The Manufacturing Sector and Global Market Integration: A Case of Jordan
DOI:
https://doi.org/10.35516/jjes.v12i2.2695Keywords:
Global market integration, Simultaneous equations, 3SLS, Industrial productionAbstract
Objective: This study aims to determine what factors affect the integration of Jordan's industrial sector with global markets by examining 85 industries (identified by ISIC Rev. 4) using four-digit codes from 2011 to 2021.
Methods: A simultaneous model of the endogenous variables (industrial production, exports, and value-added) is constructed to avoid the common issues of simultaneity and specification error using three-stage least squares (3SLS). The study categorizes industries into two groups based on their export-to-output ratios, classifying industries with ratios above 25% as high exporting industries and those with ratios between 3.8% and 25% as low exporting industries. This classification is based on output volume, and the number of sectors in each group should be similar. This classification helps clarify potential differences in strategies, competitiveness, innovation, and market access between the groups.
Results: The findings demonstrate the importance of intermediary goods in launching Jordanian industries into the global market by presenting their significant correlation with the variables of interest in most equations, such as industrial production and manufacturing value-added. Furthermore, compensation per worker typically has a positive correlation with manufacturing value-added. Particularly in the high export category, there is a positive correlation between improvement and development expenditures and manufactured exports.
Conclusion: The analysis reveals that none of the models empirically support the export-led development theory. This methodology highlights the pivotal significance of particular economic variables and provides perceptive data on the complex interplay that drives goods-market integration.
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