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What does export diversification do for growth? An econometric analysis

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Author Info
Dierk Herzer
Felicitas Nowak-Lehnmann D.

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Abstract

It is frequently suggested that export diversification contributes to an acceleration of growth in developing countries. Horizontal export diversification into completely new export sectors may generate positive externalities on the rest of the economy as export oriented sectors gain from dynamic learning activities due to contacts with foreign purchasers and exposure to international competition. Vertical diversification out of primary into manufactured exports is also associated with growth since primary export sectors generally do not exhibit strong spillovers. Yet there have been remarkably few empirical investigations into the link between export diversification and growth. This paper attempts to examine the hypothesis that export diversification is linked to economic growth via externalities of learning-by-doing and learning-by-exporting fostered by competition in world markets. The diversification-led growth hypothesis is tested by estimating an augmented Cobb--Douglas production function on the basis of annual time series data from Chile. Based on the theory of cointegration three types of statistical methodologies are used: the Johansen trace test, a multivariate error-correction model and the dynamic OLS procedure. Given structural changes in the Chilean economy, time series techniques considering structural breaks are applied. The estimation results suggest that export diversification plays an important role in economic growth.

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

Volume (Year): 38 (2006)
Issue (Month): 15 (August)
Pages: 1825-1838
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Handle: RePEc:taf:applec:v:38:y:2006:i:15:p:1825-1838

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  1. Kiminori Matsuyama, 1990. "Agricultural Productivity, Comparative Advantage, and Economic Growth," Discussion Papers 934, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  2. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
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  3. Neil R. Ericsson & James G. MacKinnon, 1999. "Distributions of error correction tests for cointegration," International Finance Discussion Papers 655, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  4. Perron, P., 1994. "Further Evidence on Breaking Trend Functions in Macroeconomic Variables," Cahiers de recherche 9421, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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  5. George Kapetanios, 2002. "Unit Root Testing against the Alternative Hypothesis of up to m Structural Breaks," Working Papers 469, Queen Mary, University of London, Department of Economics. [Downloadable!]
  6. JØrgen Wolters & Helmut LØtkepohl, 1998. "A money demand system for German M3," Empirical Economics, Springer, vol. 23(3), pages 371-386. [Downloadable!] (restricted)
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  1. Matthee, Marianne & Naude, Wim, 2007. "Export Diversity and Regional Growth: Empirical Evidence from South Africa," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  2. Dierk HERZER & Rainer KLUMP, 2009. "Poverty, Government Transfers, And The Business Cycle: Evidence For The United States," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 9(2). [Downloadable!] (restricted)
  3. Daniela Russi & Ana Citlalic González & José Carlos Silva-Macher & Stefan Giljium & Joan Martínez Alier & María Cristina Vallejo, 2007. "Material flow accounting in Chile, Ecuador, Mexico and Peru (1980-2000)," UHE Working papers 2007_05, Universitat Autònoma de Barcelona, Departament d'Economia i Història Econòmica, Unitat d'Història Econòmica. [Downloadable!]
  4. Ferreira, Gustavo, 2009. "From Coffee Beans to Microchips: Export Diversification and Economic Growth in Costa Rica," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 47178, Southern Agricultural Economics Association. [Downloadable!]
  5. Dierk Herzer & Rainer Klump, 2006. "Poverty, Government Transfers, and the Business Cycle: Evidence for the United States," Ibero America Institute for Econ. Research (IAI) Discussion Papers 141, Ibero-America Institute for Economic Research. [Downloadable!]
  6. Naude, Wim & Rossouw, Riaan, 2008. "Export Diversification and Specialization in South Africa: Extent and Impact," Working Papers RP2008/93, World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  7. Persson, Maria, 2008. "Trade Facilitation and the Extensive and Intensive Margins of Trade," Working Papers 2008:13, Lund University, Department of Economics. [Downloadable!]
  8. Oleksandr Shepotylo, 2009. "Export diversification across industries and space: do CIS countries diversify enough?," Discussion Papers 20, Kyiv School of Economics. [Downloadable!]
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