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The roots of export diversification

  • Michael Jetter


  • Andrés Ramírez Hassan


Countries with diversi ed export baskets take advantage of various bene ts, which are said to foster and stabilize economic growth directly and through indirect channels (e.g. reduced income volatility, positive externalities, spillover e ects). This is especially important in the context of developing economies. However, identifying the true determinants of export diversifi cation is di cult as there exists no comprehensive theoretical or empirical framework to capture all potential factors in their entirety. This paper uses Bayesian Model Averaging to uncover the true long-term roots of export diversi cation among 43 potential determinants,and thus 2 potential models. Our results suggest that only four factors are important in predicting export diversi cation levels over the long run: natural resource rents as a percentage of GDP (100 % posterior inclusion probability), primary school enrollment rates (96 %), population size (25 %), and foreign direct investment levels (17 %). Many prominent candidates turn out to be insigni cant in determining diversi cation levels. Neither policy-related variables (e.g. tari s, freedom from trade regulations or democracy) nor macroeconomic factors (such as trade openness, terms of trade or domestic investment levels) nor geographical remoteness (whether the country is an island or landlocked) play a role. Various robustness checks con rm our results.

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Paper provided by UNIVERSIDAD EAFIT in its series DOCUMENTOS DE TRABAJO CIEF with number 010600.

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Length: 36
Date of creation: 21 Jan 2013
Date of revision:
Handle: RePEc:col:000122:010600
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  1. Alberto Amurgo-Pacheco, Martha Denisse Pierola, 2007. "Patterns of export diversification in developing countries: intensive and extensive margins," IHEID Working Papers 20-2007, Economics Section, The Graduate Institute of International Studies, revised Jul 2007.
  2. Federico Bonaglia & Kiichiro Fukasaku, 2003. "Export Diversification in Low-Income Countries: An International Challenge After Doha," OECD Development Centre Working Papers 209, OECD Publishing.
  3. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  4. Michel Beine & Serge Coulombe, 2007. "Economic integration and the diversification of regional exports: evidence from the Canadian--U.S. Free Trade Agreement," Journal of Economic Geography, Oxford University Press, vol. 7(1), pages 93-111, January.
  5. 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.
  6. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  7. Ali, Ridwan & Alwang, Jeffrey & Siegel, Paul B., 1991. "Is export diversification the best way to achieve export growth and stability? A look at three African countries," Policy Research Working Paper Series 729, The World Bank.
  8. Ben Hammouda, Hakim & Karingi, Stephen & Njuguna, Angelica & Sadni Jallab, Mustapha, 2006. "Diversification: towards a new paradigm for Africa’s development," MPRA Paper 13359, University Library of Munich, Germany.
  9. Manuel Agosin, 2007. "Export Diversification And Growth In Emerging Economies," Working Papers wp233, University of Chile, Department of Economics.
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