The role of investments in export growth

In an increasingly globalised world, exporting plays a central role for economic growth and poverty reduction, particularly in small open economies. In this study, we test the hypothesis that a rise in investment favours entry into export markets and increases exports among firms that are already exporting. We address causal links through impact evaluation techniques for observational data. We examine the binary case and also continuous analysis of investment as treatment. We analyse a panel of Uruguayan manufacturing firms in the period 1997–2008, and we find evidence that investments “cause” exports and export orientation, and this provides a rationale for carefully designing investment promotion policies rather than focusing on other export support policies.