Export diversification and total factor productivity growth in case of South Asian region

While several studies examine the relationship between export diversification and economic growth, little is known about the relationship between export diversification and TFP growth. This paper makes an attempt to fill this research gap by considering South Asian region. We examine this relationship by looking at the long-run as well as the short-run relationship between TFP growth and export diversification by using annual data from 1995 to 2014. The empirical results derived from the panel cointegration technique provide evidence of long-run relationship between TFP growth and export diversification. The results based on DOLS confirm that export diversification positively affects the TFP growth in South Asian region; however, this evidence is weak when we analyzed each country separately. Finally, our results indicate that export diversification Granger cause TFP growth in the long-run, whereas no causality found in short-run. Our findings suggest that export diversification is crucial to avoid the volatility of export growth and for enchantment of productivity growth in South Asian region. © 2017, Institute for Social and Economic Change.