Global Journal of Human Social Science, E: Economics, Volume 23 Issue 3

II. T heoretical and E mpirical R eviews Trade is an important determinant of long-term economic growth. Economic policies favouring export growth and trade liberalisation have been central to the strategies recommended to developing countries. The theoretical underpinnings of the positive link between trade openness and growth are twofold. On the one hand, the classical approach explains the gains from trade liberalisation in terms of comparative advantage, whether in the form of natural resource endowments (Hecksher-Ohlin model) or technological differences (Ricardian model). On the other hand, the literature on endogenous growth assumes that trade openness positively affects per capita income and growth through economies of scale and technological diffusion between countries. Theoretical and empirical work has attempted to analyse the effects of openness to the outside world and integration into the world economy on countries. Smith and Ricardo were the first to define the advantages that countries can gain from liberalising their trade. In opposition to the mercantilists, Smith asserted that all countries could gain from trade because, for him, the objective of trade did not lie in the trade balance but in being able to obtain products cheaply than if one produced them oneself. This is the basis of the theory of absolute advantage which leads to international specialisation and the establishment of an international division of labour. For Adam Smith, trade is not necessary for development because production is determined by capital. However, free trade, he acknowledged, could promote a certain level of development of the country through the accumulation of capital. In the same vein, Ricardo argues that foreign trade, no matter how extensive, cannot suddenly increase national values. It is advantageous to the countries that engage in it because it increases the number and variety of objects to which one can employ one’s income, i.e. the level of welfare or real income. Krugman (1995) uses the notion of a ‘diversification effect’ to describe this situation. This diversification effect benefits not only consumers but also producers who will have an additional choice in production goods. Some work has confirmed that it is not only the level of exports that leads to growth, but also the degree of diversification of those exports or of the export base. Advocates of this view have highlighted the strong impact of diversification on growth. For example, Romer (1990) considered diversification as a factor of production, while Acemoglu and Zilibotti (1997) argued that diversification can increase income by spreading the risks of investment over a wider portfolio. However, more recent studies have focused on the existence of a non-monotonic relationship between diversification and growth. Klinger and Lederman (2004) have shown that this is the case. Using disaggregated export data, the authors found that, overall, diversification increased in less developed countries but declined when the country exceeded a certain middle income. In addition, Klinger and Lederman analysed the relationship between new export products and the level of development. In this particular case, they found that the number of new exports followed an inverted U-shaped curve with respect to income, indicating that economies become less concentrated and more diversified as income increases. Only at relatively high levels of income does an increase in growth leads to greater specialisation and less diversification. Several empirical studies have shown that export diversification helps to boost per capita income growth. Love (1986), for example, suggested that a country should avoid heavy reliance on the export of a limited number of products as this diminished its ability to partially offset fluctuations in some export sectors with those sectors that are more stable. Love concluded that export diversification was a wise strategy to reduce instability and should not be limited to sectors other than agriculture. Furthermore, Gutiérrez de Piñeres and Ferrantino (2000), in their study of Latin American countries, found that there was a positive interaction between export diversification and economic growth. Examples of countries with significant export diversification and relatively high growth included Chile, Colombia, El Salvador, the Plurinational State of Bolivia, Paraguay and Uruguay. Similar results were found by Balaguer and Cantavella-Jordá (2004) for Spain and by Hammouda et al. (2006) for African countries. The relationship between a country’s productivity and the sectoral variety of its exports has also been studied by Feenstra and Kee (2004). In a sample of 34 countries for the period 1984-1997, they found that a 10% increase in export diversity across all industries resulted in a 1.3% increase in the country’s productivity. Furthermore, Herzer and Nowak-Lehmann (2006) analysed the hypothesis that there is a link between export diversification and economic growth through learning-by-doing and learning-by-exporting externalities in the case of Chile, and found that both horizontal and vertical export diversification had a positive effect on economic growth. However, this positive link between export diversification and growth is not always apparent in the literature. Michaely (1977), for example, found a significant positive link between exports and economic growth only in more developed countries. This was not the case in the least developed countries. He found that a minimum level of development was necessary for exports to have an effect on the growth of the economy. Mariem’s (2019) work analysed the relationship between FDI (Foreign Direct Investment), exports and economic growth in 14 countries in the Middle East and North Africa (MENA) region. They used a lagged laddered model (ARDL) over the period 1970-2014. Their results show that the stylised facts show that the selected countries can be classified into two more or less homogeneous groups: © 2023 Global Journals Volume XXIII Issue III Version I 3 Global Journal of Human Social Science - Year 2023 ( )E Analysis of Agricultural Exports and Economic Growth in Benin