|Title:||Trade Liberalization and Industrial Growth in Ethiopia: A Co integration Analysis|
|Keywords:||Trade policy, Endogenous growth, Cointegration|
|Abstract:||This paper studies the relation between trade policies and economic growth in Ethiopia. The ‘human capital model of endogenous growth’ developed by Lucas (1988) which takes labor, capital, and education as secondary school enrollment. The Human capital model is augmented with trade liberalization variables of export/GDP and import duty. In the empirical investigation of the aggregate growth function of industrial value added in Ethiopia, cointegration and error correction modeling approaches have been applied to measure the long run and short run determinants of industrial value added. The data of Ethiopia which covers a period of 1971 to 2005 suggest that there is a long run relationship between the industrial value added and its determinant capital, labor, high school enrollment ratio of ratio of real export to GDP, and import duty collection. The short-term dynamics is also estimated using an error correction model (ECM). The estimate shows that all variables including real capital formation, the labor force, human capital, industrial import tariff and ratio of real exports to GDP have emerged as insignificant determinants of industrial value added function in Ethiopia. The policy implication is government should promote trade liberalization policy.|
|Appears in Collections:||Thesis - Economics|
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