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A new look at the benefits of diversification: lessons from Central America

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  • Denise Stanley
  • Sirima Bunnag

Abstract

Recent trends of export diversification in Central America may lower foreign exchange earnings instability there. Four countries-Costa Rica, El Salvador, Honduras, and Guatemala-are analysed across a twenty-year period. The paper uses United Nations Commodity Trade Statistics to explain why Costa Rica and Honduras have enjoyed greater earnings stability in recent years, despite the fact that Honduras has not greatly diversified its export products and markets. Despite the growth of new agricultural and manufacturing goods, traditional primary products still dominate the countries' export portfolios. Specific products within each of the four broad product category groups contribute to the varied country outcomes. Summary statistics from the United Nations (panel) data suggest newer agricultural exports have not stabilized Guatemalan and Salvadoran export earnings, while Honduras has enjoyed relatively stable banana export revenues and Costa Rica has benefited from the smooth flow of microelectronic products. Further panel data regression analysis shows country size and intangible country effects also explain parts of the detrended earnings deviation in addition to product base and level of diversification.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 33 (2001)
Issue (Month): 11 ()
Pages: 1369-1383

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Handle: RePEc:taf:applec:v:33:y:2001:i:11:p:1369-1383

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Cited by:
  1. Hakim Ben Hammouda & Stephen Karingi & Angelica Njuguna & Mustapha Sadni Jallab, 2010. "Growth, productivity and diversification in Africa," Journal of Productivity Analysis, Springer, vol. 33(2), pages 125-146, April.
  2. Haouas, Ilham & Heshmati, Almas, 2014. "Can the UAE Avoid the Oil Curse by Economic Diversification?," IZA Discussion Papers 8003, Institute for the Study of Labor (IZA).
  3. Taylor, Timothy G. & Francis, Brian, 2003. "Agricultural Export Diversification in Latin America and the Caribbean," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 35.
  4. Dierk Herzer & Nowak-Lehnmann Felicitas, 2006. "What does export diversification do for growth? An econometric analysis," Applied Economics, Taylor & Francis Journals, vol. 38(15), pages 1825-1838.
  5. Herzer, Dierk & Nowak-Lehmann D., Felicitas, 2006. "Export Diversification, Externalities and Growth: Evidence for Chile," Proceedings of the German Development Economics Conference, Berlin 2006 12, Verein für Socialpolitik, Research Committee Development Economics.
  6. Dierk Herzer, 2005. "Exportdiversifizierung und Wirtschaftswachstum in Chile, Eine ökonometrische Analyse," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 225(2), pages 163-180, March.
  7. Starosta de Waldemar, Felipe, 2010. "How costly is rent-seeking to diversification: an empirical approach," Proceedings of the German Development Economics Conference, Hannover 2010 4, Verein für Socialpolitik, Research Committee Development Economics.
  8. Dierk Herzer & Felicitas Nowak-Lehmann D., 2004. "Export Diversification, Externalities and Growth," Ibero America Institute for Econ. Research (IAI) Discussion Papers 099, Ibero-America Institute for Economic Research.

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