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Determinants of Export Diversification Around the World: 1962–2000

  • Manuel R. Agosin
  • Roberto Alvarez
  • Claudio Bravo‐Ortega

Using a large dataset of countries during the last forty years, this paper analyzes the main determinants of export diversification. We explore the role of several factors and we use three different indicators of export diversification. We find robust evidence across specifications and indicators that trade openness induces higher specialization and does not favor export diversification. In contrast, financial development helps countries to diversify their exports. Looking at the effects of exchange rates, our results suggest a negative effect of real exchange rate overvaluation, but not significant effects of exchange rate volatility. We also find evidence that capital accumulation contributes positively to diversity exports and that increasing remoteness tend to reduce export diversification. We explore also the role of terms of trade shocks. Some of our results suggest that there is an interesting interaction between this variable and human capital. We find that improvements in terms of trade tend to concentrate exports, but this effect is lower for those countries with higher levels of human capital. This evidence suggests that countries with higher education can take advantage of positive terms of trade shocks to increase export diversification.

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Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 35 (2012)
Issue (Month): 3 (03)
Pages: 295-315

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Handle: RePEc:bla:worlde:v:35:y:2012:i:3:p:295-315
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  1. Manuel Arellano, 2003. "Modelling Optimal Instrumental Variables For Dynamic Panel Data Models," Working Papers wp2003_0310, CEMFI.
  2. Andrew K. Rose, 2002. "Do We Really Know that the WTO Increases Trade?," NBER Working Papers 9273, National Bureau of Economic Research, Inc.
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  4. 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.
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  8. 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.
  9. Anne O. Krueger & Hal B. Lary & Terry Monson & Narongchai Akrasanee, 1980. "Trade and Employment in Developing Countries, Volume 1: Individual Studies," NBER Books, National Bureau of Economic Research, Inc, number krue80-1, June.
  10. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  11. Dani Rodrik, 2008. "The Real Exchange Rate and Economic Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 365-439.
  12. Claudio Bravo Ortega & Álvaro García Marín, 2008. "Exploring the Relationship Between R&D and Productivity: A Country-Level Study," Working Papers Central Bank of Chile 472, Central Bank of Chile.
  13. Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc.
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