Economic Growth in Upper-Middle Income Countries
Minh Quang Dao

Esfahani (1991) shows that the statistically significant correlation between export promotion and economic growth in semi-industrialized countries (SICs) has been mainly attributable to the role of exports in reducing import “shortages”, which have impeded output growth in these countries. As a result, export-promotion policies as a superior development strategy in SICs play an important role in those that cannot secure sufficient foreign aid or investment. Esfahani (1991) also develops a simultaneous equations model to address the simultaneity bias between GDP and export growth rates. In this paper we extend the model developed by Esfahani (1991) by incorporating the contribution of government consumption to output growth and test it using a sample of 27 upper-middle income economies.

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