Factors influencing exports of Pakistan 1. Introduction The exports of goods and services play a vital role in the economic improvement of a country and signify one of the most important sources of foreign exchange income. Exports not only ease the pressure on the balance of payments but also create employment opportunities. They can increase intra-industry trade, help the country to integrate in the world economy and reduce the impact of external shocks on the domestic economy. The experiences of Asian and Latin American economies provide good examples of the importance of the export sector to economic growth and development.
Hamilton (1791) and List (1841) argued for the promotion of small scale manufacturing industries as a vehicle for economic development as in the case of Japan. Since the 1960s, however, infant manufacturing industries developed by Hamilton and List have been replaced by the increasing importance of export oriented manufacturing activities in several East Asian economies. If we have a look at the last three decades, merchandise exports of developing countries have grown at an average rate of 12% per annum. Manufactured exports accounted for 70% of developing countries exports at the end of the 1990s and 30% of world manufactured exports. These global markets therefore present an excellent avenue for developing countries to
Participate in the benefits of a floating trade environment. In recent years the labor intensive manufacturing exports of developing countries such as China, India, Indonesia, Hong Kong, Malaysia, Taiwan, and Thailand are rapidly increasing; rewarding them with employment, economic growth, and many other benefits.
Recently, many researchers have investigated the role of exports in economic growth and the factors that influence it. Gylfason (1997) has taken the data