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Does comparative advantage explain countries’ diversification level?

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  • Asier Minondo

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Abstract

This paper analyses whether the products in which a country has comparative advantage can explain its exports' diversification level. We argue that specialisation endows countries with some specific skills and assets; in some cases those skills and assets can easily be redeployed in other products and facilitate diversification, whereas in other cases skills and assets are more difficult to redeploy and offer scant diversification possibilities. Based on countries' comparative advantage and an index of product proximity, we construct a metric for countries' diversification possibilities. Using non-parametric and parametric techniques, we show that this metric is a very strong and robust predictor of countries' actual diversification level, even when we control for differences in income across countries. These results point out that diversification may not be an automatic outcome of development.
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Suggested Citation

  • Asier Minondo, 2011. "Does comparative advantage explain countries’ diversification level?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(3), pages 507-526, September.
  • Handle: RePEc:spr:weltar:v:147:y:2011:i:3:p:507-526 DOI: 10.1007/s10290-011-0097-7
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Maria Persson & Fredrik Wilhelmsson, 2016. "EU Trade Preferences and Export Diversification," The World Economy, Wiley Blackwell, vol. 39(1), pages 16-53, January.
    2. Sekkat, Khalid, 2016. "Exchange rate misalignment and export diversification in developing countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 59(C), pages 1-14.
    3. Giray Gozgor & Muhlis Can, 2016. "Effects of the product diversification of exports on income at different stages of economic development," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(2), pages 215-235, August.
    4. Roberto Basile & Aleksandra Parteka & Rosanna Pittiglio, 2015. "Export diversification and economic development: a dynamic spatial data analysis," Gecomplexity Discussion Paper Series 15, Action IS1104 "The EU in the new complex geography of economic systems: models, tools and policy evaluation", revised Dec 2015.
    5. Aleksandra Parteka & Massimo Tamberi, 2013. "What Determines Export Diversification in the Development Process? Empirical Assessment," The World Economy, Wiley Blackwell, vol. 36(6), pages 807-826, June.
    6. Akerman, Anders & Seim, Anna Larsson, 2014. "The global arms trade network 1950–2007," Journal of Comparative Economics, Elsevier, vol. 42(3), pages 535-551.
    7. Parteka, Aleksandra & Tamberi, Massimo, 2013. "Product diversification, relative specialisation and economic development: Import–export analysis," Journal of Macroeconomics, Elsevier, pages 121-135.
    8. Javed, Zanib & Munir, Kashif, 2016. "Impact of Export Composition on Economic Growth in South Asia," MPRA Paper 71519, University Library of Munich, Germany.
    9. repec:spr:jsecdv:v:19:y:2017:i:1:d:10.1007_s40847-017-0037-z is not listed on IDEAS
    10. repec:eee:streco:v:42:y:2017:i:c:p:26-37 is not listed on IDEAS

    More about this item

    Keywords

    Product proximity; Export diversification; International trade; Comparative advantage; F10;

    JEL classification:

    • F10 - International Economics - - Trade - - - General

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