Diversification, Macroeconomic Growth and Development: The Case of Martinique

Marques, Bruno; Granvorka, Charley G.

doi:10.1007/978-3-030-02994-4_12

Bruno Marques² &
Charley G. Granvorka³

228 Accesses

Abstract

The case of Martinique offers some new insights on the capacity of diversification as a way out of recessions. Economic accounting of Martinique shows that diversification in service activities can have a causal and long effect on macroeconomic growth but not necessarily on per income capita growth. Reflecting on the last half century of this small island, an Overseas Region of France, using the models of the New Development Structuralist Approach suggests that diversification can be a consequence of a development strategy and a macroeconomic growth accelerator as well, if the territory itself is considered as a product: “a strategic invisible service”.

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Notes

1.
Otherwise named “capacities” of the economy.
2.
All the figures are authors’ calculations from regional accounts of Martinique and from World Indicator Indices (WDI) for France and Caribbean small states.
3.
In order to eliminate cyclical and erratic possible influences, regressions (1) and (2) are carried out with the trends of norm of absolute value (NVA), modified Lilien index (MLI), and the global GDP rate of growth, all computed with the Hodrick-Prescott filter.
4.
With residuals normally distributed, Fisher and student tests ascertaining the non-nullity of the parameters and the effective influence of indices and the RESET test attesting the linearity of the relation conducted, the quality of regressions is quite good, except for the specification weakness of the Durbin and Breush Pagan test (other explaining variables are missing).
5.
Because of the difference between the integration orders of time-series indices and the one of GDP per capita rate of growth.
6.
The continuing decrease of the real global GDP growth rate with an increase of the diversification indices.
7.
As is the case for other regions of France, as an expression of regional and spatial redistribution system in the French Republic.
8.
According to Putnam (1993), social capital covers the features of social organizations, such as trust, norms, and networks, that improve the effectiveness of society and facilitate coordinated actions.
9.
2.5% for all the overseas regions.

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Authors and Affiliations

Management, Économie, Modélisation, Informatique et Aide à la Décision (MEMIAD) Laboratory, Université des Antilles, Pointe-à-Pitre, France
Bruno Marques
Consultant, Martinique, France
Charley G. Granvorka

Authors

Bruno Marques
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Charley G. Granvorka
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Editors and Affiliations

Faculty of Social Sciences, The University of the West Indies, St. Augustine, Trinidad and Tobago
Ann Marie Bissessar

Appendix: Causality Tests, Cointegration Test and Regressions

All tests and regressions are performed with Gretl software

(a) Causality Tests

Causality test index norm of absolute value (NAV) for production (PRODNAV) to growth rate of real per capita GDP (TxPIBtAtcons).

Equation 2 TxPIBtAtcons

	Coefficient	Std error	t student	Prob
Const	0.0160651	0.0106804	1.504	0.1427
PRODNAV_1	−0.807569	0.567939	−1.422	0.1650
PRODNAV_2	1.81679	0.590801	3.075	0.0044***
PRODNAV_3	0.0106085	0.464639	0.02283	0.9819
TxPIBtAtcons_1	−0.133702	0.174329	−0.7670	0.4489
TxPIBtAtcons_2	0.337674	0.217313	1.554	0.1304
TxPIBtAtcons_3	−0.423187	0.176711	−2.395	0.0229**

Fisher tests for no restriction:

All lags of PRODNAV F(3, 31) = 3.3889 [0.0302]

Causality test index modified Lilien index (MLI) for production (PRODMLI) to growth rate of real per capita GDP (TxPIBtAtcons).

Equation 1 TxPIBtAtcons

	Coefficient	Std error	t student	Prob
Const	0.0180695	0.0101776	1.775	0.0856*
TxPIBtAtcons_1	−0.130.890	0.165906	−0.7889	0.4361
TxPIBtAtcons_2	0.363477	0.223863	1.624	0.1146
TxPIBtAtcons_3	−0.447105	0.179755	−2.487	0.0185**
PRODMLI_1	−0.0748681	0.0477233	−1.569	0.1268
PRODMLI_2	0.160.623	0.0484191	3.317	0.0023***
PRODMLI_3	8.95359e-05	0.0408131	0.002194	0.9983

Fisher tests for no restriction:

All lags of PRODMLI F(3, 31) = 3.8629 [0.0186].

