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The roots of export diversification

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  • Michael Jetter

    ()

  • Andrés Ramírez Hassan

    ()

Abstract

Countries with diversi ed export baskets take advantage of various bene ts, which are said to foster and stabilize economic growth directly and through indirect channels (e.g. reduced income volatility, positive externalities, spillover e ects). This is especially important in the context of developing economies. However, identifying the true determinants of export diversifi cation is di cult as there exists no comprehensive theoretical or empirical framework to capture all potential factors in their entirety. This paper uses Bayesian Model Averaging to uncover the true long-term roots of export diversi cation among 43 potential determinants,and thus 2 potential models. Our results suggest that only four factors are important in predicting export diversi cation levels over the long run: natural resource rents as a percentage of GDP (100 % posterior inclusion probability), primary school enrollment rates (96 %), population size (25 %), and foreign direct investment levels (17 %). Many prominent candidates turn out to be insigni cant in determining diversi cation levels. Neither policy-related variables (e.g. tari s, freedom from trade regulations or democracy) nor macroeconomic factors (such as trade openness, terms of trade or domestic investment levels) nor geographical remoteness (whether the country is an island or landlocked) play a role. Various robustness checks con rm our results.

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Bibliographic Info

Paper provided by UNIVERSIDAD EAFIT in its series DOCUMENTOS DE TRABAJO CIEF with number 010600.

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Length: 36
Date of creation: 21 Jan 2013
Date of revision:
Handle: RePEc:col:000122:010600

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Keywords: Export Diversification; International Trade; Bayesian Model Averaging;

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  1. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment: Updates and Implications," CID Working Papers 42, Center for International Development at Harvard University.
  2. Alberto Amurgo-Pacheco, Martha Denisse Pierola, 2007. "Patterns of export diversification in developing countries: intensive and extensive margins," IHEID Working Papers 20-2007, Economics Section, The Graduate Institute of International Studies, revised Jul 2007.
  3. Ben Hammouda, Hakim & Karingi, Stephen & Njuguna, Angelica & Sadni Jallab, Mustapha, 2006. "Diversification: towards a new paradigm for Africa’s development," MPRA Paper 13359, University Library of Munich, Germany.
  4. Ali, Ridwan & Alwang, Jeffrey & Siegel, Paul B., 1991. "Is export diversification the best way to achieve export growth and stability? A look at three African countries," Policy Research Working Paper Series 729, The World Bank.
  5. Federico Bonaglia & Kichiro Fukasaku, 2003. "Export Diversification In Low-Income Countries: An International Challenge After Doha," Development and Comp Systems 0307001, EconWPA.
  6. Manuel Agosin, 2007. "Export Diversification And Growth In Emerging Economies," Working Papers wp233, University of Chile, Department of Economics.
  7. Michel Beine & Serge Coulombe, 2007. "Economic integration and the diversification of regional exports: evidence from the Canadian-US free trade agreement," ULB Institutional Repository 2013/10417, ULB -- Universite Libre de Bruxelles.
  8. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  9. Ricardo N. Bebczuk & Daniel Berrettoni, 2006. "Explaining Export Diversification: An Empirical Analysis," Department of Economics, Working Papers 065, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
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