The Research About Export Margins And Economic Growth Based On The CIS Countries

Since the beginning of the formation of economic science,investigating the role of international trade in the economic growth was in the focus of scientists' attention.Many researchers confirmed that the development of international t rade positively affects economic growth,and thereby,the nations' well-being.However,economic science is still unable to explain many economic processes regarding the relationship of exports and economic growth.For example,there is no clear explanatio n as to why exports in some countries are growing faster while others are not? Why the growth o f exports in some countries contributes to high rates of economic growth and in others the effect of exports is negligible or even negative? Nevertheless,the re cent research works about the heterogeneity of export and its effect on the growth of exports have significantly enriched our knowledge about the nature of export growth.These studies revealed that export might grow through the increase of extensive and i ntensive margins.The present study aimed to investigate the export growth margins and their impact on economic growth.Using trade data at the six-digit level of seven CIS countries for the period of 2005-2016,the study decomposes export growth into the extensive and intensive margins and examines how these margins impact on the economic growth.Furthemore,the study determines the main factors that effect on extensive and intensive margins of export growth.The study provides a broad overview of previous theoretical and empirical studies on international trade and economic growth relationship and highlights their significant results that further assisted the investigation of the objectives of the present study.CIS countries performed a remarkable growth of export during the last two decades.However,still,the export of most countries are highly concentrated at a few products and export destinations.Moreover,the export concentration tends to grow in a majority of the selected countries.A remarkably high concentration of export in products demonstrated the resource-abundant countries,while the export o f resource-poor countries became more diversified.Moreover,the export in the most of the CIS-7 countries mainly diversified due to the growth in the export of primary and resource-intensive products,while the share of manufactured and high-tech products tended to decrease in their export portfolio.Furthermore,although these countries were successful in the geographical diversification of export,the share of new destinations in the export is relatively small,and the export of most countries of this region highly depends on the few export destinations,particularly,Russian market.The study applied the share method of decomposition proposed by Hu mmels and Klenow(2005)to calculate the extensive and intensive margins of export growth.The intensive margin was further decomposed into its ‘price' and ‘quantity' components.Decomposition results revealed that the extensive margin during the study per iod grew faster compared to the intensive margin in most countries except Azerbaijan.Moreover,the extensive margins grew faster in smaller economies such as Armenia and Moldova.However,the bigger economies,i.e.,Russia,Ukraine,and Kazakhstan export more product varieties compared to smaller economies.The results o f decomposition also showed that global financial and economic crises have a more significant negative impact on the intensive margin growth;its negative impact on extensive margin was negligible.Moreover,in countries such as Armenia,Kazakhstan,and Moldova,the extensive margin grew during the two crises(2008-2009 and 2013-2015).The decomposition of intensive margin into price and quantit y components revealed that the intensive margin grew mainly due its quantit y component,and the contribution of the price in export growth was negligible.Such observations indicate that growth in the extensive margin has not affected the growth of quality of export.Results of decomposition of CIS-7 countries' export across regions indicate that these countries significantly increased the variety of exported products within the CIS countries.Furthermore,the most of the CIS-7 countries significantly extended the types of products in export to non-traditional regions such as Africa and America.Nevertheless,the CIS-7 countries' export is represented by more types of products in traditional regions such as Asia and Europe.The results of the export decomposition at industry level signified that the extensive margins grew faster in primary industries like ‘Agriculture',‘Mineral products',Chemical & Plastics',and ‘Stone,glass,& metals'.However,it was evident that growth rates of extensive margin in manufactured products were higher in smaller economies(e.g.,Armenia and Moldova).More interestingly,high growth rates of extensive margin have not contributed to the growth of intensive margin.Moreover,in Russia,Kazakhstan,and Ukraine,the intensive margin declined during the study period.The e stimation of the contribution of dual margins using Bingzhan(2011)methodology further confirmed that an export mainly contributed by the intensive margin(i.e.old products and old destinations).Despite the significant growth in the extensive margins,t his growth was not transferred into the extensive margin's growth.The results suggest that high growth rates of the extensive margin alone do not promise significant growth in exports.It