Causality test index NAV for production (PRODNAV) to growth rate of real GLOBAL GDP (TXPIBCONS).

Equation 2 TXPIBCONST

	Coefficient	Std. error	t student	Prob
Const	0.0183433	0.0104461	1.756	0.0890*
PRODNAV_1	−0.938466	0.488476	−1.921	0.0639*
PRODNAV_2	1.78460	0.484161	3.686	0.0009***
PRODNAV_3	−0.0783544	0.452923	−0.1730	0.8638
TXPIBCONST_1	−0.0861520	0.191228	−0.4505	0.6555
TXPIBCONST_2	0.456958	0.178603	2.559	0.0156**
TXPIBCONST_3	−0.409778	0.185530	−2.209	0.0347**

Fisher tests for no restriction:

All lags of PRODNAV F(3, 31) = 4.8232 [0.0072]

Causality test index MLI for production (PRODMLI) to growth rate of real GLOBAL GDP (TXPIBCONS).

Equation 1 TXPIBCONST

	Coefficient	Std error	t student	Prob
Const	0.0200335	0.0100124	2.001	0.0542*
TXPIBCONST_1	−0.0914565	0.179870	−0.5085	0.6147
TXPIBCONST_2	0.481670	0.178983	2.691	0.0114**
TXPIBCONST_3	−0.429126	0.182555	−2.351	0.0253**
PRODMLI_1	−0.0874613	0.0384569	−2.274	0.0300**
PRODMLI_2	0.157059	0.0393897	3.987	0.0004***
PRODMLI_3	−0.00547476	0.0391537	−0.1398	0.8897

Fisher tests for no restriction:

All lags of PRODMLI F(3, 31) = 5.6665 [0.0032]

(b) Cointegration Tests

Cointegration of the trend of NAV for production (PRODNAV) and growth rate of trend of real GLOBAL GDP (TXhpPIBCONS)

Trends of PRODNAV (hpt_PRODNAV) and of real GLOBAL GDP (TXhptPIBCONST) are Hodrick-Prescott filters of the two variables

Step 3: cointegration

Cointegration regression

OLS using observations 1972–2002 (T = 31)

Dependent variable: TXhptPIBCONST

	Coefficient	Std error	t student	Prob
Const	0.0228666	0.00128480	17.80	3.78e-017***
hpt_PRODNAV	0.757540	0.0602914	12.56	2.94e-013***

Mean. Dep. var.	0.037771	Std error dep. var.	0.006857
Sum-squared resids.	0.000219	Std error of regres.	0.002748
R²	0.844812	R² adjusted	0.839461
Log likelihood	139.8548	Akaike criterion	−275.7096
Schwarz criterion	−272.8416	Hannan-Quinn	−274.7747
rho	0.870156	Durbin-Watson	0.145035

Step 4: unit root test for residuals

Augmented Dickey-Fuller test for residuals

testing down from six lags, Akaike criterium (AIC)

Null hypothesis unit root: a = 1

Model: (1 − L)y = (a − 1)*y(−1) + … + e

Estimation (a − 1): −0.0552523

Test value: tau_c(2) = −1.76024

prob. 0.6497

Cointegration of the trend of MLI for production (PRODMLI) and growth rate of trend of real GLOBAL GDP (TXhpPIBCONS)

Trends of PRODNAV (hpt_PRODMLI) and of real GLOBAL GDP (TXhptPIBCONST) are Hodrick-Prescott filters of the two variables

Step 3: cointegration

Cointegration regression

Ordinary Least Square (OLS) using observations 1972–2002 (T = 31)

Dependent variable: TXhptPIBCONST

	Coefficient	Std error	t student	Prob
Const	0.0240733	0.00135840	17.72	4.23e-017***
hpt_PRODMLI	0.0657574	0.00596318	11.03	6.86e-012***

