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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 and 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. Dierk Herzer, 2004. "Exportdiversifizierung und Wirtschaftswachstum in Chile: eine ökonometrische Analyse," Ibero America Institute for Econ. Research (IAI) Discussion Papers 098, Ibero-America Institute for Economic Research.
  2. Felipe Starosta De Waldemar, 2010. "How costly is rent-seeking to diversification : an empirical approach," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00461486, HAL.
  3. 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.
  4. 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.
  5. Dierk Herzer & Nowak-Lehnmann Felicitas, 2006. "What does export diversification do for growth? An econometric analysis," Applied Economics, Taylor and Francis Journals, vol. 38(15), pages 1825-1838.
  6. 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.
  7. 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.

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