Essays on trade and diversification : the case of Mauritius

Ph.D. (Economic)Abstract: Small developing economies, especially small island states, are more vulnerable in the global economy. This is partly due to the fact that by virtue of their size, trade comprises a larger proportion of their economic activities. Despite facing similar economic vulnerabilities, Mauritius has transformed from an impoverished mono-crop sugar island to Africa’s highest per capita income economy. The country is often hailed as an economic model as it has managed in spite of its vulnerabilities to diversify its production activities and achieved rapid and sustained economic growth over the past four decades. While globalisation has stimulated the growth of international and domestic trade, few African countries have managed to diversify domestic production and exports and to effectively integrate with the global economy. It is in this context that this study aims to investigate the trading activities and transformation in this small African island economy in an essay format, of four self-contained essays. The first essay uses time series data and analysis for the period 1963 to 2013 to investigate if the trade openness led growth hypothesis holds true for Mauritius. In order to investigate the relationship between trade openness and economic growth, the measure of trade openness this study uses covers various indicators ranging from, trade outcomes to trade policy. Overall, the results suggest that although increasing trade openness has a positive and significant influence on growth, the magnitude of the trade policy effects is however negligible. Our results also highlight the growth-enhancing contributions of imports and the value of an outward-oriented trade policy regime. These results are robust for several model specifications. The Special Economic Zones (SEZs) programme in Mauritius has contributed to the country’s industrialisation and aided in its diversification from a predominantly agricultural economy into manufacturing. The second essay..