An empirical analysis of agricultural export on economic growth: A case study of Pakistan

Abstract

This study has focused to analyze the influence of agricultural and nonagricultural export on economic growth in Pakistan obtaining annual time series data from 1972 to 2014. Gross domestic product, labor force, capital formation, agriculture exports, non-agriculture exports, exchange rate and consumer price index are prominent variables of the study. Johansen cointegration, Error Correction Model (ECM) and Granger Causality econometric approaches have employed for empirical analysis of the study. Labor force and exchange rate stationary at 1 st difference while all other variables are stationary at level. According to empirical estimates, long run equilibrium exists among agriculture exports and non-agriculture exports. Error correction model estimates have justified the existence of short run equilibrium among variables of the study. Agriculture must have significant importance, increasing productivity through priority policy measures of adequate provision of inputs, infusion of innovative mechanization and minimization of market imperfection. Potential productivity in agriculture more desirable goal and agro-based industries must familiarized in agriculture to export value added goods rather than raw material to increasing foreign exchange earning of country.

Contribution of Agriculture Sector in Economic Growth of Pakistan: An Empirical Analysis

“…Analysis depicted that one percentage increase in GCF leads to 0.48% increase in real GDP/capita in the long-run. Results were significant and consistent with theory and previous research that capital stimulates economic growth (Ahmad and Ahmad, 2018;Ee, 2016;Awokuse and Xie, 2015;Metha, 2011;and Awokuse, 2005).…”

“…Capital is considered as one of the basic factors for economic growth in endogenous as well as in exogenous growth theory (Harrod, 1939;Domar, 1946;Solow,1956;Swan, 1956;Lucas, 1988;and Romer, 1990).Present study also included gross capital formation as independent variable in growth equation to see its impact on economy of Pakistan following the other researches (Ahmad and Ahmad, 2018;Ee, 2016;Awokuse and Xie, 2015;Metha, 2011;Awokuse,2007;and Awokuse, 2005). Other variables include TOT and mortality (as proxy of health).…”

“…Modified Solow-Swan growth model was used for examining the association between agriculture sector and economic growth analysis following the previous researches of such kind (Ansari and Khan, 2018;Awokuseet al,2015;Humphries and Knowles, 1998;Faridiet al,2012;and Ahmad and Ahmad, 2018). Basically, the Solow-Swan growth model is an model for measuring long-run economic growth and this model was modified by Mankiw et al (1992) by including variables of education and health in the model supposing that enhancement of education and health improvement of the labor force enhance the labor productivity and hence contribute in economic growth.…”

“…In Pakistan, this issue has attracted very little consideration of the researchers. Some of the research work done by Ahmad and Ahmad, 2018;Raza et al, 2012 andAzraet al, 2013 have addressed the issue. According to Ahmad and Ahmad (2018) agricultural exports of the country proved to be influential in economic growth.…”

“…Some of the research work done by Ahmad and Ahmad, 2018;Raza et al, 2012 andAzraet al, 2013 have addressed the issue. According to Ahmad and Ahmad (2018) agricultural exports of the country proved to be influential in economic growth. Though Pakistan's export base is highly dependent on agriculture and trade of agricultural products accounts for 70% of the foreign exchange earnings of the country (Rehman et al, 2016) but agricultural exports are only a component of the whole sector so impact of agricultural exports cannot depict the true picture of the effect of the whole agriculture sector on economic growth.…”