Textile and Apparel Exports of India and South Korea: An Econometric Analysis

The purpose of this research is to examine the determinants of the textile and apparel exports of India and South Korea over 1974-2001. This was addressed through an econometric analysis of the effects of several independent variables on the gross and net exports of textiles and apparel for India and South Korea. The analysis employed four linear models, which were each estimated separately for textiles and apparel for India and South Korea. The independent variables were net value of physical-capital stock, technological capital, two different levels of human capital, unit labor cost in textiles and in apparel, per-capita domestic apparel production, and domestic cotton production. The study extends that by Zhang and Dardis (1991) who analyzed the determinants of textile exports over the period 1970-1985, using a sample of 27 major textile exporting countries.

Secondary data for each year over 1974-2001 were used for the variables in the analysis. The data analysis included 32 estimations using the four different linear models to test the hypothesized relationships between textile and apparel exports and the independent variables for India and South Korea separately. Model 1 examined the impact of current year values of the independent variables on current-year gross or net exports of textiles or apparel. Model 2 examined the impact of one-year lagged values of the independent variables on current-year gross or net exports of textiles or apparel. Model 3 examined the impact of changes in the current-year values of the independent variables on changes in current-year gross or net exports of textiles or apparel. Model 4 examined the impact of one-year lagged values of changes in the independent variables on changes in current-year gross or net exports of textiles or apparel.

Major findings indicate that current-year net value of physical-capital stock positively impacted the gross textile exports of India and both gross and net textile exports of South Korea over 1974-2001.Although the results indicate positive effects of current-year net value of physical-capital stock on India's gross and net apparel exports, they indicate negative effects on South Korea's gross and net apparel exports. One-year lagged net values of physical-capital stock were positively related to South Korea's current-year gross and net apparel exports. A negative impact of previous-year net value of physical-capital stock was found in one instance, South Korea's current-year gross apparel exports. Technological capital measured as the number of scientists, engineers, technical personnel involved in R&D, negatively affected South Korea's gross and net apparel exports. The impact of one-year lagged technological capital was negative on both India's and South Korea's current-year gross and net apparel exports.

Human capital measured by enrollment in secondary-level education showed positive impact on India's current-year gross and net exports of textile and apparel and on South Korea's current-year gross and net apparel exports. The results also showed a negative impact of current-year changes in secondary-education enrollment on current-year changes in net textile exports of India. Human capital measures by enrollment in tertiary-level education indicated a positive impact on South Korea's net textile exports and gross apparel exports. One-year lagged tertiary-education enrollment also positively affected South Korea's gross textile exports and its gross and net apparel exports. Contrary to expectations, current-year change sin tertiary-education enrollment showed a negative impact on current-year changes in India's net textile exports.

Per-capita domestic apparel production showed a positive impact on India's gross and net textile exports and on South Korea's gross apparel exports. One-year lagged domestic apparel production also had a positive impact on India's current-year net textile exports and South Korea's gross apparel exports. The results of one-year lagged domestic cotton production had a positive impact on South Korea's current-year gross and net textile and apparel exports.