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Export Diversification: How Much Does the Choice of the Trading Partner Matter?

  • Julie Regolo
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    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.

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    Paper provided by Institut d'Economie et Econométrie, Université de Genève in its series Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva with number 13072.

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    Length: 52 pages
    Date of creation: Jul 2013
    Date of revision:
    Handle: RePEc:gen:geneem:13072
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