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Export diversification: How much does the choice of the trading partner matter?

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  • Regolo, Julie

Abstract

This paper studies how a country's export diversification varies across destination markets. It develops an extension of the Romalis (2004) model which yields two testable predictions. According to the first, exports between similarly endowed countries (“South–South” and “North–North”) are more diversified than exports between differently endowed countries (“South–North” and “North–South”). The second implication is that, for given countries' production patterns, low bilateral trade costs lead to greater export diversification. These predictions find empirical support in a panel of 102 trade partners and 4998 HS-6 industries over the period 1995–2007. Results show that similarities between trading partners in physical capital, land and human capital endowments per worker are associated with more diversified bilateral exports. Exports are also more diversified when bilateral trade costs are relatively low.

Suggested Citation

  • Regolo, Julie, 2013. "Export diversification: How much does the choice of the trading partner matter?," Journal of International Economics, Elsevier, vol. 91(2), pages 329-342.
  • Handle: RePEc:eee:inecon:v:91:y:2013:i:2:p:329-342
    DOI: 10.1016/j.jinteco.2013.07.004
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    8. Amighini, Alessia & Sanfilippo, Marco, 2014. "Impact of South–South FDI and Trade on the Export Upgrading of African Economies," World Development, Elsevier, vol. 64(C), pages 1-17.
    9. Stender, Frederik & Berger, Axel & Brandi, Clara & Schwab, Jakob, 2020. "The trade effects of the economic partnership agreements between the European Union and the African, Caribbean and Pacific group of states: Early empirical insights from panel data," Discussion Papers 7/2020, German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE).
    10. Omar S. Dahi & Firat Demir, 2017. "South–South And North–South Economic Exchanges: Does It Matter Who Is Exchanging What And With Whom?," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1449-1486, December.
    11. Ignacio Rosal, 2018. "Power laws in EU country exports," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(2), pages 311-337, May.
    12. Alain McLaren & Meysut Saygili & Miho Shirotori, 2018. "Revealed Factor Intensity of Products: Insights from a New Database," UNCTAD Blue Series Papers 81, United Nations Conference on Trade and Development.
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    Keywords

    Export diversification; Comparative advantage; Trade costs; Intra-industry trade; North–South trade;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade

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