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The elusive effects of trade on growth: Export diversity and economic take-off

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  • Theo S. Eicher
  • David J. Kuenzel

Abstract

The hallmark of the voluminous growth determinants literature is the absence of a clear-cut effect of trade on growth. Numerous candidate regressors have been motivated by alternative theories and tested by a multitude of empirical studies, but not one trade regressor has been robustly related to growth. In this paper, we leverage Melitz's (2003) insights regarding sectoral export dynamics and Feenstra and Kee's (2008) approach to productivity and sectoral export diversity to propose a structured approach to trade and growth determinants. Instead of relying on aggregate trade measures as previous studies have done, we examine the diversity of sectoral exports and the development of broad-based comparative advantage as a potential growth determinant. Controlling for model uncertainty and endogeneity, we find that export diversity serves as a crucial growth determinant for low-income countries, an effect that weakens with the level of development.

Suggested Citation

  • Theo S. Eicher & David J. Kuenzel, 2016. "The elusive effects of trade on growth: Export diversity and economic take-off," Canadian Journal of Economics, Canadian Economics Association, vol. 49(1), pages 264-295, February.
    • Handle: RePEc:cje:issued:v:49:y:2016:i:1:p:264-295
    DOI: 10.1111/caje.12197
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    Cited by:

    1. Mark F. J. Steel, 2020. "Model Averaging and Its Use in Economics," Journal of Economic Literature, American Economic Association, vol. 58(3), pages 644-719, September.
    2. Xiaofei Qi, 2025. "Export diversification in the national blue economic system: a case study of China," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-14, December.
    3. Theo S. Eicher & David J. Kuenzel, 2019. "European influence and economic development," Canadian Journal of Economics, Canadian Economics Association, vol. 52(2), pages 667-734, May.
    4. Bolhuis, Marijn, 2019. "Catch-Up Growth and Inter-Industry Productivity Spillovers," MPRA Paper 94730, University Library of Munich, Germany.
    5. Mora, Jesse & Olabisi, Michael, 2023. "Economic development and export diversification: The role of trade costs," International Economics, Elsevier, vol. 173(C), pages 102-118.
    6. Mullings, Robert & Mahabir, Aruneema, 2018. "Growth by Destination: The Role of Trade in Africa’s Recent Growth Episode," World Development, Elsevier, vol. 102(C), pages 243-261.
    7. Klimis Vogiatzoglou, 2019. "Export Composition and Long-run Economic Growth Impact: A Cointegration Analysis for ASEAN ‘Latecomer’ Economies," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 13(2), pages 168-191, May.
    8. Machado, José A.F. & Santos Silva, J.M.C. & Wei, Kehai, 2016. "Quantiles, corners, and the extensive margin of trade," European Economic Review, Elsevier, vol. 89(C), pages 73-84.
    9. Jesse Mora & Michael Olabisi, 2022. "Export growth drivers and economic development," Empirical Economics, Springer, vol. 63(5), pages 2389-2426, November.
    10. Gnangnon, Sèna Kimm, 2025. "Effect of the African Growth and Opportunity Act on the Structure of Public Revenue in Sub-Saharan Africa," EconStor Preprints 309256, ZBW - Leibniz Information Centre for Economics.

    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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