EXPORT-LED GROWTH IN SMALL ECONOMIES

Abstract

This study investigates the relationship between Jordan’s exports and economic growth by employing time series data spanning the period from 1991 to 2021. Utilising the Ordinary Least Squares (OLS) method, a two-sector framework—comprising export and non-export sectors—was applied. The initial model integrates exports as an input within a conventional production function. The empirical results reveal that export productivity has a positive influence on economic growth, contingent upon the composition and diversification of the export structure. Moreover, exports were found to yield beneficial externalities for the Jordanian economy. The analysis provides empirical, long-term support for the export-led growth hypothesis, illustrating the pivotal role exports play in fostering sustained economic development. Evidence presented in the study reinforces the argument that international trade serves as a catalyst for Jordan’s long-term economic expansion. These findings bear important implications for policymakers in Jordan. By examining the interconnections among gross domestic product (GDP), exports, labour, and capital within the context of a small open economy—where exports constitute a modest share of GDP—this research enriches the academic discourse on trade and economic growth. Consequently, the study advocates for the adoption of an export-led strategy that leverages the country’s comparative advantage in producing goods that intensively utilise locally available resources. To this end, it is recommended that national policy prioritise the diversification of manufactured exports aimed at enhancing competitiveness in global markets.