Foreign trade, human capital and economic growth: An empirical approach for the European Union countries

摘要

While neoclassical growth theory does not consider external demand to be a constraint to growth, the Keynesian approach emphasizes that demand forces are actually the key factors determining growth. In this paper, an attempt is made to introduce the balance-of-payments constraint hypothesis into the neoclassical growth model through a consideration of a sample of 14 European Union (EU) countries over the period 1980-2004. A panel data model is estimated using different proxies for human capital and foreign trade as conditioning factors to explain growth. The income-elasticity ratio with respect to exports and imports and the degree of openness are also used to capture the effects of (non-price) competitiveness and trade intensification on growth. The regression analysis shows that the inclusion of human capital, external trade and interaction terms between them have significant effects on growth. Depending on the combination of variables used, the constraining factor to growth can be shown to be due to foreign trade, human capital or both.