Mean dep. var.	0.037771	Std. error dep. var.	0.006857
Sum-squared resids.	0.000272	Std. error of regression	0.003061
R²	0.807437	R² adjusted	0.800797
Log likelihood	136.5101	Akaike criterion	−269.0201
Schwarz criterion	−266.1522	Hannan-Quinn	−268.0853
rho	0.856393	Durbin-Watson	0.140440

Step 4: unit root test for residuals

Augmented Dickey-Fuller test for residuals

With 3 lags (1 − L) residuals

Null hypothesis of unit root: a = 1

Model: (1 − L)y = (a − 1)*y(−1) + … + e

Estimation (a − 1): −0.0522303

Test value: tau_c(2) = −1.80559

prob. 0.6276

(c) Regressions

Trends of PRODNAV, PRODMLI, and of real GLOBAL GDP are Hodrick-Prescott filters of the two variables

Regression 1: TXhptPIBCONST: a + b hpt_PRODNAV

OLS using observations 1972–2002 (T = 31)

Dependent variable: TXhptPIBCONST

	Coefficient	Std error	t student	Prob
Const	0.0228666	0.00141737	16.13	5.06e-016***
hpt_PRODNAV	0.757540	0.0925790	8.183	5.06e-09***

Mean dep. var.	0.037771	Std error dep. var.	0.006857
Sum of squared resids.	0.000219	Std. error of regression	0.002748
R²	0.844812	R² adjusted	0.839461
F(1, 29)	66.95535	prob. (F)	5.06e-09
Log likelihood	139.8548	Akaike criterion	−275.7096
Schwarz criterion	−272.8416	Hannan-Quinn	−274.7747
rho	0.870156	Durbin-Watson	0.145035

Normality tests for residuals

Hull Hypothesis: resids. are normally distributed

Chi-deux(2) = 0.974865

prob. = 0.614201

RESET test for linearity

Null hypothesis: the relation is linear

F Test: F(2, 27) = 12.6589

With prob. = P(F(2, 27) > 12.6589) = 0.000132326

Regression 2: TXhptPIBCONST: a + b hpt_PRODMLI

OLS using observations 1972–2002 (T = 31)

Dependent variable: TXhptPIBCONST

	Coefficient	Std error	t student	Prob
Const	0.0240733	0.00148582	16.20	4.52e-016***
hpt_PRODMLI	0.0657574	0.00943241	6.971	1.15e-07***

Mean. dep. var.	0.037771	Std error dep. var.	0.006857
Sum-squared resid.	0.000272	Éc. type of regression	0.003061
R²	0.807437	R² adjusted	0.800797
F(1, 29)	48.60082	prob. (F)	1.15e-07
Log likelihood	136.5101	Akaike criterion	−269.0201
Schwarz criterion	−266.1522	Hannan-Quinn	−268.0853
rho	0.856393	Durbin-Watson	0.140440

Normality test for residuals

Null hypothesis: resids. are normally distributed

Chi-deux(2) = 0.0866859

prob. = 0.957583

RESET test for linearity—

Null hypothesis: the relation is linear

F test: F(2, 27) = 20.0549

With prob. = P(F(2, 27) > 20.0549) = 4.5899e-006

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Marques, B., Granvorka, C.G. (2019). Diversification, Macroeconomic Growth and Development: The Case of Martinique. In: Bissessar, A. (eds) Development, Political, and Economic Difficulties in the Caribbean. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-02994-4_12

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DOI: https://doi.org/10.1007/978-3-030-02994-4_12
Published: 24 January 2019
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-030-02993-7
Online ISBN: 978-3-030-02994-4
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Diversification, Macroeconomic Growth and Development: The Case of Martinique

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Appendix: Causality Tests, Cointegration Test and Regressions

Appendix: Causality Tests, Cointegration Test and Regressions

(a) Causality Tests

Equation 2 TxPIBtAtcons

Equation 1 TxPIBtAtcons

Equation 2 TXPIBCONST

Equation 1 TXPIBCONST

(b) Cointegration Tests

(c) Regressions

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