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Is export diversification the best way to achieve export growth and stability? A look at three African countries

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Author Info

  • Ali, Ridwan
  • Alwang, Jeffrey
  • Siegel, Paul B.

Abstract

Malawi, Tanzania, and Zimbabwe depend heavily on export earnings from a narrow base of agricultural commodities (coffee, cotton, sugar, tea, and tobacco). This dependence increased between 1961 - 1973 and 1974 - 1987, when international prices for those commodities were declining and unstable. Policymakers concerned with the instability and downward trend in export earnings for the three countries, tend to equate these trends with the countries'narrow export commodity base. They often propose export diversification as an expedient remedy. But the authors found that horizontal diversification would have produced lower export earnings and more instability. Policymakers introducing horizontal diversification must first consider price forecasts, comparative advantage, the economy's changing structure, and the costs of adjustment. Reactions to historical price movements can produce unexpected, undesirable results. A shift during this period from favorable to unfavorable price trends, and shifts in the covariances of deviations from price trends, complicate the design of export diversification policies, especially policies aimed at stabilizing export earnings. Generally, the most effective way to achieve growth and stability in export earnings is to increase and stabilize agricultural production and the volume of exports. The authors analysis shows that different export diversification policies can help fulfill different policy goals.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 729.

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Date of creation: 31 Jul 1991
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Handle: RePEc:wbk:wbrwps:729

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Related research

Keywords: Economic Theory&Research; Airports and Air Services; Achieving Shared Growth; Water Resources Assessment; Crops&Crop Management Systems;

References

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  1. Takamasa Akiyama & Larson, Donald F., 1989. "Recent trends and prospects for agricultural commodity exports in sub-Saharan Africa," Policy Research Working Paper Series 348, The World Bank.
  2. Glezakos, Constantine, 1973. "Export Instability and Economic Growth: A Statistical Verification," Economic Development and Cultural Change, University of Chicago Press, vol. 21(4), pages 670-78, Part I Ju.
  3. Svedberg, Peter, 1991. "The Export Performance of Sub-Saharan Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 39(3), pages 549-66, April.
  4. Knudsen, Odin & Nash, John, 1990. "Domestic Price Stabilization Schemes in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 38(3), pages 539-58, April.
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Cited by:
  1. Amurgo-Pacheco, Alberto & Pierola, Martha Denisse, 2008. "Patterns of export diversification in developing countries : intensive and extensive margins," Policy Research Working Paper Series 4473, The World Bank.
  2. Michael Jetter & Andrés Ramírez Hassan, 2013. "The roots of export diversification," DOCUMENTOS DE TRABAJO CIEF 010600, UNIVERSIDAD EAFIT.
  3. Coelli, Tim J. & Fleming, Euan M., 2003. "Diversification Economies And Specialisation Efficiencies In A Mixed Food And Coffee Smallholder Farming System In Papua New Guinea," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25841, International Association of Agricultural Economists.
  4. Mekhora, Thamrong & Fleming, Euan M., 2004. "An Analysis of Scope Economies and Specialisation Efficiencies Among Thai Shrimp and Rice Smallholders," Working Papers 12914, University of New England, School of Economics.
  5. K. Dimitris & AM. Pinna, 2013. "Trade activity between the EU and its neighboring countries: Trends and potential," Working Paper CRENoS 201320, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  6. AM. Pinna & VM. Licio, 2013. "The European firms' export activity to the neighbouring countries," Working Paper CRENoS 201321, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

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