is evident that the intensive margins growth is more responsible fo r the growth in the export volumes,while the growth in extensive margins creates foundations for future growth.Furthermore,within the framework of the present study using gravity like model we identified the main determinants of the intensive and exten sive margins o f country's exports.This subject was insufficiently explored in previous literature and only few studies attempted to investigate that determinants affect export growth along extensive and intensive margins.Furthermore,even these studies mainly have focused on determinants that may affect extensive margin's growth.The estimation was done in two stage.At first,we estimated determinants o f dual margins for panel data of all selected CIS countries.At the second stage,we estimated determinants of export margins in case of export of selected sa mple countries.We choose two sample countries for investigation,Russia and Moldova.Russia represent a big economy and resource abundance country,while Moldova represent a small economy with resource scarcity.The first stage estimation revealed that GDP per capita and a population o f exporting country,GDP per capita and a population of exporting country,the distance between trade partners,historical ties,economic integration research,and innovation are important determinants of extensive margin.Nevertheless,in the case of the selected CIS countries the variables such as FDI,Research expenditures had a negative effect on extensive margin's growth.The estimation showed that besides traditional variables of the gravity model,the significant and positive effect on the growth of exports through the intensive margin has variables such as extensive margin of exports,oil prices,and FDI.In addition,we estimated the effect on dual margins of the CIS countries the economic sanction on Russia imposed by Western Countries.The results showed that these sanctions have a negative impact on the growth of both margins for all selected CIS countries.However,it has a stronger impact on extensive margins.The results across selected sample countries showed that GDP per capita,FDI,Labour force,distance and import cost have statistically signifcant impact on the extensive and intensive margins.Furthermore,the study for the first time attempted to investigate the impact of extensive margin on intensive margin growth.The findings revealed that extensive margin growth has statistically significant association with intensive margin growth,i.e.extensive margin have significant impact on intensive margin.However,its impact's sign is varies between selected countries.Extensive margin had positive impact on intensive margins growth in case Moldova,and negative impact in case of Russia.The present study applied a novel approach and examined the impact of extensive and intensive margins on economic growth.The estimated model besides extensive and intensive margins incorporates the gross fixed capital and labour force as determinants of economic growth in the Cobb-Douglas production function.The cointegration tests for panel data proposed by Pedroni(2004)and Kao(1999)were applied to examine the cointegration between the selected variables.The cointegration tests confirmed that the GDP,extensive margin,intensive margin,gross fixed capital,and labour force are co-integrated in the long-run.Long-run estimates were obtained through Fully Modified Ordinary Least Squares(FMOLS)and System GMM methods.The study results revealed the extensive margin,intensive margin,gross fixed capital,and labour force have positive and significant impacts on t he economic growth.Furthermore,the extensive margin's impact on economic growth is more significant,compared to the intensive margin.These results suggest that the growth of export through extensive margin accelerates the economic growth.Additionally,the growth of export through extensive margin indicates export diversification.The export of most CIS-7 countries is highly concentrated in a narrow range of products,whereas,in the current study,the growth in the intensive margin(existing products)may be assumed an increase of export specialisation.Therefore,the obtained findings may indicate that both export diversification and export specialisation have a positive effect on the economic growth.However,the impact of diversification is more significant.Findings of the study suggest that Russia,Ukraine,Kazakhstan,and Belarus may accelerate the export growth by adopting policies that facilitate geographical diversification and the growth at the intensive margin,while countries such as Armenia,Azerbaijan,and Moldova should focus on increasing the variety o f exporting products.Furthermore,the CIS-7 countries' export is mainly driven by quantity,while the contribution of price margin in export was negligible.These countries can reap rich dividends by increasing the export of high-technology manufacturing products.That,in turn,requires to adopt policies that will aim the growth investments in R&D,to modernise the production techniques,and encourage innovation.Thus,all this will enhance the competitiveness of the CIS-7 countries' exports and may ease the entry and the retaining of the new markets.In addition,higher transportation cost of export,particularly in land-locked countries,hinders the translation of extensive margin growth into intensive margin growth.Thus,the CIS countries should aim to develop the export infrastructure that in turn may reduce the export transport cost.