gender differential paper IJCRB

ijcrb.webs.com
JUNE 2011
INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS VOL 3, NO 2
3 Data and Methodology:
3.1 Data and Variables
This paper includes three variables – Exports (EP) and Public Expenditure (PE) are
independent variables whereas Economic Growth (EG) is taken as a dependent variable.
The theoretical and empirical findings of our study are explained below in detail. The data
used in paper is secondary in nature and obtained from an online data source of World
Bank known as World Development Indicators (WDI) mark 2010. The frequency of data
that is used for this study is on annual basis form year of 1985 to 2009.
3.1.1 Exports
Exports are most important element in the development of country. Exports of any country
matters a lot in its economic development and contributes positively in terms of achieving
economies of scale, optimal production, competitiveness, reduction in unemployment, and
contributes towards infrastructure development.(Bhagwati and Srinivasan, 1979; Krueger,
1980; Helpman and Krugeman, 1985). Endogenous theory of growth also support that
there is a positive effects of export on economic growth. Exports allow any country long
term growth that causes ultimately specialization in those particular sectors, increase in
Research and Development and human capital formation. All these factors are very much
critical for growth. (Romer, 1987; Rivera-Batiz and Romer, 1991; Grossman and Helpman,
1991; Krugman, 1991; Barro, 1991; Mankiw et al., 1992, Barro and Sala-I-Martin, 1993,
Mankiw, 1995; Sachs and Warner, 1995). Recent studies provide evidences that as the
exports increases and country go for liberalization, its economic growth also increases
(GOI, 2005). If the economy is closed as was during the period of 1952-1978 there was no
economic growth in countries but when the deregulations came in world the economies
boost up (Pyle, 1997). As the exports increases foreign reserves also improves that increase
the purchasing capacity and provide opportunities to target the world international markets
and capture more share. Inflation that makes product and services costlier also results in
exports instability. The expected relationship between economic growth and exports is
positive with positive sign. Study is using exports of goods and services (current USD) as
proxy of export.
3.1.2 Public Expenditure
The sole purpose for inclusion of this variable in the model is to put light on the significant
relationship that exists between public expenditure and economic growth. Government
incur such expenditures to fulfil certain goals like increase in per capita income that is
efficient indicator of economic growth. Historical wisdom tells, as the public expenditure
increases the economic growth in return also increases. Keynes (1936) and his supporters,
also support the view that use of fiscal policies i.e. expansion in public expenditure
increase the overall output. In research background different theories can be found related
to public expenditure whether they are having positive or negative relationship with
growth. Aschaur (1989) and Barro(1990:1991) found positive relationship between public
spending and output of economy. Public expenditure is considered endogenous to
economic growth because as the EG increases Public expenditures are also tend to increase
(Wagner, 1883). We also support their view because as government spend for the welfare
and infrastructure of the economy the economic growth increase by all means. For long
term growth of economy, public expenditures are inevitable (Scully, 1989). Human
resource is most important factor of growth for any country if the government is likely to
spend more on its human resource it would result in increased growth, satisfaction of all the
sects in community and improve overall performance (Anand and Ravallion, 1993;
Chakraborty, 2003). The expected result of this variable could be significant and the proxy
that we are using for this variable is general government final consumption expenditure
COPY RIGHT © 2011 Institute of Interdisciplinary Business Research 853